India allows its citizens to invest up to $250,000 annually overseas under LRS guidelines.
Economic and fiscal upheaval. Uncertainty due to the pandemic. Government of India seeing a dip in its finances. Consumers cut discretionary spending and consumer finance drying up. Now, tax collections take a further hit.
India is going through that dreaded economic downcycle where growth is taking a backseat. Downgrades and bad loans are dominating the business headlines. Moody’s this week cutting India’s sovereign rating and companies are facing the heat.
Blue-chip companies are under the watch for Moody’s. These include Reliance Industries, Tata Consultancy Services and Infosys, downgraded by one notch. These companies are part of the benchmark 30-share Sensex and 50-share Nifty indices.
Ratings of several infrastructure companies – NTPC, NHPC, National Highways Authority of India, Power Grid Corporation of India, Gail India, Adani Green Energy and Adani Transmission have also been downgraded by one notch. Oil exploration and refining companies ONGC, Indian Oil, Oil India and BPCL have met the same fate.
As the cost of capital is certain to go up, consumption is slowing. Companies’ earnings could be hit. Worse, money could move out of India’s markets.
Uncertainty of earnings
Investors hate uncertainty. But currently, that is exactly what they are having to face. If other rating agencies follow Moody’s, it could hurt India even more since lately India has been dependent on overseas inflows for meeting its capital expenditure needs.
Over 120 million people have lost jobs after the March 25 lockdown began and 12 million could be pushed into extreme poverty. That leaves lesser consumers to buy products and services for India’s companies.
In uncertain times like these, a strong dose of liquidity is critical to assure businesses that the central bank and the government will support them. With government stretched on its finances, it does not look like a fiscal bazooka could be round the corner. Institutions brushed aside India’s $265 billion stimulus package, as they studied the details. At best, it was about 1 percent of the GDP, they said.
Institutions brushed aside India’s $265 billion stimulus package, as they studied the details. At best, it was about 1 percent of the GDP, they said.
V-shaped US recovery
The US markets are roaring ahead. The S&P 500 has given an over 37 percent return over the last 50 trading sessions, leading up to June 3. It has been one of the best 50-day streaks for the index. The rally may still have some more legs.
Tech stocks have been on fire. With strong demand from around the world, Amazon, Apple, Facebook, Microsoft, and several other tech stocks are leading the surge. Several companies said that the strong demand for digitization has pushed the industry ahead in the last few months.
Fed is also supporting the recovery with its ‘whatever it will take’ approach, confirming unlimited finances. For the first time, it has started to buy a little under $1 trillion of ETFs, assuring liquidity to the markets. The markets are expecting another Fed-fuelled rally, just like it happened after the 2008-09 financial crisis.
US-listed companies are also reaping the opportunities of global shifts in the energy industry, with renewable power expanding. They are leading the charge in new industries and emerging technologies like space tourism, bitcoin, cannabis, online entertainment, and others. Investors who want to partake in the opportunity need to invest in the US-listed stocks for making the best use of this opportunity.
India allows its citizens to invest up to $250,000 annually overseas under LRS guidelines. The change in regulation happened a few years ago. After the initial set up, buying a stock in the US market is as simple as going through a transaction on the mobile.
Stay tuned to find out if the NYSE can outshine the BSE surge in the battle between two bulls!