Chris Wood, Global Equity Strategist at Jefferies, struck a bullish tone on India’s market prospects at CNBC-TV18’s Market Town Hall, a week ahead of the Union Budget 2024. He believes the current economic cycle bears a resemblance to the upswing witnessed between 2002-2009 in India’s stock market., which was not derailed by monetary tightening.
Echoes of the Past, Promise for the Future. Wood highlights key similarities between the current period and the earlier growth phase of India’s stock market. “We’ve emerged from a property downturn and are now in the midst of a property uptrend,” he observed. Additionally, a tightening monetary policy hasn’t disrupted the real estate recovery, and private sector investments have shown positive signs in the last year.
However, Wood acknowledges a key difference: the current cycle is bolstered by significant government-funded capital expenditure (capex). He credits the BJP government with implementing substantial structural reforms over the past decade, laying the groundwork for the ongoing growth. “We are nowhere near the end of a bull market,” Wood asserts.
Navigating the Budget and Beyond
Veteran investor Ramesh Damani inquired about Wood’s preferred investment strategy. Wood admits he would have ideally preferred a clear majority for the government. “Tactically,” he suggests, “allocating some funds to rural consumption plays could benefit from potential budget measures.” However, from a long-term perspective, Wood prioritises investments and consumption within his portfolio.
Capital Gains Tax: A Call for Simplification. With India’s benchmark Nifty 50 index on track for its ninth consecutive year of gains, investor focus remains on the upcoming budget. A key area of interest is the capital gains tax structure, currently lacking uniformity and causing confusion. The government has acknowledged this complexity and is exploring potential revisions to ensure fairness across asset classes. Wood, advocating for a simplified approach, believes there should be no capital gains tax in the current scenario.
The article concludes by outlining the complexities of the existing capital gains tax system and the potential for the upcoming budget to introduce streamlining measures. By drawing parallels with economies like Hong Kong, where capital gains taxes are absent, Wood emphasizes the potential for such reforms to stimulate investment and market growth.
Booming India’s stock market: Early Signs of a Retail Investor Revolution?
Despite a multi-year rally, Chris Wood, Global Head of Equity Strategy at Jefferies, believes India’s stock market is only in the early stages of a retail investor phenomenon. He cautions, however, that changes to capital gains tax in the upcoming Budget 2024 (scheduled for July 23rd) could trigger a correction more significant than the one seen after the inconclusive Lok Sabha elections in June.
Wood’s optimism stems from the surging participation of retail investors in recent years, including through mutual funds. He views India as the world’s most promising market for asset management, even after the BJP’s loss of majority in the recent elections.
In his weekly investor note, “GREED & fear,” Wood highlights the resilience of the Indian markets. He points out that the post-election correction was short-lived, with the market now up 13.3% since June 4th. This, he argues, underscores the growing power of retail investors, who stepped in to buy when professional investment
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