The days of American exceptionalism are getting over and with that Europe, China and other emerging markets are becoming the new destinations of capital. However surprisingly, the stock market in Latin America is up by 21 per cent in USD terms and well ahead of Europe as well as emerging markets. Interestingly, Latin America is low on President Donald Trump’s tariff target list and thus, a great place during trade war.
While United States of America and China trade has collapsed as the tariffs are too prohibitive, the economy of both the countries will suffer and also make indirectly the world economy suffer. Hopes are being built around early resolution through negotiated settlement. Sustainable turnaround in the bilateral trade balances between US and China would require fundamental lasting changes to the growth model of both these economy.
Defence, inspite of being richly valued looks good for long term with rearmament happening all over the world. Defence electronics and ship building are areas in defence which deserves inclusion in portfolio.
Even if the policy makers force the issue, requiring China to increase purchases from US through trade agreement, implementing the same will be fraught with challenges. Overall the more trade oriented economies will face greater growth damages, and we are heading towards a sharp slow-down in the world economy unless the tariff related uncertainties are quickly resolved.
India continues to remain an attractive market for the global capital as its dependence on trade is miniscule. India also is expected to strike a trade deal with US well before most nations. As one of largest economies of the world, it is expected to clock a GDP growth rate between 6 per cent to 6.5 per cent in the current fiscal. All this should make it an attractive investment destination.
Of course, internally Indian economy needs some improvement particularly in the area of consumption demand. The geo-political tension also needs to subside at least to reassure global investors about India’s attractiveness.
In the interim it would be better to focus on domestic facing sectors for building long term portfolio. This will enable the investor to navigate the global uncertainties with confidence and least impact. While aligning portfolio with domestic market one also needs to look at the demand supply dynamics and the prevailing trends.
Slowing consumption demand doesn’t augur well for FMCG, Consumer durables, Two Wheelers etc. at this juncture. However, strong capital expenditure and booming real estate and infrastructure development leads to increase in Cement and EPC demand. Investors will do well to focus on these segments.
Power is another sector which is depicting secular and long term growth trajectory. All segments of this industry including power financiers should be looked at for building long term portfolio.
Defence, inspite of being richly valued looks good for long term with rearmament happening all over the world. Defence electronics and ship building are areas in defence which deserves inclusion in portfolio.
