NRIs And PIOs: The Real Ambassadors For Indian Equity Markets

Limiting Them Would Be Detrimental For Marketing The India Growth Story.

- M Rajendran and Yagnesh Kansara

We are in the 10th anniversary of global financial crisis (of 2008). Is the Indian economy prepared for such a situation?

A lot has already been said about the topic. Things have definitely changed in the last one decade. Financial markets are more macro driven today and face a different set of risks. Financial strength and capital adequacy are pretty good across the world for most banks. Regulatory regimes are better prepared and global growth is fairly robust. The major risks ahead that I see are - rising interest rates, increasing protectionism and higher inflation in the short-term.

Interest rates in the US have already gone up and could go higher. In India too, we have seen bond yields going up over 100 Basis Points. While the short-term impact on growth has been muted, medium-term higher interest rates could slow down global growth and lead to other risks, including a potential recession across some economies.

The Indian economy today is better placed due to strong domestic demand drivers, but worsening trade flows and fiscal deficits are factors that India needs to be concerned about.

How intense is it for emerging economies?

We have already seen increased volatility in the emerging markets as compared to the US markets. The US markets have been in an upward trend with low volatility over the last few years. That could change as risks outlined earlier rise.

What are the factors likely to dominate the domestic market?

Apart from oil prices, the US trade policies could be an important driver for what happens in the global financial markets, including India. Also, it is important to track the dialogues on the US and China trade relations.