Indian equity markets are richly valued among the emerging markets and valuations have to come to levels where this market (Indian equities) becomes attractive again, Nannette Hechler-Fayd’herbe, Head of Global Economics and Research, Credit Suisse, has said.

She was responding to a media query on how the impending interest rate cuts by global central banks will affect foreign portfolio flows into India. 

Sharing the findings of Credit Suisse’s latest research on Supertrends 2023 with theme of ‘Investing Reimagined’, Nannette said that the key message from Credit Suisse was that this is not the time for global equity investors to relax and that they must select their investments wisely. 

She said that investors would do well to focus on markets where there is an interesting valuation perspective and good earnings drivers. Latin American markets, especially Brazil, and Gulf Cooperation Council (GCC) countries are particular markets that Credit Suisse sees as being attractive and need to be looked into, she noted.

Interest rate cycle

She also highlighted that a number of central banks are still on tightening course and that it was really too early to think about reversal of policy here.

“Even on the US Fed, we don’t really regard it as realistic to expect interest rate cuts before next year. It is much too early to be enthusiastic about interest rate cuts in our view,” Nannette said.

She noted that emerging markets are big beneficiaries when interest rates are starting to fall in developed markets. 

“The fact that we are coming to the end of the rate hiking cycle is good news from an emerging market perspective. However, we have to distinguish here that markets that are expensively priced are already in some sense reflecting the enthusiasm about US Federal Reserve cutting interest rates quicker rather than slower. I don’t think these markets are going to have their hopes fulfilled so easily,” she said.

Credit Suisse does see the prospects of interest rate cuts by central banks such as US Fed, but they are likely to be longer out only in 2024, she added.

While noting that investors must not expect the US Fed to cut interest rates quickly (except if there is a major shock to US economy which is putting them in a position to have to act), she said that the European Central Bank would continue to increase interest rate for some time in 2023.

Supertrends 2023

Credit Suisse on Tuesday released the new Supertrends Report for 2023, with the report focusing on long-term and multi-year societal trends that are expected to lead to rapidly expanding business opportunities. 

The report identifies six long-term equity investment themes that are still very relevant, including anxious societies, infrastructure, technology, silver economy, millennials’ values, and climate change.

This year, Credit Suisse has introduced a new sub-theme in its climate change Supertrend, “Metals of the future,” and merged related sub-themes in other trends.

Burkhard Varnholt, Global Chief Investment Officer at Credit Suisse, said, “While the Supertrends could not escape the downtrend in financial markets in 2022, we retain our overall conviction across the Supertrends and their sub-themes. We believe the Supertrends continue to offer value in terms of diversification and growth opportunities by focusing on themes that transcend business cycles and will ultimately shape the future.”