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BNP Paribas sees policymakers around the world responding aggressively to the slowdown with monetary and fiscal easing beyond current expectations in the US, Europe and most of Asia.
As the search for yield increases, flows into emerging markets assets should increase, said Abhiram Eleswarupu, Head of India Equity Research, BNP Paribas in a presentation on ‘Inside India’.
In this scenario, BNP Paribas research sees little pressure on emerging market currencies including rupee. The consensus view among the BNP Paribas economists is that there will be a significant synchronous global slowdown and central bank action in the coming days.
No recession
Global growth could sharply slowdown in the fourth quarter of calendar year 2019 and bottom out in first quarter of calendar year 2020. While this may not lead to a US recession, the Eurozone, China and India will slow further.
On the equities front, the latest research note highlighted that Asian equities performance has been closely correlated with Asian currencies.
Although India’s earnings remain lacklustre, improved sentiment could spur select stocks, especially those that best satisfy BNP Paribas requirements on quality, growth and valuation, including those in the mid- and small-cap areas, it added.
Focus sectors
BNP Paribas sees continued weakness of the Indian economy, at least in the near term. However, a gradual recovery is likely, led by better base effect, cyclical and structural factors.
“We see the recent corporate tax rate cuts as a long term positive, especially for investments,” the research note added.
As for India 2025 themes, the major ones over the next few years could be premiumisation and higher penetration in consumer facing and telecom sectors; digitisation in financial services and media; rise of technology staples companies as IT services companies continue to reinvent themselves while maintaining their strong cash flow profiles. There is also threat of electric vehicles to both the auto and energy industries; and regulation in areas such as tobacco, according to BNP Paribas Equity Research.
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