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India Strategy – Is India Immune To Global Tightening? Systematix Analysis

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Systematix Research Report

We examine the implications of tightening global monetary policies, slower growth and trade, and diminishing forex buffer on India, in the context of rates, Indian rupee/U.S. dollar, and growth outlook. Accordingly, we calibrate our model portfolio.

The path of restrictive monetary tightening adopted by central banks in advanced economies and the narrowing global liquidity reflect the considerable drawdown in forex buffer in Asia by over 550 billion from the 2021 peak, mostly contributed by China (-$195 billion), and India (-$89 billion).

Significant further tightening by advanced economies could accentuate the transmission of tightening financial conditions into emerging markets.

Emerging Asia, particularly China and India, gained disproportionately from the fiscal and monetary stimulus’ in advanced economies, particularly in the U.S. and UK. Demand surge and supply bottlenecks created new export opportunities, with substantial surge also seen in forex reserves. But those episodic gains are now reversing.

While correction in global commodity prices is impacting price-led exports, higher consumption and crude prices are elevating imports, thereby widening the current account deficit, gross domestic product to 3.3% in FY23E, unmatched by capital lows. Thus, Reserve Bank of India will also be compelled to temper demand.

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This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

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