The Indian central bank cut rates, but also did not. No right or wrong done. The South Korean President certainly saw no wrong in declaring martial law. And in France, the Far Right joined forces with Left to topple the French government. Just that kind of a week when there was right and left throughout. There were comments from Fed Chair Jerome Powell, who said that the US economy is in 'remarkably good shape' and that officials can afford to be cautious as they lower rates toward a neutral level — one that neither stimulates nor holds back the economy. The week was also punctuated by CEO departures on the global stage, with Intel CEO Pat Gelsinger ousted and Carlos Tavares ousted from Stellantis. However, the son of US President Joe Biden got a reprieve, with the action climbing the ranks of controversial decisions taken across the world. And in other news, McKinsey research suggests that employee disengagement could cost a median-size S&P 500 company up to $355 million per year in lost productivity. Employers, take note. Anyhow, here are the top talking points this week:
Trump Is At It Again
In a message posted on social media platform X, Donald Trump posted thus: "The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful US Economy. They can go find another “sucker!” There is no chance that the BRICS will replace the US Dollar in International Trade, and any Country that tries should wave goodbye to America."
The timing of this, coming on the back of China closing a successful dollar bond issue in Saudi Arabia and heightened chatter of the BRICS currency, should have been expected. Guessing the world will be an exciting place for the next four years of the Trump era.
However, India Still 'Trumps'?
In a scorecard for market sensitivity to adverse US trade policy with Trump 2.0 tariff proposals, CLSA ranks India as one of the least sensitive markets. India scored a negative 2.3 on their rank weighted Z-score, the lowest amongst nations including Mexico, China and Turkey as well as Brazil and Japan. For context, Mexico and China's Z-Score came in at 2.9 and 2.1 respectively.
CLSA believes that India, Australia and some of the ASEAN nations like Indonesia have some moats around themselves. It is probably one of the many reasons why CLSA's regional salesperson Alex Oldfield has been quoted as saying that the CLSA India Forum was a timely reminder of the long-term structural growth story, underwritten by stable policy and stable currency and that it should not be long before the foreign funds switch around and we reach a turning point.
MPC Doesn't Deliver What Was (Un)expected
Post the Q2 growth howler, expectations were rife that there would be rate action from the Reserve Bank of India in the December monetary policy. Not only did the MPC not cut rates, but the stance was also not changed from neutral. CRR was cut by 50 basis points, presumably to manage liquidity concerns in Q2FY25.
However, the fact that RBI projected headline CPI at 4.6% in Q2 and 4% in Q3, the market would now believe that the doors have opened up for rate easing in the February policy. This was also evident in the way the Nifty Bank and the Nifty PSU Bank indices recovered and traded positively. No surprises — and now the street would await the extension/not of Governor Shaktikanta Das' term.
Corporate Commentary Mixed
Every week, I will write about the key corporate commentary that happens on my shows. This week, two comments stood out for me.
One came in from Patanjali Keswani of Lemon Tree Hotels. He believed that the growth rates for the well managed hotels could exceed 20–25% for the next five years on a CAGR basis. That is some serious growth projection. Mr Keswani agreed with peers that the hotel industry is no longer as cyclical as it used to be. Speaking of hotels, Wonderla Holidays, probably the only large player in the theme park format in India, spoke of having hotels in his theme parks. He also spoke about a minimum 10–15% growth over the next few years as a base case. However, while urban consumption continued, the gauge of widespread consumption uplift is still not completely clear.
Finally, it's also a week which will have the Indian Cricket Team up against a tough ask in Adelaide in a pink ball Test. Will they be able to master this day-night Test, something that team Australia has not lost ever? One certainly hopes so — for that is the only way the Indian team has a strong chance of qualifying for the World Test Championship in 2025. I am biased, but am not wrong. For I am a fan. Fingers crossed.
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