Christopher Wood of Jefferies stated in his weekly investor newsletter that India’s suspension of Rs 2,000 currency notes, which he termed “mini-demonetization”, has no monetary policy implications but may have political motivations, as reported by Reuters.
Wood stated in his weekly column ‘GREED & Fear’ that the note withdrawal is “officially being rationalized from an anti-corruption standpoint. However, there is also a political motive on the part of the incumbent BJP government in regards to opposition party funding activities. India’s elections are financed by cash-filled vaults.
Christopher Wood is Jefferies’ global director of equity strategy. Multiple times, prestigious publications such as Asiamoney and Institutional Investor have referred to him as the “best strategist” in Asia.
Christopher Wood stated the note removal is “officially rationalised on the anti-corruption angle.”
In light of this year’s state elections and 2024’s general election, the analyst believes that the withdrawal of Rs 2,000 notes will not have a significant impact on the economy.
In contrast to the 2016 demonetization, there has not been a stampede to deposit local currency in local banks. In lieu of mangoes, consumers have chosen to spend their money on a variety of products, from luxury timepieces to mangoes.
Wood continues to be “constructive” for India. “From a stock market perspective, the most obvious positive is that the monetary tightening cycle is nearly over, as inflation has declined in recent months,” he wrote.
In April, headline inflation fell to 4.7%, and it is anticipated that it will fall further to approximately 4% in May. Chris Wood anticipates a 5% average inflation rate for the current fiscal year. In addition, he anticipates a reduction in policy rates later this year or the following year.
Chris Wood asserts that, now that the monetary policy tightening cycle has ended, there is no clear immediate catalyst for a further de-rating of valuations, with the possible exception of external risk-off market activity.
According to his observations, the forward price-to-earnings ratio for the stock markets is 18x, which is marginally higher than the 10-year average of 17.4x.
“Recently, foreign investors have returned as net buyers of Indian equities as they retreat from China,” said Wood. From December to February, foreign investors sold 4.5 billion dollars’ worth of Indian stocks, but since March, they have purchased 7 billion dollars’ worth of shares.
