CNBC’s Inside India newsletter: A disjointed stock market

Warren Buffett speaks at Berkshire Hathaway’s annual shareholder meeting on May 4, 2024 in Omaha, Nebraska.

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This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big players behind its meteoric rise. Like what you see?You can subscribe here.

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Buffett once bet and invested S&P 500 Index Tracker will outperform most hedge funds.

However, this bet from the Oracle of Omaha, which holds Berkshire Hathaway’s annual shareholder meeting over the weekend, will also outperform many other indexes, including Indian Mad Cow Disease Sensex and nifty 50.

For local investors, Indian stocks will underperform the U.S. benchmark by more than 45 percentage points since Buffett made his bet in 2008.For foreign investors, returns will be worse Dollar There is a 280 percentage point gap between the two indices.

This is the story that is happening today. The S&P 500 is up 9% this year, while India’s benchmark has struggled to maintain profits. India’s GDP growth of nearly 8% does not appear to be translating into stock market returns.

So, what’s missing?

“If you’re a top-down investor, India looks amazing because everything is going right,” said Jonathan Pines, a contrarian investor and portfolio manager at Federated Hermes, who believes valuations on Indian stocks are “completely crazy.” ”.

Pines believes that India’s rapid economic expansion is closely related to the birth of new enterprises and opportunities. But it also means fierce competition for existing businesses, many of which are listed on the stock market.

“Even if India’s GDP per capita is going to grow rapidly, it doesn’t mean that earnings across the stock market are going to grow at the same rate because you’re going to have competition,” he added.

Rajeev Agrawal, a hedge fund manager and founder of DoorDarshi Advisors, said that leaving aside comparisons with the United States, where GDP per capita exceeds $76,000, it is unfair to compare India with itself a year or two ago.

Twenty years ago, India’s per capita GDP was US$624 and has grown by 300% since then. Agrawal believes that crossing the $2,500 mark means that Indian consumers can now buy non-essential items for the first time, which is a sign of growth in global stock markets.

This year has been particularly unlucky for Indian stock market investors due to the uncertainty brought about by political factors.

Analysts pointed out that the decline in voter turnout in the first two phases of the current election may mean that Prime Minister Narendra Modi’s Bharatiya Janata Party may win fewer parliamentary seats than expected.

India’s VIX index, more widely known as the fear gauge, has risen for 11 consecutive days, its longest winning streak since March 2020. Closing price.

Finally, several Indian stocks also appear to be emerging from their bubble, said Kevin Carter, chief investment officer of the company behind the India Internet and E-commerce ETF.

For example, One97CommunicationPaytm, the owner of fintech giant Paytm, which has been backed by Buffett, has fallen nearly 80% since its 2021 IPO.

But market watchers say rising volatility and lackluster index performance mean investors can make money if they pay close attention.

“This whole story happened too early in India, and yes, there was a pandemic-induced bubble. But that doesn’t mean the opportunities for real investors didn’t exist,” Carter added. “If you thought the opportunity in India looked good before, you (now) can get twice the opportunity for the same price.”

Ignoring the turmoil in Indian banks, e.g. HDFCAgrawal said that as the central bank tightens policy, it is turning to microfinance institutions such as Ujjivan Financial Services.

The former fell 12% over the past year, while the latter more than doubled.

need to know

Modi cast his vote in the middle of the election. The Indian general election is halfway through this week, and vote counting will begin on June 4. Prime Minister Modi votes in Gandhinagar Lok Sabha constituency in the west of the country on Tuesday. Amit Shah, a close Modi aide, is the BJP candidate there.

Four people have been arrested for allegedly tricking men into fighting for Russia. Four people detained by Indian police on suspicion of crimes Attract young people to fight for Russia to Ukraine. They were reportedly promised lucrative jobs or university degrees. According to India’s Central Bureau of Investigation, around 35 people have been lured into such situations so far.

Mumbai Indians withdraw from Indian Premier League. Wednesday’s Cricket Club is Be the first to be eliminated from the 2024 tournament. At the keystroke, Royal Challengers Bangalore faced Kings XI Punjab and had the upper hand. Virat Kohli and Rajat Patidar scored 2 runs in the 95th boundary.

What happened to the market?

Indian stock market index, Sensex and nifty 50, had a miserable week – both down about 2%. The benchmarks have given up almost all of their gains this year and are up less than 1% since January.

India’s 10-year government bond yield edged lower last week to 7.13%.this indian rupee fell, then cut its losses Dollar.

This week, Tata Power Chief Executive Praver Sinha discussed the company’s steps to increase renewable energy capacity on CNBC. He predicted that the country’s electricity demand will “grow significantly” over the next decade.

We also learned more about Qualcomm, with the company’s India president Savi Soin discussing opportunities in the Indian market.

In keeping with the tech theme, Microsoft Asia president Ahmed Mazhari talked about the company’s investments in Asia. He said India had a “huge number of graduates” but questioned how many of them had “the skills and proficiency of today”.