India

While 2024 will see various election risks, global geopolitical uncertainty is driven by the US election and its struggle with Russia, China, and Iran. The stock market can manage local domestic political risk. But it will correct upon a major outbreak of geopolitical uncertainty.

Decelerating nominal sales, a peaking credit cycle, and very high valuations - Indian stocks will not escape the carnage when risk assets globally begin to sell off.

India’s intake of industrial commodities is 10-to-20 times as small as China’s. Capital goods are five times as small. Hence, India is not in a position to offset any decline in Chinese demand for these commodities and goods.

Investors should underweight global equities and risk assets; overweight US stocks relative to global; and overweight defensive sectors versus cyclicals.

Indian stocks have gone up this year even as the broader EM markets have been falling. How long can Indian markets continue to rise?

Indian EPS growth is set for major disappointments vis-à-vis the lofty expectations. Weak domestic demand amid tight fiscal and monetary policy entails more downside in stock prices. Stay underweight.