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During the previous weeks, we were writing on significant stages of Portfolio Construction. However, this week, we had to shift our attention away from the topic in order to address specific questions raised by our partners. We promise to re-focus on the portfolio construct from the following week. ?

We have received an interesting set of questions from multiple partners asking us the following – “When the whole world is at a turmoil, recessions and inflation and the macro is not healthy, how is India able to sustain and thrive or is it getting over-rated? When lay-offs happen in IT in the US, this is not reflecting in Indian IT”. Why is this the case? “

To answer the above, it is crucial to analyse the global macro situation with a nuanced perspective –

  1. While the world and economists around the world predicted US to go into recession, the actual spending patterns on the ground and the scarcity of labour does not reflect the same. Surprisingly, there has been substantial growth in the housing construction, which is highest in the last 2 years. These indications suggests that US economy is definitely stronger that what most ‘Analysts’ predicted.
  2. The layoffs in the big-tech was primarily aimed at reducing the excess capacities that had accumulated over the past decade when easy money and capital was available. We have been discussing about the likelihood of interest rate being higher for an extended period in the US.
  3. India is at a great tailwind cycle, with unique combination of favourable macro and micro at play. Historically, we have relied on stable oil prices, experienced balance of payment deficits and weak treasury reserves over the last decade. Despite these challenges, we have displayed growth primarily because of a strong micro. This is the first time where we see macro-economic conditions also aligning with strong micro fundamentals creating a synergistic tailwind effect.

To summarize, the ground reality in the US not being as bad as analysts predicted, India has emerged as one of the major beneficiaries where significant influx of capital the last few months and we believe this  will have a structural impact over the next few years.

We look forward to providing you with further updates on our portfolio and sharing our perspectives in the upcoming weeks. In the meantime, we wish you a delightful weekend.


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Weekly Enlightenment Archives – ITUS Capital

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