In India, investors have been spooked by the deceleration in GDP growth to 5% (monsoon deficits and the credit crunch in rural India being the primary culprits), the vulnerability of the export economy (now, accounting for 20% of GDP) to the global slowdown, the stock market overhang from pledged shares being held as collateral and the government’s self-inflicted wounds (specifically, the tax surcharge on high-networth and foreign portfolio investors and the heavy-footed response to the credit squeeze on the smaller non-bank finance companies).
(Sept 30): The Tantallon India Fund closed 4.58% lower in August, almost all of it on account of the rupee’s 3.7% depreciation against the US dollar, in line with the 4% depreciation of the renminbi.
The world is significantly more complicated than just six months ago. The spectre of an increasingly aggressive response to the mass demonstrations in Hong Kong, the risk-off/risk-on market schizophrenia to offagain/on-again, trade-talk carrots and sticks, a liquidity-constrained and slowing China and an inverted yield curve foreshadowing a potential global recession, the bleak prospects of a no-deal Brexit, saber-rattling over the Kashmir Valley, rolling conflicts in the Middle East… the list goes on and on and on, paralysing actual investment decision-making and encouraging myopic portfolio duration and positioning.
