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The Indian stock markets plunged over a 1,600 points and the rupee weakened from 64 per dollar to 66.74, a fall of over 4 per cent since August 11 when China announced the devaluation of its yuan currency.
On #IndiaHangOut, our panel of experts - Shubhada Rao, the Chief Economist of YES Bank, Jyotinder Kaur, the Principal Economist, of HDFC Bank, G Chokkalingam, the Founder of Equinomics Research and Advisory and Ajay Bagga, Market Expert - along with Govindraj Ethiraj discuss if the Indian economy can absorb a currency shock.
They also list out the opportunities for India in this global market rout:
1. No revision of growth forecasts. We are still looking at a resilient economy and anticipate that India will tide over this current volatile scenario far better than other markets. The prediction of growth at over 8% will look much better.
2. We have not taken one more interest rate cut off the table. Currently, we are still pencilling in one rate cut from RBI, which is a positive.
3. Since growth is slowing down purely on the basis of institutional policy paralysis, the turnaround too lies in our hands. The government really acts when they are at the edge of the cliff. This scenario might result in couple of reforms getting jump-started. Recovery can happen quickly if we get our policy framework going. There are talks of government taking action on the Shah panel report on MAT (minimum alternate tax) soon, which will boost the market.
4. China looking shaky brings back the spotlight on India. There will be a reallocation of funds from China to India. The fact that rupee has corrected so much, creates some degree of competitiveness, especially in sectors where India has an advantage like chemicals and furniture.
5. Since China is bringing down Asia along with it, commodity prices are going to be lower. As a result, retail inflation into India will be negative. Inflation should surprise us on the downside growing forward.
6. Participation and leverage, in terms of investors, is low. So, there is a lot of dry powder in the market, around 7,400 levels, which are pre-Modi levels. Participation in the market should increase when we hit these levels.