Markets may correct 25% if BJP loses Election in 2024: Chris Wood Stock Market Prediction at BS BFSI Summit
Chris Wood stock market warning at the BS BFSI Summit: Jefferies Global strategist Chris Wood on Monday said Indian equity markets could experience a market fall by as much as 25 percent in the event that it is the case that India’s ruling Bharatiya Janata Party (BJP) is defeated in the general elections next year, as per a Business Standard report.
At the BS BFSI Summit, Wood added that the BJP not coming back could be the biggest threat to Indian markets.
However, the markets will rebound sharply because of the momentum according to the world-renowned market strategist, while cautioning against positions that are leveraged in anticipation of the coming polls.
A renowned market strategist Chris Wood, who holds the post of the Global Director of Equity Strategy at Jefferies, presented a noteworthy prediction at the Business Standard BFSI Summit 2023.
Wood stated his concern about the possibility that the Indian market could suffer significant declines by 25 percent during the time that being unable to win the elections of Bharatiya Janata Party (BJP) that is headed by Prime Minister Narendra Modi, not being able to win the general elections of 2024.
In drawing a parallel to the surprising 2004 elections, Wood remarked, “If there was a repeat of what happened with the surprise election in 2004, then I would expect a 25 percent correction if not more. However, the markets would bounce back sharply due to the momentum. “
Wood stressed that the Modi government’s implementation of fundamental reforms could be hard to undo. As a security measure, he warned against taking positions that are leveraged in India in the lead-up to coming elections and highlighted the dangers associated with a change of leadership.
India is the top opportunity in the emerging market
Chris Wood, who has always been optimistic about the growth of India has reiterated that India is the most equity-based economic tale among new markets.
“India’s growth story is among the best in the world, especially in Asia,” said the minister.
Indian market conditions are range-bound, with mixed market signals coming from the global markets when investors consider concerns about geopolitical uncertainty and the trajectory of rate hikes to the West.
However, despite these scathing comments, Chris Wood pointed to India as the most prominent domestic equity investment opportunity in the emerging market (EMs).
“India is the best growth story among EMs, and particularly in Asia,” he said and noted that the belief is now gaining traction amid the difficulties faced by China.
But, Wood said that his viewpoint isn’t yet a consensus in the world since global investors have not invested in India. Wood advised investors to keep an ongoing, structural position within this Indian market, and advised that every dip in the market is a possible purchase chance.
India’s Economic Potential: Expected a New Boom Cycle
Wood is anticipating the return of the economic boom that was witnessed between 2002 and 2009, which was primarily fueled by a boom in housing, followed by private capital investment. Notably, the Indian property market is in the third season of growth after 7 years of stagnation without any immediate indication of a slowdown. He expects the percentage of fixed capital production as a percent of Gross Domestic Production (GDP) to increase in the next few years, thereby driving the growth of India’s economy.
“Equities are experiencing a short-term bounce after the heavy selling last week, as crude moderates and Q2 results provide some relief. But a full containment will depend on a radical fall in geopolitical risk and global bond yield,” said Vinod Nair, the Head of Research and Analysis at Geojit Financial Services.
Economic Outlook of China
Wood has compared China to Japan which is slowing. The key issue, he said the question of whether the slowdown is a lasting change or whether China is going to experience a revival. Wood expressed his belief that China’s economic growth will come back, though at the rate of about 3 percent over the course of the next decade, compared the India’s anticipated growth of 6-7 percent.
Challenges for FIIs
Wood recognized the difficulties faced by foreign institutional investors looking to get into the Indian market, with a number of cumbersome procedures that hinder their investment. He suggested that a substantial amount of money that was previously put into China could move into India. However, the analyst pointed out that a greater proportion of global funds are flowing through Japan this year thanks to simplified investment procedures.
Market perspectives on the conflict between Israel and Hamas
In addressing the conflict between Israel and Hamas, Wood observed that the markets seemed to believe that the conflict could not grow to a larger Middle East war, evident in the relatively low volatility of the price of oil. However, Wood cautioned that assumptions based on market data are not the sole source of assurance.
US Federal Reserve’s focus on economic growth
In relation to the context of the US market, Wood forecasted an economic slowdown in the next year as a result of the effects of tightening the monetary system. Wood raised concerns over the rising US Treasury bond yields and their impact on fiscal cost and budget deficits. The perception of a shift in risk with regard to US Treasury bonds could have significant implications. Wood also emphasized the importance of monitoring closely how the US Federal Reserve, particularly in response to a weakening of labor data and the persistent rise in inflation.
Wood stated his belief that his research suggests that the US Federal Reserve would likely prioritize maintaining a strong workforce in order to sustain the growth of the economy. This, Wood believes, could ensure that inflation stays within the range of 3-4 percent in the US which is higher than the current goal of 2 percent. This has possible consequences for US bond markets.
Analyst View On The Market
Apart from the Chris Wood stock market prediction, other market analysts warn that market sentiment is still uncertain in the near term as investors keep an eye on changes across West Asia, second-quarter earnings as well and key economic figures.
The risk of volatility in the global market is likely to slow the growth in the local market, analysts added in light of concerns about the rise of interest rates and geopolitical tensions persist.
“In the near term, we expect markets to consolidate as investors await interest rate decisions from major central banks, including Bank of Japan, Bank of England, and US Federal Reserve this week, looking for guidance about future interest rate decisions. Stock-specific action is likely to continue in the market with ongoing result season,” said Siddhartha Khemka, Head – of Retail Research, Motilal Oswal.
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