India's immediate worries are more local than global
Adrian Lim, Aberdeen Asset Management
Jul 15, 2016 | Source: ET Now
Brussels has threatened to take a hard line with the UK in negotiations. But UK politicians are in no hurry to trigger those negotiations. Brussels can't act unilaterally either. This vacuum will have negative consequences for trade and investment for the UK and EU alike, with negotiations potentially taking years.
Brexit comes at an awkward time for a global economy already struggling with stuttering growth in China, weak commodities and an unconvincing US -led recovery. Although markets have been relatively calm since the vote, lower levels of growth will hurt earnings eventually.
Trade with the West is important for emerging markets. A renewed strong dollar may affect the ability of EM companies to repay dollar debts. That said, many emerging market stocks were already depressed and their currencies oversold (on a PPP basis). From this standpoint, we can see there's selective value in the asset class. The sticking point is a lack of earnings growth.
India is less exposed to foreign trade than most EM countries. Its immediate problems are arguably more domestic. These include a lack of business confidence, leading to low investment; Concerns about resurgent inflation arising from supply bottlenecks and policy delivery. The public bank logjam has not led to meaningfully cheaper money. Complicating this picture is the fact that Indian equities aren't cheap.