India insight: Weak macro, resilient markets – ANZ

Analysts at Australia and New Zealand Banking Group (ANZ) offers fresh insights into the Indian financial markets, in light of weak fundamentals.

Key Quotes:

“A universal question has popped up amongst investors. There has been a slew of bad news on the India macro story – slowing economy, financial sector problems and a worsening fiscal position. And yet, the Indian rupee and bond yields have remained remarkably resilient. What explains this?

Ironically, it is the macro stresses that  lie at the heart of this paradox. The associated slowing demand for credit, combined with rising risk aversion, is raising the proclivity of the financial sector to increase its exposure to government bonds. Moreover, driven by weak growth, the improving BoP position is anchoring the Rupee.

A reversal in the current financial market trends will therefore, need to wait for a durable revival in growth.”