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India was already cooling before lockdown

The Indian market fell again in May. Carnegie Indienfond fell 7.4 percent this month, largely due to a weakening of the currency. The Indian rupee fell 4.7 percent against the krona.

India’s GDP growth for the fourth quarter (ending in March) was 3.1 percent. Growth for full-year 2019/2020 was 4.2 percent, which was the lowest in eleven years. Because India went into lockdown on March 24, the interpretation is that the economy showed a weaker trend even before shutdown. Restrictions have now been extended until June 30, although some regions where the spread of infection is under control have already begun to open. The plan is to open the entire economy by July 1. This is what the market is choosing to focus on right now; a return to normal economic activity.

The central bank lowered interest rates this month. The government presented a hotly-awaited support package that covers several areas and represents 10 percent of GDP in total. The government is also guaranteeing bank lending to small companies to avoid bankruptcies, while borrowers are being given a further three-month payment holiday. However, critics point out that the net effect of the package is only 1 percent of GDP in ready money from the government budget, which is something that the market has reacted negatively to.

With a few exceptions, corporate reports for the full year were, not entirely unexpectedly, at the weaker end. Despite a tough climate, HDFC Bank and Bajaj Finance showed growth in lending and profits as well as low bad debt losses. Over the past month, Reliance Industries has sold 10 percent of Reliance Jio Platform to Facebook. The deal means a valuation of Jio Platform at USD 75 billion. After this, a number of small parts of the company were sold to several venture capital funds and PE investors. Reliance Jio will probably be floated next year. Together with a new share issue, this means that Reliance will be essentially debt-free by the end of the year. Facebook’s plan is to introduce its mobile payment services in the Indian market. Reliance Jio has close to 400 million subscribers in its telecom network.

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Carnegie Indienfond offers exposure towards one of the world’s most exciting emerging markets. India has in the last decade established itself as a major economic power with extremely high growth. The...

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