Ruchir Sharma: India is a quality regime

I feel that in India, it is a quality regime and that is one of those things which has frustrated many investors which is that they all though that as you get this big hope and you get this big revival in India, a lot of the junk will also rally Instead what we are seeing in India is that the quality regime has continued and all these advocates of buying these low quality stocks in India has got burned over the last few years and particularly over the last year. And I do not see a change in that regime. I still feel that quality is the way to go as far as India is concerned because the recovery is in the works but it is a gradual recovery.

 So, in that case the story for the last 20-30 years has been that always be short on what the government does and be long on what the private sector does in India because the government systematically disappoints. I do not see that changing too much. Sure, we have been offered a so called cleaner government and stuff but in terms of execution it always lags what has been promised and we get excited periodically about what is going to be delivered and we systematically get disappointed and yet the private sector in many ways the quality people in the private sector continue to march ahead.

I still feel that regime is in place in India despite all this hype which takes place every few years.-said Ruchir Sharma,Head-Emerging Markets,Morgan Stanley

Ruchir Sharma:What is driving Indian markets?

Also keep in mind that for the last few months I agree with you that Indian politics has played a dominant role in driving this market but there are many other factors at work which have driven the Indian market over time.

One very significant factor has obviously been the state of global risk appetite and of global liquidity and I think that here there is something more concerning in fact at this stage because I know that in India we have been very much lost to the domestic political scene.

Let us not forget that the Indian market over a period of time is still extremely linked to what happens globally, never before in the history of markets have markets been so high five years after recession ended. So, you have asset price inflation across the world and some of that asset price inflation has also helped India and Indian equities do well over the last five years. I agree that lot of the factors have been domestic but some of the asset price inflation has also played a role in lifting assets to a level which is somewhat disconnected from underlying economic reality. That is one big factor we have to keep in mind.-said Ruchir Sharma


Ruchir Sharma:Inflation Impact on India Underestimated