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Indusion Insights: 3Q2016

According to McKinsey’s September 2016 survey on global economic conditions, executives in emerging markets are expressing increasing optimism about the state of their economies. In India particularly, a whopping 91% of executives surveyed expect better conditions in the following months.

Indian markets are also reflecting an increase in optimism with the NIFTY up ~4% in the last quarter, albeit having corrected from a peak rise of ~9% into early September driven by an increase in geo political risk. The IPO market is also picking up with an increase in retail interest as evidenced by the recent 10x over subscription of ICICI Prudential Life Insurance and a slate of companies receiving approvals to raise public funds.

The tensions on the border aside, several economic indicators and policy trends are pointing towards a strong, sustained growth trajectory for the Indian Economy. Inflation is expected to remain below RBI’s target for early 2017 which set the stage for the new RBI Governor Urjit Patel  to ease rates by 25bps in his first Monetary Policy Review. The government seems to be on track for rolling out GST by April 2017. Very recently, India’s rankings jumped by a sharp 16 places to 39th on the World Economic Forum’s Global Competitiveness Index (GCI) with improvements in infrastructure and labour market efficiency. At the time of writing, India’s biggest spectrum auctions are expected to kick off although proceeds are expected to be at ~US$7bn. Overall GDP growth estimates for FY17 remain in the range of ~7.5% driven by robust demand and key reforms.

India’s manufacturing sector is seeing an increase in optimism and, while still early days, the case for growth seems to be gaining traction. Although IIP numbers are still not compelling, the Nikkei India PMI for August touched a 13 month high and recorded an expansion in total order books.

The Real Estate Sector continues to remain under pressure, but investor interest has increased with private equity investments jumping sharply in recent quarters. While changing regulation such as the introduction of the Real Estate Regulation Act (RERA) has had a near term negative impact, it is expected to boost prospects in the medium to longer term.

India’s Banking & Financial Services sector has been a turbulent space over the past year and more to say the least. Particularly in Banking, the spectre of non performing assets have hamstrung loan growth but the tide seems to be turning slowly. In a recent release, Moody’s Investor services mentioned that India’s banking system seems to be moving past the worst of it’s asset quality down cycle, supporting its stable outlook for the sector over the next 12-18 months.

Asset quality issues and the RBI’s increased actions to resolve these have led to a burgeoning interest in the distressed asset management space with several international investors seeking to enter or tying up with local partners for setting up investment funds and ARCs.

Additionally, NBFCs have increasingly gained favour as the platform of choice to drive the next leg of credit growth in India across both consumer and institutional lending.

In the virtual world, several large digital first platforms have run into funding issues and laid off employees in large numbers. However, there is an overwhelming push by several large business groups across sectors to magnify their digital footprint by building teams, acquiring companies and entering into strategic partnerships – a trend we expect will intensify over the next year.

For more details on market and hiring trends across our practice areas, read on…

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