In this briefing:
- India: Outlook on Capex Recovery Continues to Brighten
- Gold: Dovish Central Banks May Sustain Rally; Closing Our GLD Short
1. India: Outlook on Capex Recovery Continues to Brighten
As per the CSO, gross fixed capital formation (GFCF) has grown above nominal GDP for 4 consecutive quarters now (latest data for September quarter). This, after GFCF grew slower than nominal GDP in 20 of the preceding 21 quarters. Capex cycle is thus picking up. And there are good reasons to expect this continue in the foreseeable future. Capacity utilisation is increasing in a broad-based manner. Liquidity conditions have improved, and cost of capital is likely to fall. Corporate profit cycle is no longer a headwind, although it is not yet a strong tailwind. The nascent signs of a recovery in the capex cycle are thus likely to get stronger in the months ahead.
2. Gold: Dovish Central Banks May Sustain Rally; Closing Our GLD Short
Central banks around the world have signaled their willingness to return back to the Easy Money Playbook in their quest to re-stimulate economic growth and inflation. This significant shift in market expectations has been the key factor driving the recent rally in Gold (GOLD COMDTY) prices, and it appears to have legs. As such, we are closing our Spdr Gold Shares (GLD US) short.
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