Foreign brokerage Credit Suisse said it is less concerned about India’s macro fundamentals, but more about global headwinds, which could weigh on equity markets in the near term. The brokerage, however, said its medium-term outlook for Indian equities is still positive, and any sharp corrections could be a good buying opportunity. In the fixed income space, it has changed its view from negative to neutral across the yield curve, as commodity prices have started to fall globally, and the RBI could be relatively less aggressive. Here's what the brokerage said on various assets.

Credit Suisse announced that around 9,000 posts would vanish in the following three years. However, it did not say which posts or where the cuts would occur. Axel Lehmann, the Chairman, said it is a success blueprint. Investors did not like the news, and its shares dropped by over 13% after this announcement. Credit Suisse wants to raise around $4 billion as new capital per its restructuring plan. Saudi National Bank will provide $1.5 billion out of the $4 billion.

The aim is to spin off the investment arm of the bank and relaunch CS First Boston. Another aim is to reduce some of the higher-risk businesses it finds itself in. By 2025 the workforce will decrease from 52,000 to 43,000, and this year will see 2,700 jobs vanish.

What Credit Suisse says on Indian stocks, fixed income, rupee & gold

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India Strategy

Foreign brokerage Credit Suisse said it is less concerned about India’s macro fundamentals, but more about global headwinds, which could weigh on equity markets in the near term. The brokerage, however, said its medium-term outlook for Indian equities is still positive, and any sharp corrections could be a good buying opportunity. In the fixed income space, it has changed its view from negative to neutral across the yield curve, as commodity prices have started to fall globally, and the RBI could be relatively less aggressive. Here's what the brokerage said on various assets.

Equity

The Indian equity market recovered sharply in last month and outperformed most other equity markets. As a result, India’s PE valuation premium increased again compared to its peers. CS expects India’s relative valuation to remain elevated, supported by its improved macro fundamentals and relative attractiveness. However, geopolitical risks and recession fears amid aggressive tightening by major central banks are key headwinds that could lead to heightened volatility in the near term, it said. Against this backdrop, some caution and risk management are warranted as India’s valuation premium is still elevated, the brokerage added. CS said it would remain defensive in the near term and prefer companies with high domestic exposure. It prefers sectors such as financials, healthcare, autos, and FMCG in the near term.

Fixed income

Credit Suisse said the CPI inflation in India was largely unchanged MoM, and in line with consensus. Incremental inflation pressure eased largely, helped by excise duty cuts and a fall in palm oil prices. With pricing pressures moderating, and the monsoon progressing well, the urgency of rate hikes could wane, and the RBI may adopt a less aggressive monetary policy. Nevertheless, the key risk is higher oil prices and the impact of rupee weakness on imported inflation that needs to be closely monitored.

"We close our negative view and turn neutral on bonds across the yield curve as we believe inflation could not be a major worry, and the RBI could be less aggressive. We continue to prefer investing into debt instruments where credit spreads are attractive," CS said.

Rupee

The rupee fell to an all-time low against the dollar due to the strengthening of the dollar, FPI outflows, and concerns over the worsening of India’s balance of payment (BoP) position. India’s BoP in Q4FY2022 fell into deficit for the first time since the taper tantrum, and at –$16 billion, it was the second highest ever. More importantly, it is expected to widen further in case the oil prices remain elevated. According to CS' macro strategist, India could run a BoP deficit of $50 billion in FY2023 if oil prices average around $120 per barrel for the fiscal year. While this could remain an overhang on the rupee, India’s healthy forex reserves may help to prevent a sharp depreciation, CS said.

Gold

Gold prices declined 7.7 per cent in the past four weeks as a stronger dollar and aggressive tightening by central banks weighed on gold. Against this backdrop, investor outflows from gold ETFs accelerated over the last month. The risk-reward appears well balanced for gold. On the one hand, aggressive rate hikes could weigh on gold prices, while on the other hand, recession fears will likely support gold on the downside. CS' commodity team maintains a neutral view on gold with a 12-month forecast of $1,750 per ounce.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

While Credit Suisse is primarily in Switzerland, it has a significant presence in London, employing 5,500 in the UK. The job cuts will reduce its costs by 15% by 2025. It will also set up a unit that would keep high-risk assets it wants to shut down.

FAQs

Q1. How many people does Credit Suisse employ in the UK?
A1. While Credit Suisse is primarily in Switzerland, it has a significant presence in London, employing 5,500 in the UK.

Q2. What is Credit Suisse's aim?
A2. The aim is to spin off the investment arm of the bank and relaunch CS First Boston. Another is to reduce some of the higher-risk businesses it finds itself in.

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