Deutsche Bank-Asia Macro Strategy Notes India – Signs of growth slowdown;...-110280308

11 September 2024Deutsche BankResearch Asia India Fixed Income Asia Macro Strategy Notes Date India – Signs of growth slowdown; Receive 5YWe recommend receiving INR 5Y swaps in addition to our existing long IGB 7Y exposure in the Asia portfolio.nOur highest-frequency daily growth indicator suggests the growth miss that first showed up with the March-June quarter may have now widened.nInflation outcomes should also be incrementally conducive to this position with good monsoons and a food-price supportive sowing season.nWe remain more circumspect on FX, with RBI REER close to the stronger end of its decade-long range.The technical rationale for choosing the tenor above for our trade over others is presented in the Annex.Vaninder Singh, CFAMacro Strategist+65-6423 8947Sameer GoelMacro Strategist+65-642-36973Deutsche Bank AG/Hong KongIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. MCI (P) 041/10/2023. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Distributed on: 11/09/2024 09:03:10 GMT7T2se3r0Ot6kwoPa11 September 2024Asia Macro Strategy NotesPage 2Deutsche Bank AG/Hong KongOur readers will recall that GDP growth missed – vs. RBI’s Nowcast & forecast – for the March-June 2024 quarter. Our highest-frequency daily growth indicator suggests that the growth slowdown may have widened further since, possibly substantially (Figure 1).Relying on any daily data necessitates the statutory warning that these are still early readings, and that the guidance might shift. However, we would like to highlight our cause for concern.nManufacturing. The steepest drop is in daily electricity generation, which correlates almost perfectly with both the monthly generation numbers, released as a part of the Eight Infrastructure Industries release (August data due on September 30), as well as the electricity demand data (August data already out, Figure 2).nConsumer durables. There is a substantial dip also apparent in car sales (August -9.3%, Figure 3) and two-wheeler sales (down to 3%, after averaging double-digits earlier in the year).nSales. Sales and earnings for listed large corporates – tracked by Bloomberg – are both showing signs of slowdown, again over the August-September period (Figure 4).The weakness in data since August is increasingly palpable. The only high-frequency indicator still holding up somewhat is credit card transactions – although even that is showing some early signs of weakness in September mtd (-0.7% mom sa vs. +1.3% in Aug and Jul).RBI's stance continues to be in favor of withdrawal of accommodation. Governor Das asserted, though, in a recent speech that “balance between inflation and growth is well-poised”. Were this high frequency data to get confirmed in more monthly and quarterly prints in coming days, this could shift the narrative further still towards more downside in growth.Figure 1: Daily growth indicator has fallen sha