Investing.com — UBS Group AG (NYSE:) is advising investors to short the Indian rupee and reduce their positions in the country’s stocks. The research arm of the Swiss banking institution suggests that the Indian economy, which is worth $4 trillion, is experiencing a structural slowdown. This downturn is not attributed to cyclical factors such as oil price fluctuations or sluggish government spending.
The research group cites a prolonged decline in credit growth, foreign direct investment, export competitiveness and profit potential as reasons for the slowdown. These factors are expected to deteriorate further after Donald Trump assumes the US presidency.
Manik Narain, the London-based head of Emerging Market Strategy Research at UBS, challenges the conventional belief that India is relatively insulated from the impact of Trump’s policies compared to other emerging markets.
He emphasizes that a potentially prolonged period of high US interest rates could pose a challenge to Indian growth. This is due to India’s high debt service to revenue ratio, one of the highest among major emerging markets.
Nearly $500 billion of Indian equities have been wiped off their market value in the past month. This is the worst start to a year since 2016, according to the US government MSCI Inc (NYSE:).’s index for the nation. The Indian rupee has also hit consecutive lows against the US dollar, making it the worst performing currency in Asia.
Moreover, Indian bonds are experiencing the fastest outflows since 2020 as enthusiasm over their inclusion in global bond indices wanes.
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