Investment banking major Goldman Sachs on Thursday downgraded Indian stocks to “underweight” — shorthand for a comment that means that equities could give lower returns than average-amid concerns about a crippling industrial deceleration.
“The investment case for India has turned less favourable. Growth recovery looks elusive, macro vulnerabilities are rising and positioning remains extended,” the bank said in a research report. “We see further earning cuts and limited room for re-rating. We downgrade India to underweight and recommend investors to stay selective.”
In other signs that industrial activity was in the middle of a major slowdown, India’s manufacturing activity slowed down to its weakest pace in more than four years in July.
The overall Purchasing Managers’ Index (PMI) from HSBC fell to 50.1 in July from 50.3 in the previous month on the back of cooling domestic demand.
The HSBC India Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 companies.
“Order flows weakened led by slower export growth,” HSBC chief economist for India and ASEAN Leif Eskesen said.