Invesco predicts global central banks to avoid significant tightening amid banking crisis

In the wake of the recent banking crisis in the US and signs of growth moderation, Invesco Asset Management India expects that global central banks will possibly refrain from significant tightening in the future. This is in line with their base scenario that most global rate hikes are now behind us.

The Reserve Bank of India recently surprised the market by maintaining its interest rates, as the country suffers a slowdown in growth, particularly in consumption, and inflation begins to cool off. Invesco believes that India’s economic growth will pause in 2023 due to the impact of higher interest rates and a slowdown in global growth.

Although Invesco sees a risk of earnings downgrades for FY24 due to moderate growth, it sees opportunities for investors to arise in the market for the remainder of the year. It predicts that India’s next earnings upgrade cycle will begin in mid-2024, as the effects of the global slowdown weaken, and India’s structural growth drivers become more prominent.

Despite this, Invesco sees India as an attractive ‘buy on dips’ market for medium-term investors, given the current macro-backdrop.

Invesco notes that with the possibility of peak interest rates and slowing global growth, the road to achieving inflation normalisation may finally be opening. Moreover, the recent underperformance of Indian markets over the past six months has led to a rapid normalization of India’s relative valuations.