A lot to digest from the below but it’s looking like the early innings of a currency crisis for India. $USDINR

UBS is recommending investors should short India’s rupee and go underweight the country’s stocks amid slowing economic growth. The bank’s research group said India’s $4 trillion economy has entered a structural slowdown that can’t be explained by cyclical factors like oil-price hikes or declining government spending. 
The deceleration is underpinned by a long-term moderation in credit growth, foreign direct investment, export competitiveness and earnings potential. The “conventional wisdom that India is ‘far removed’ from Trump risk compared to other emerging markets is debatable,” said Manik Narain, head of EM strategy research at UBS. “A potentially higher-for-longer US yield environment poses challenges to India’s growth, with one of the highest debt service-to-revenue ratios in the major EM space.” 
Apart from the losses in equities UBS says India’s bonds are recording the fastest outflows since 2020 as euphoria over their inclusion in global bond indexes wanes. Market losses follow a slowing in real GDP growth over successive quarters, showing the Indian economy slipping below the 7% average generated before Covid-19. Disappointing business updates following a decade in which companies in the Sensex index failed to meet analyst expectations have underscored the bearish turn. UBS says that the moderation in India’s earnings growth is spreading to defensive parts of the economy — such as consumer-staples — showing that temporary factors such as government capital expenditure are not the only reasons behind the slowdown. 
Elsewhere, UBS says there is credit moderation, china deflation which will lead to tougher competition, slowing FDI which is a big concern as India saw only around $3 billion in the past 12 months. Equities are now 23% of the financial assets of Indian households and 60% of bank deposits. That means the market can no longer be termed “underpenetrated,” UBS said, adding that as per their valuation methodology, the country’s stocks trade at a 72% premium to the rest of emerging markets, a premium “unheard of even 12 months ago.”
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