According to Yahoo News, Societe Generale SA strategists have downgraded India's equities to neutral from overweight, citing the upcoming general election as a source of volatility for the nation's stock market. The downgrade comes at a time when India's economic growth outlook is moderating. The South Asian market is expected to experience a pause in outperformance until the elections are over, according to strategists Frank Benzimra and Rajat Agarwal. This move is contrary to Wall Street's optimism, as Goldman Sachs Group Inc. upgraded India to overweight earlier this month, citing the nation's strong structural growth prospects.
The S&P BSE Sensex benchmark has risen 15% since Benzimra's team upgraded India stocks in September 2022, compared to an 8.8% increase in the MSCI Emerging Markets Index. Societe Generale strategists also downgraded Indonesia to underweight due to a weak earnings outlook and political uncertainty. The upcoming elections in various markets, combined with an uncertain outlook for the Federal Reserve's rate decisions, pose risks of increased volatility in global financial markets. Indonesians will head to the polls in February, while India's general election is expected to take place in April and May.