Is it true that Credit Suisse has downgraded Indian equities?

In fact, last year when many of the big name like Morgan Stanley and Goldman Sachs had downgraded Indian equities, Credit Suisse had preferred to hold on. Now, Credit Suisse has also downgraded Indian equities from “Overweight” to “Underweight” citing a steep spike in oil prices as the key reason. Oil prices in the Brent market are already at 14-year highs; closing in on the record levels last seen in middle of 2008, ahead of the sub- prime crisis.

As per the CSFB note, this geopolitical risk gets compounded due to India’s 85% dependence on imports. This latest risk factor comes over and above the other existing risk factors like inflationary pressures and sensitivity to Fed rate hikes. CSFB will now reallocate these funds to Chinese stocks, where it has gone Overweight. CSFB has specifically stated in its note that it considers China to be a grossly under-priced market at this juncture.

Credit Suisse had upgraded Malaysia due to the higher oil prices. However, they have downgraded South Korea due to its excess dependence on imported oil. CSFB has also downgraded Thailand, due to its high exposure to Russian tourism, which could not get negatively impacted. In the Indian context, CSFB is of the view that the crude rally could literally add $60 billion to India’s import bill, impacting its external ratings.