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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

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Speaker 1: Curtis and myself for the stories, making news and moving

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Speaker 1: markets in the APAC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.

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Speaker 2: Let's get to tanvi Madon, Senior Fellow on Foreign Policy

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Speaker 2: at the Brookings Institution, to talk a little bit more

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Speaker 2: about the India elections. Tonvie, thank you for joining us.

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Speaker 3: Now.

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Speaker 2: You see comments like even if Mody remains Prime Minister,

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Speaker 2: his position will be much diminished. He won't be the

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Speaker 2: same MODI it puts the eight percent growth target at risk.

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Speaker 2: But I want to flip the argument a little bit

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Speaker 2: and put this to you. Might this not be a

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Speaker 2: good thing in that it shows democracies working in India

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Speaker 2: and even smart strongmen need a check on their power.

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Speaker 4: I think the word you're hearing a lot from analysts

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Speaker 4: but also from voters is balanced. That the Indian voter

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Speaker 4: has voted for more balance, and as you said, that's

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Speaker 4: not necessarily a bad thing. You could see an argument

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Speaker 4: made that Prime Minister Mode will continue some reforms, for

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Speaker 4: example on the economic side, but he will need to

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Speaker 4: think about how to ensure more inclusive growth. The message

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Speaker 4: from voters seems to be that India is shining for some,

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Speaker 4: but not for many, and so I think you will

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Speaker 4: see it doesn't mean that you won't see the same direction,

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Speaker 4: but I think there will have to be some tweaks

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Speaker 4: and adaptations. But as you said, I don't think this

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Speaker 4: is necessarily a bad thing. It shows that at the

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Speaker 4: end of the day, the ultimate guarant of Indian democracy

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Speaker 4: are Indian voters and they want choice and the exercise choice.

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Speaker 1: So let's drill down into that if we can. How

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Speaker 1: pervasive is inequality, joblessness and inflation when it comes to

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Speaker 1: the cost of living.

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Speaker 4: I think it depends from state to state, and one

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Speaker 4: of the things that analysts will do in the next

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Speaker 4: few days is drilled down in each state and see

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Speaker 4: what the signal has been. One thing we've heard even

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Speaker 4: in the state elections in the studden southern state of

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Speaker 4: Karnataka a few months ago where Bangalore, is that what

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Speaker 4: rural voters in particular, we're feeling economic distress, We're upset

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Speaker 4: about inflation and prices, and we're pleased actually by Prime

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Speaker 4: Minister Modi's welfare schemes cash transfers, but they also want

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Speaker 4: jobs and so I think that's where you will see

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Speaker 4: some of the focus as Prime Minister Modi tries to

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Speaker 4: not just form a coalition but think about what the

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Speaker 4: policy priorities are going to be in the months ahead.

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Speaker 2: So those thirty seats that are controlled by the allies,

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Speaker 2: the small parties, we did have the Telugu Dessaum Party

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Speaker 2: in under Pradesh saying that they will that they are are,

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Speaker 2: you know, reaffirming their support for Modi. Is it possible

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Speaker 2: that not really all that much changes because the coalition

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Speaker 2: will still be in power and Modi will still be

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Speaker 2: the man.

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Speaker 4: I think where you will see change is from the

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Speaker 4: fact that Primal Simodi is somebody who has never had

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Speaker 4: to deal with a coalition government. He was a Chief minister,

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Speaker 4: the equivalent of governor of the state of Gujrat for

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Speaker 4: a number of years. He's been Prime Minister for ten years,

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Speaker 4: but he's always had a majority. So there will have

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Speaker 4: to be some change, even though it's only about thirty

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Speaker 4: forty seats that they need partners for they'll be changed

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Speaker 4: from the fact that Primal Simodi now has to deal

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Speaker 4: with coalition partners. I think the second thing that we

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Speaker 4: will will see over the next few months is what

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Speaker 4: this means for the party internally. What is their assessment

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Speaker 4: of why they have lost? And I think there will

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Speaker 4: have to be some adaptation. And if there is not,

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Speaker 4: if Prime Minister Modi and his party do not adapt

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Speaker 4: and send a signalative voters that actually they're not acknowledging

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Speaker 4: that the voters have sent a different message from twenty

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Speaker 4: nineteen twenty fourteen, they will perhaps suffer greater defeats in future,

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Speaker 4: not just national elections but state elections as well. So

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Speaker 4: I do think there will be some adaptation that's necessary.

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Speaker 1: I'm curious about what this may mean for foreign policy,

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Speaker 1: particularly with India's relationship with Russia, whether we're talking about

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Speaker 1: support for the conflict in Ukraine or the importation of

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Speaker 1: a Russian crude oil into India. Does it change the

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Speaker 1: calculus on foreign policy at all?

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Speaker 4: Not really. I think foreign policy is one place that

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Speaker 4: even though you see their ruling party often say that

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Speaker 4: everything has changed with Madi, whether it is actually more

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Speaker 4: continuity rather than change. Sometimes this emphasis that differs for

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Speaker 4: example on the diaspora or on cultural issues, but largely

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Speaker 4: whether it's the traditional partnership with Russia that remains but

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Speaker 4: has been both this government, the Modi government and previous

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Speaker 4: governments have been diversifying away from it to some extent.

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Speaker 4: You'll see that continue. You'll see at the end of

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Speaker 4: the day, a recognition that even job creation needs foreign

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Speaker 4: investment and that's been coming mostly from the West writ large,

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Speaker 4: or from the Middle East. And I think so you'll

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Speaker 4: see I think more con consistency, then change, maybe a

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Speaker 4: change in pace, but not change in direction and foreign.

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Speaker 2: Policy Tanvi domestically, how much does this strengthen the hand

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Speaker 2: of Rol Gandhi.

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Speaker 4: I think this will definitely change his image in India.

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Speaker 4: He was seen as somebody who you know, could not

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Speaker 4: pull off a victory for the Congress Party. And technically

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Speaker 4: he's not the leader. There's another leader of the Congress Party,

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Speaker 4: but he was seen as the face of it. And

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Speaker 4: so I think it will in the voter's mind, but

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Speaker 4: also a narrative, and I think that's huge can be

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Speaker 4: hugely important in Indian politics. In the narrative, the kind

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Speaker 4: of image that the BJP has tried to portray him

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Speaker 4: as a loser of sorts, you know, has nothing, hasn't

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Speaker 4: been able to kind of pull off victories. I think

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Speaker 4: that will change a bit. I think the Indian voters

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Speaker 4: have shown that they're actually not that willing to dismiss

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Speaker 4: him as the BGB perhaps would like.

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Speaker 2: Tommy, thank you so much for joining us. Tom V. Madon,

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Speaker 2: Senior Fellow on Foreign Policy at the Brookings Institution.

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Speaker 1: We go to Indian next, where Prime Minister nurenber Modi

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Speaker 1: has avowed to continue in his role even though his

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Speaker 1: party did lose a majority in parliament. Let's bring in

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Speaker 1: Hustlin to Amen. Bloomberg's the chief international correspondent for Southeast Asia.

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Speaker 1: She is in Delhi and she joins us. Now hawas

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Speaker 1: it's always a pleasure. I'm curious. It feels like we've

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Speaker 1: witnessed what some are describing as a political earthquake. Can

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Speaker 1: you give us a sense of what you saw as

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Speaker 1: these election results came in.

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Speaker 3: Wow, it's such a stunning blow to Modi. I mean,

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Speaker 3: when we were tracking the vote ground and you know,

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Speaker 3: initially it stopped with oh, it's going to be a

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Speaker 3: landslide victory for Modi. Then he went to like, oh,

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Speaker 3: it's getting really really close. You know, in the end,

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Speaker 3: this is the largest democracy and they're voted against the

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Speaker 3: status go they want change. You know, we talk about

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Speaker 3: how India is a rich country. We talked about India,

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Speaker 3: how it's growed at eight percent the fosses growing economy

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Speaker 3: among the G twenty, but that wealth has not been

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Speaker 3: equal and the people voted against that. It's been a blow.

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Speaker 3: You talk about political usquake, this is how it landed. Really.

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Speaker 3: Modi's VJP parties secured two hundred and forty one seat.

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Speaker 3: What in needed for a majority was two hundred and

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Speaker 3: seventy two. Essentially, what it needs to do now is

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Speaker 3: to get those votes from its allies. The problem is

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Speaker 3: the leaders of the two allies are flip swapping. They've

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Speaker 3: been flip swapping for the last couple of months. In fact,

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Speaker 3: they joined the alliance only several months ago. So he

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Speaker 3: remains to be seen if Modi can get them on

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Speaker 3: its side.

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Speaker 2: In our stories though, we are saying that a spokesperson

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Speaker 2: for the allies basically affirming support for the coalition. But

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Speaker 2: it does give them some power, so it kind of

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Speaker 2: raises the questions if Mody is a I wouldn't say

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Speaker 2: a loser, but I mean he's definitely in that category

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Speaker 2: of not achieving quite what he'd hoped. Who has achieved

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Speaker 2: a lot more and how much power does it give them?

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Speaker 3: Well los to say it is a weekend Modi Mody

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Speaker 3: was seen for a very long time as the strong man,

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Speaker 3: unbeatable I mean cint he king to power, which was

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Speaker 3: a surprise. Ten years ago his bill his power near

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Speaker 3: a year afia no one expected to see a week

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Speaker 3: in Modi. He talked about what's staying in power to

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Speaker 3: twenty forty evans. That is when he targets in it

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Speaker 3: to be a middle income country right now, if you're

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Speaker 3: talking about a torments alternative to motive, that isn't any

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Speaker 3: nobody's ever talked about succession plan. But you are right.

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Speaker 3: The power now lies are the regional leaders, those allies

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Speaker 3: and Modi is after we could see a hung parliament

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Speaker 3: in both sides the opposition as well as the b

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Speaker 3: Japs fail to get that majority, So a lot of

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Speaker 3: like state right now, we don't really know for sure

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Speaker 3: Modi remains in power, remains the Prime minister a week

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Speaker 3: from now.

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Speaker 1: So has we've talked a little bit about the economic backdrop.

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Speaker 1: I'm curious about Modi's Hindu nationalism and whether or not

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Speaker 1: that played a role as well. Well.

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Speaker 3: I guess in a way it did play a role.

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Speaker 3: I mean, body tried to rule the Hindus in the country.

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Speaker 3: That means eighty percent of the population. But if you

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Speaker 3: take a look at the most populars state out there,

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Speaker 3: that is Uja Pradesh, mainly Hindus. In fact, he recently

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Speaker 3: erected the Rum Temple, which replaced a mosque which was

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Speaker 3: there since the eighteen fifties. But then again that did

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Speaker 3: not translate to more votes for him. At the lost

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Speaker 3: election in twenty nineteen, the BJP secured sixty two seats

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Speaker 3: out of the eighty available up for grabs. This time round,

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Speaker 3: that was reduced to only forty seats. If you want

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Speaker 3: to win the overall election, you need to win Uta Pradesh.

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Speaker 3: And so barren lies the evidence that Hindu nationalism that

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Speaker 3: Modi has been touting all the time on us for

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Speaker 3: the lost and years has not really worked.

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Speaker 2: So has I think we need to kind of put

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Speaker 2: this in the category of another wealth divide story. It's

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Speaker 2: evident that people at the lower end have suffered a

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Speaker 2: little bit, even though even though India has seen dramatic

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Speaker 2: growth rates and has a target of eight percent ongoing.

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Speaker 2: So what are the changes that Mody might have to

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Speaker 2: put in place to satisfy those people who voted against him.

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Speaker 3: It's about income inequality, right, I mean income inequalities at

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Speaker 3: the widest in twelve years. And when it comes to

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Speaker 3: getting help from the government, eight hundred million people out

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Speaker 3: of the one point three billion people get free grain

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Speaker 3: from the government. Therein lies how poverty looks in India. More,

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Speaker 3: he needs to ensure that wealth gets distributed more evenly

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Speaker 3: to the people. He's concentrated, some say on the wealthy

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Speaker 3: in the country. He's concentrated on manufacturing in getting investments.

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Speaker 3: The likes of Google and Apple have made huge investments

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Speaker 3: in the south of the country. But that's not translating

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Speaker 3: to real jobs for the people, not translating to real wealth.

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Speaker 3: So the question really is what does he needs to

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Speaker 3: do or perhaps he needs to grow the services sector

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Speaker 3: even more. Some like Graham Rajan, who's a farmer IBI governor,

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Speaker 3: he's been saying that services can create the kind of

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Speaker 3: jobs that right now India needs structural changes and if

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Speaker 3: what he remains in power in the next five years,

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Speaker 3: he needs to look at that, raise consumption levels, raise

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Speaker 3: the level of the quality of life for the ordinary Indians.

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Speaker 1: Haz thank you so much for making time to chat

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Speaker 1: with us, filling us in on the details surrounding the

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Speaker 1: election in India, where Prime Minister and Arndra Modi vowed

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Speaker 1: to continue in his role after his party did lose

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Speaker 1: its majority in parliament. Has Linda Ahman, Bloomberg's chief international

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Speaker 1: correspondent for Southeast Asia, joining us from Delhi here on

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Speaker 1: Daybreak Asia.

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Speaker 2: Joining us now is James Demmer, chief investment officer at

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Speaker 2: Main Street Research. James plenty of time to talk about

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Speaker 2: the US. I wanted to get some reaction here to

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Speaker 2: the strong reaction that we saw in the election results

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Speaker 2: from Mexico and India. The landslide VI three by Claudia

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Speaker 2: Scheinbaum in Mexico rattled markets there. It strengthens the hand

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Speaker 2: of the leftist of the ruling leftist party, So that's

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Speaker 2: one thing, and then the result in India may Weakennuendra

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Speaker 2: Modi's hands. So I'm wondering if you've looked at this

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Speaker 2: and whether there's any sort of invisible thread takeaway from

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Speaker 2: these results for emerging markets.

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Speaker 5: Thanks Brian. Yeah, I think there are there are a

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Speaker 5: number of takeaways here, and I think markets absolutely were

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Speaker 5: not expecting this in Mexico or certainly in India, and

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Speaker 5: it is definitely a blow to equities and this very

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Speaker 5: pro growth era that Modi's had, you know, eight hundred

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Speaker 5: million Indians and as you mentioned or was mentioned earlier,

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Speaker 5: six hundred and forty million going to the polls was

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Speaker 5: a big surprise, a big move towards the Gandhi administration

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Speaker 5: and the big changes that they see. And this is

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Speaker 5: not a positive for equities, no question question. And that's

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Speaker 5: why you're seeing the big sell off, the significant selloff

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Speaker 5: and even in bigger in individual names and indexes. And

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Speaker 5: we would suggest investors here, you know, you wanted to

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Speaker 5: use risk management tools here, stop losses whatever, because even

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Speaker 5: though Mody thinks that he may gather enough to stay

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Speaker 5: in power, it looks less likely and definite an uphill

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Speaker 5: battle for him and also for equity markets there.

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Speaker 1: Yeah, and I'm wondering whether or that was a part

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Speaker 1: of the stable situation for the dollar today. You would

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Speaker 1: expect with lower treasury bond yields and expectations now that, Yeah,

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Speaker 1: maybe the Fed is going to have room to cut rates.

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Speaker 1: The dollar held in and we had a rally in

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Speaker 1: the end, So currencies that may be a little bit

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Speaker 1: of a kind of a safe haven. Is that going

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Speaker 1: to be the case going forward, favoring haven currencies?

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Speaker 3: Yeah.

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Speaker 5: I think whatever you have these kind of disruptions, and

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Speaker 5: we've seen a lot of them over the last thirty years,

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Speaker 5: there's going to be a flight to qualities to stability.

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Speaker 5: The US dollar is absolutely going to be a beneficiary

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Speaker 5: of that. That certainly saw that today.

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Speaker 2: So with bond yields down, in the dollar down, we've

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Speaker 2: entered this period here where it seems like, you know,

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Speaker 2: the what we had before, which is bad news is

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Speaker 2: good news. That that's giving way to bad news is

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Speaker 2: bad news. People want to see growth hang in there.

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Speaker 2: It's it's a little bit of a concern, but it's

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Speaker 2: not yet a scare, right. I mean we haven't had

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Speaker 2: dramatic economic data suggesting any sort of meaningful move down, right.

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Speaker 5: Yeah, I would agree with that, and I think investors

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Speaker 5: continue in general to focus maybe on the wrong thing.

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Speaker 5: I mean, you've got people, you know, really parsing through

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Speaker 5: the inflation data, which frankly has has gone in the

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Speaker 5: right direction, you know, certainly lower over the last couple

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Speaker 5: of years and closer to the FEDS target. And you know,

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Speaker 5: jobs reports, you know they ebb and flow, but they

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Speaker 5: generally speaking are healthy. So you know, in our view,

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Speaker 5: you know, this is a great setup for equities if

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Speaker 5: you stop thinking necessarily about the economic data, which is

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Speaker 5: generally speaking better, and focus more on earnings. I mean,

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Speaker 5: the last two quarters and we can get deeper into

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Speaker 5: that have been much better than expected to a wide degree.

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Speaker 5: So earnings are what drive stocks once you get the

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Speaker 5: Fed out of the way, and we think they are

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Speaker 5: out of the way.

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Speaker 1: So if the fit is out of the way, I'm

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Speaker 1: imagining that you think, okay, they're going to still be

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Speaker 1: in a position to cut rates this year. How much

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Speaker 1: do you think we're going to see in terms of

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Speaker 1: easing between now and December.

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Speaker 5: You know, we've been of the thought that this economy

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Speaker 5: growing at north around four percent, let's call it, and

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Speaker 5: positive earnings and particularly recently more broadening of that earnings growth,

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Speaker 5: that the Fed may not have to do anything. And

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Speaker 5: you know, again recent data, most specifically cooling jobs and inflation,

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Speaker 5: suggested they could cut, now, that's super bullish. If they

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Speaker 5: can cut in September, which probably the futures markets say

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Speaker 5: possibly September, certainly November. Now that's another layer of bullish

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Speaker 5: data and potential strategy that would work for equities. Here.

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Speaker 5: Our feeling is that equities can do continue to do

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Speaker 5: fine even if the FED sort of stays out of

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Speaker 5: the way and the economy grow up and again or

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Speaker 5: inaction to be where they are.

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Speaker 2: In fact, many would say that that might even be

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Speaker 2: better to have the FED just stay what it's been doing,

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Speaker 2: because once you start getting some cuts, you know, some

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Speaker 2: people will worry that there's something under the hood and

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Speaker 2: all that. This is an interesting period that we're coming

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Speaker 2: into here. No earnings basically now for several weeks, and

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Speaker 2: the FED is I mean, it's what it's saying, it's

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Speaker 2: data dependence. We can see the same data they see,

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Speaker 2: so you're not going to get much of a surprise.

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Speaker 2: They don't really want to surprise the market here. So

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Speaker 2: do you think that the drift is lower or the

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Speaker 2: drift is higher?

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Speaker 5: You know, I would suggest I hate to say this,

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Speaker 5: it's kind of boring, but I think it's choppy. I

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Speaker 5: don't think you're going to see an economy that gets

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Speaker 5: real weak here, particularly here in the US, and I

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Speaker 5: don't really think that you're going to see any significant

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Speaker 5: more strength than we have. I mean, four percent is

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Speaker 5: a higher growth rate than we've really seen in GDP

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Speaker 5: for the last ten years. So we've got an economy

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Speaker 5: that seems to be much more resilient, growing at a

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Speaker 5: much higher pace, and we don't think that it's going

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Speaker 5: to accelerate a lot from here. But we also just

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Speaker 5: can't see how it's going to sort of get accelerate

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Speaker 5: at any significance. So again that's why we think the

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Speaker 5: FED doesn't necessarily certainly need to cut I mean, I'm sorry,

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Speaker 5: raise rates, and probably without meaningful deterioration, probably isn't going

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Speaker 5: to be interested in cutting.

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Speaker 1: So what area is the market do you like, James,

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Speaker 1: as we wrap up here, is it industrials, materials? Given

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Speaker 1: the economic sensitivity of those groups. Do you like artificial

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Speaker 1: intelligence and the tech trade? Do you want to chase that?

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Speaker 1: What do you favor these days?

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Speaker 5: Yeah, it's a new business cycle. You got the FED

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Speaker 5: out of the way. Ernie's going to drive stocks the

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Speaker 5: next seven to eight years, and we want to focus

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Speaker 5: on where that Ernie's growth is going to be. That's

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Speaker 5: tech and telecom because of the AI tailwinds, and then

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Speaker 5: how does that affect everything else. You got to own

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Speaker 5: the financials like JP Morgan or healthcare industrials and the

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Speaker 5: utility sector with the expanding grid to absorb all this energy,

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Speaker 5: we're going to need to run. These chips going to

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Speaker 5: be important sectors. So investors should be here and be bullish.

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Speaker 5: Stocks are relatively cheap based on forward earnings. I think

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Speaker 5: it's a great setup requities.

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Speaker 2: Yeah, all right, James, thanks very much for joining us.

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Speaker 2: James Demmer at, Chief Investment Officer, Main Street Research.

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