Prudent Equity

Prudent Equity is a Gurugram based asset management company
Disclosure -

[Prudent Equity @prudent_equity]

For a normal Indian investor, the weak yen barely touches your portfolio. The catalyst is what happens when it turns.

A serious BOJ hike or a risk-off shock forces the carry trade to unwind. Money borrowed cheaply in yen gets pulled home fast, and that triggers a global sell-off. In August 2024, one such unwind knocked the Sensex down over 2,000 points in a single day.

The narrow silver lining: a weak yen cuts import costs for Indian firms buying Japanese machinery, while squeezing those that compete with Japanese autos, bearings and steel.

[Prudent Equity @prudent_equity]

Last week, the US dollar bought 163 Japanese yen.
The last time it bought that many was 1986.

Japan has raised interest rates to a 31-year high and spent tens of billions of dollars buying its own currency to stop this. Neither worked.

Here's why it's happening, and why it's a bigger deal than it looks 🧵

[Prudent Equity @prudent_equity]

Why would Washington spend its own money to prop up someone else’s currency?

Japan is the largest foreign holder of US government debt. A yen in freefall pushes Japanese institutions to dump Treasuries, lifting America’s own borrowing costs. The 10-year yield is already up ~57bps this year.

The US stepped in to protect its own bond market. Japan’s problem is now America’s too.

[Prudent Equity @prudent_equity]

This isn't one trade for India - it's sector-specific.

Under pressure: domestic steel, specialty chemicals, solar modules

Tailwind: autos & capital goods, construction/infra, India's share of global flows

[Prudent Equity @prudent_equity]

The transmission to India cuts both ways.

⚠️ Chinese steel & chemicals are flooding in as demand dries up - DGTR has active probes/duties on electrical steel, HRC, PET resin & rubber chemicals.

✅ Same oversupply = cheaper inputs for Indian manufacturers.

[Prudent Equity @prudent_equity]

The economic damage:

→ ~2pp annual GDP drag, 2024 & 2025 (Goldman Sachs)
→ Real estate investment -16.2% YoY (Jan-May 2026)
→ Evergrande liquidated, Country Garden defaulted, Vanke's losses hit records

Beijing's ¥7tn bank whitelist hasn't fixed it yet.

[Prudent Equity @prudent_equity]

China's housing market has just erased 20 years of price gains.

Here's what it means for Indian portfolios. 🧵

[Prudent Equity @prudent_equity]

The scale, in one chart:

Chinese home prices are back below where they stood when tracking began in 2005.

Major cities: -15% to -30% from peak.
Smaller cities: even steeper.

~70% of urban Chinese household wealth sits in property.

[Prudent Equity @prudent_equity]

With recent headlines about Chinese FDI into India, one question keeps coming up:

Has India reopened its doors to Chinese investment?

For six years, the common narrative was simple: Chinese capital was effectively shut out of India.

But the reality in 2026 is far more nuanced.

[Prudent Equity @prudent_equity]

Conclusion:
• If rains revive: buffers + irrigation contain it; the hit stays mild.
• If the deficit holds: pricier pulses & sugar, winter-crop risk, deeper cut to rural spending.

[Prudent Equity @prudent_equity]

The Middle East risk that rattled markets, the oil spike is finally cooling off.
But another headwind is building:
India's 2026 rains are forecast at just 90% of normal, with El Niño building through September. 🧵

[Prudent Equity @prudent_equity]

Why hasn't rural demand cracked yet?
GST cuts, a high base, and record food stocks are propping it up. (Part of the ~34% drop in rural job-scheme demand is a scheme change, not pure distress.)
What breaks first: real rural wages, already slowing as prices tick up.