New Delhi: Praising the Narendra Modi government for the  progress made on economic reforms, Christopher Wood, managing director and equity strategist at CLSA, said: “We won’t give him 10 as the government in not addressing banking problems immediately, but I feel demonetisation has helped weed out so-called black money.”

“It (demonetisation) was a brave step politically as it hurt small businesses, which were the supporters of the BJP,” he said at the CLSA India Forum.

“The real estate regulation Act is also commendable. Good developers will take advantage of this, but obviously there is some near-term collateral damage,” said Wood.

He also praised the government for bringing in the landmark bankruptcy law. He pointed that foreign outflows have been a big worry. "IL&FS crisis has been a big mess. Problems with some of the banks have just proved to be a double whammy for the domestic market," he added. 

CLSA cut its India rating to double overweight from triple overweight early this year. 

He added that he neither changed his bullish stance on India nor made any changes to India allocation so far.  He expects a lot of volatility in the Indian markets in the run-up to the general elections next year, he said, adding that he cut his India rating to double overweight from triple overweight at the start of this year.

He added that crude oil prices to go up although prices have seen a sharp decline recently — Brent crude has plunged 23.2% to $66.3 per barrel from its recent peak of $86.29 on October 3.

“The key risk is oil price, and key risk for the financial sector is more skeletons in the closet, but for the aggregate market it is oil price,” said Wood.

“I will raise my allocation to India if I see evidence of a pick-up of the investment cycle, which I am expecting next year,” Wood said.

Talking about the falling rupee and risks to the Indian economy, Wood said the strengthening dollar is a matter of concern. The Indian currency has depreciated 11.67% year to date and currently trades at 72.31 per dollar.

Indian stocks have also declined. The benchmark Sensex fell 9.87% from its record high of 38,989.65 on August 29.

(With agency inputs)