INSUBCONTINENT EXCLUSIVE:
Anyone giving an outlook for the Indian stock market would remind you of the proverbial half empty-half full glass analogy.
After a highly
volatile calendar year in 2018, the domestic equity market is looking a glass half full for investors looking to cherry-pick cheaper stocks,
and half empty for those who entered the market after the rally in 2017 only to burn their fingers in 2018
the wings all this while, it looks like the sky is the limit
Short-term volatility from forthcoming elections, quarterly earnings and rising crude oil prices do not bother this class of investors
They find the India growth story intact
The Indian economy is projected to expand 7.5 per cent in 2019 and 7.7 per cent in 2020, an impressive one percentage point ahead of
So let us start with a cup half full
It is good to see that growth continues at over 7 per cent
What is worrisome, of course, is some of the underpinnings of that growth
It is largely consumption led, but that is not creating enough jobs
One can dispute the job figures, but there are lots of people vying for very few jobs
Going forward, we have to move towards a more job-creating economy
Monday.
So where is it that the optimists see this ray of hope for the Indian economy These three key factors can help put things in
The OECD Leading Indicator points to strong growth ahead
This gives confidence to brokerages like Karvy Stock Broking to peg Nifty at 14,000 level by December 2019.
The OECD system of Composite
Leading Indicators is designed to provide early signals of turning points in business cycles - fluctuation in output gap, i.e
fluctuation of the economic activity around its long-term potential level
Secondly, despite the occasional heavy selloff in stocks like the one seen during the financial crisis of 2008, the domestic equity market
has delivered over 13 per cent annualised return to investors in last 20 years
This figure is higher than the returns delivered by other asset classes.
Thirdly, India Ratings believes investments are gaining traction
slowly but steadily, with gross fixed capital formation projected to grow 12.2 per cent this financial year and 10.3 per cent next year.
The
narrative for the pessimist is equally convincing
Indian governments tend to forget financial discipline in election years and policy uncertainty slows down corporate expansion plans
The rupee remains shaky and crude oil prices a big unknown
Should global growth look up, oil can be on the boil again.
Meanwhile, the US-China trade war remains unresolved, and threatens to drag the
US economy into a recession
A slowing China is not good news for global growth
India, despite being a domestic consumption-led economy, cannot remain immune should global growth slowdown.
Overseas portfolio investors
have turned wary on India
They have offloaded shares worth of over Rs 36,000 crore in calendar 2018 against an inflow of Rs 49,729 crore, Rs 20,566 crore, Rs 17,806
crore and Rs 97,069 crore, respectively, in 2017, 2016, 2015 and 2014, respectively
Delay in earnings recovery and revival of the capital expenditure cycle and subdued macros are waiting for light at the end of the
There is a couple of reasons why people have got excited about it
One is investments data in GDP numbers, which is GFCF (gross fixed capital formation) that comes out every quarter
The last quarter number indicates a very strong YoY growth
If you look at the same data series with a two-year CAGR and smooth out base effects of GST, there is in fact no acceleration in top-down
later, at least from a capex perspective
forecasts for a while, but this has been ignored by investors
Consensus expects FY20 and FY21 earnings growth of 25 per cent and 18 per cent, while UBS top-down estimates stands 16 per cent and 14 per
cent, indicating a 9 per cent cut to FY20 estimates
UBS thinks that three out of four key macro drivers remain missing which includes fiscal or monetary impulse, disappointing capex recovery
The global financial services firm believes the credit cycle remains a silver lining, but sustainability depends on the above
factors.
Coming to investment in domestic equity markets considering the above pros and cons, one can take some position in equity markets
depending on their risk taking ability
Going with market experts, several stocks are available at attractive valuations after the recent correction in the midcap and smallcap
space.
UBS has advised investor to take more stock-specific calls rather than sector-specific
On the downside, the brokerage sees Nifty at 10,000 by December 2019, while on the upside it projected Nifty at 11,800 with a 12-month
Mihir Vora, Director and CIO, Max Life Insurance told ETNow that consumption is probably one theme that can benefit in the short term
IT and pharma have tailwinds of the US market and the currency
On the private sector, we continue to remain positive on both retail and corporate banks, but in the last few months we have probably
