India’s growth trajectory till now has been interesting with few speed-bumps and short-term hiccups. With the introduction of structural reforms such as GST, RERA and Bankruptcy Code, the Indian economy is booming with evident transformation in the economic landscape of India. The equity markets are experiencing increased participation from the domestic investors, which clearly implies that the Financialization trend is here to stay. Better-than-expected GDP numbers, a strong pickup in the corporate earnings recovery, increased car sales on a y-o-y basis and healthy credit growth augurs well for India’s growth trajectory. Owing to the growth across a multitude of sectors, one can safely conclude that the Indian economic growth is resilient in the long-term.
We would like to draw special attention to the sixth bi-monthly monetary policy statement, wherein RBI maintained a status quo by retaining a hold stance on the key policy rates. It remained sanguine on the Gross Value Added (GVA) and expected it to escalate from 6.6% to 7.4% for the new fiscal. With this, it also lowered the inflation forecast from the range of 5.1%-5.6% to 4.7%-5.1% for the first half of the new fiscal year 2018-19. This further augments our conviction in India’s growth story and clearly validates that the economy is witnessing green shoots with early signs of revival in an investment activity, easing inflation numbers, improving global demand and government’s unwavering focus to ameliorate the rural and infrastructure sector in India. This will further bolster the development at the grassroots level, and in turn, spur the aggregate demand and economic activity in our country.
With the convergence of global and local challenges, the Indian stock market may continue to experience volatility in the near future.
On the global front, the trade spat between the US-Sino relations has recoiled the financial markets worldwide. If the tension continues to boil, it would have major repercussions on global growth and capital flow between the economies. However, if the U.S. is just playing it by ear and using it to haggle over the import costs, then it may turn out to be a noise between the two friends, who will later handshake and make up. Now, whether this labyrinth surrounding the crack in the U.S.-Sino relations is just a transient noise or a long-term trend would only be untangled in the coming months.
Alongside, we are witnessing a sudden upswing (~$70 per barrel) in the crude oil prices, which may drip the net external demand, thus affecting the industries bottom-line number on account of rising raw material costs. This may eventually shoot up the inflation levels and current account deficit in the near future. Any further fiscal slippage at the centre or state level can have a broad-based macro-financial implications by directly hitting the cost of borrowing.
With the pressure of soaring crude oil prices; domestic challenges such as the staggering impact of HRA revisions, upcoming state elections and the much-prophesied 2019 major election will play a major role in setting the tone for the markets ahead and would be closely monitored by the Indian investors.
The Markets Are Not Keeping Calm, But We Can!
With the unification of global and local challenges as mentioned above, the markets are moving sideways with a downward bias. With the ongoing stock market mood swings and changing market sentiments, many investors are left in a baffled state, especially when it comes to their stock market investment. Till now, the Indian stock market has corrected to the tune of ~7-8% since its 2018 high.
The S&P BSE Small Cap Index underwent a correction in double digits while the large-cap and mid-cap stocks dwindled in a range of ~6-7% and ~9-10% respectively from their 2018 highs.
Yes, the markets are not yet ready to keep calm, however, as a smart investor it pays off to remain calm and not succumb to the bizarre mood swings of the markets.
Risk mitigation strategies such as stock portfolio allocation, rebalancing, investing through SIP route to optimize rupee-cost averaging and systematic planning will set the tone of your wealth creation journey for the next 1-2 years.
Making money in stock market is not a sprint. Rather, it is similar to prepping for a Marathon which requires patience, discipline and perseverance. The journey can sometimes get tedious, you may be allured by a quick fix solution and emotion-based decision making. However, an investor who is able to look beyond the short-term scenario, resist the distractions (tips, rumours, media hype) and hire a coach who can guide them in times of turbulence will emerge as the winner in the Investing Marathon.