Sensex & Nifty are down by around 1% at the start of the week. There was a bit of chaos and panic out there, and somewhat understandably so as well – after what we have seen has happened to stocks, especially small and mid-caps, it\’s natural that a layman would be worried.
But what is beyond us is that there are those so called \”experts\” who are fuelling this fire.
Let’s break this in 3 parts for you:
1. USA & the Trump Card – Markets in the USA have been witnessing some fall over the past few days that have got the world to think of recession and not just that, they are talking of a global slowdown.
Are we missing out on seeing the key economic indicators? The interest rates in USA are rising on the back of strong economic growth, the internal demand (consumption) seems to be picking up, the unemployment rates seem to be on the downslope, etc. But yes, like we said, there have been some differences between the President and the Chairman of FED and along the recent hike in interest rates by the latter haven\’t been taken very positively by the markets.
But, seeing all this, it surely doesn\’t suggest anything of what is being portrayed out there. No, the USA economy is neither falling apart nor does it signify any global growth going down. Maybe, it could be suggesting the opposite.
2. Stock Markets and Elections – This is something on our mind all through and let us show you why we see the green side here. Let’s first put across a set of figures across to you.
What does the table suggest to you? We understand from this, as we approach the elections, the stock markets have seen an 83-93% growth in 5 years of the past 3 government cycles and we are just at around 62.17% now. Wouldn\’t the markets grow up to that 90-95% mark until the Central elections in mid-2019? That would mean they have to have a 25% jump from here until then. If you are confused on how this would happen, let us highlight a few reasons to you.
3. The GREENs in India – The list is long. The Central Government has been reducing GST rates and despite that, we have been seeing a continuous rise in the overall GST collections. Even though the GST rates have been going down and the collections have been going up, what does it suggest to you?
Think of this as a reality, the overall liquidity condition in the country is improving, inflation is now under control, the indications we get from RBI are that there may be a drop in interest rates in the next RBI policy meeting. What does this suggest? To us, it suggests all this put together should give a significant boost to corporate earnings.
Coming to NCLT & IBC, think this, when the government put out the target of recovering Rs. 100,000 crores in 2019, how many of us thought it would be possible? Well, NCLT has already helped recover Rs. 80,000 crores and the number is in all likelihood to go well beyond Rs. 100,000 crores in 2019 as there still are many big default cases pending. Wouldn\’t this give a big push to the banking sector?
Nifty companies are likely to show a 20% jump in EPS in the FY20, taking it to around 640-660 EPS for the year FY20. So, if we value it at around 18-19 times, we can expect the markets to go up by 15-25% in the next 3 to 6 months touching 12,000-13,000 levels on the Nifty.
And lastly, we had concerns over the falling Rupee & rising oil prices a little while back, now with the oil prices falling a bit, leave all the rumour mongering on the economic crisis due to oil prices going high, now there are whispers going on about a global slowdown. Would you want to fall into the rumour trap once again?
Would you still be fearful to invest now and miss the bus one more time?