There is no evidence to show that the Indian economy is improving especially over the last few months . The economic data , not only got bad but shows a pronounced period of weakness. Some analysts believe that we have actually seen the peak profit margins of 2017-18 and now the new corporate debt defaults and worsening telecom major balance sheet could make things look ugly in 2020 . Even after deploying five rate cuts from the RBI and the recent reduction in corporate Income Tax rate cut by the government , the drop-off in consumer demand confidence has not picked up. Some economists wonder if more rate cuts are needed, then something is very wrong with the Indian economic backdrop. All this should eventually weigh on equity performance and the stock market. But no! The market has a mind of its own and it looks forward to earnings and Prime Minister Narendra Modi to take all this negativity out at the earliest. While Indian corporates face a number of headwinds on the back of continued deterioration in business confidence, rising unemployment and a weakening in revenue growth along with disruptive forces of economic nationalism and protectionism around the world are serving to reverse many decades of globalisation. No wonder, we are seeing an erosion in Indian business confidence. Moreover, cooling demand and fiscal constraints could lessen infrastructure spending and stock markets could unwind. With little headroom for fiscal expansion given the falling tax collections, the government will have to cut its expenditure unless it is able to realise a lot of money by privatisation or disinvestment. But all these depressing words are not reflected in the stock market indices.Or is it that the wizards of the market are weaving a narrative to validate the buoyancy of the equity markets! With markets at all time highs in November this year, the Indian stock markets reflected through the BSE Sensex and the NSE Nifty may turn out to be a crucial month for market participants. With macro economic signals showing distress, the concerns have been offset by reasonable equity earnings post corporate tax cuts by the government in October. About 65% of the companies reported positive earnings and in line financial results for Q2 FY20. Even though quality stocks are trading at very expensive valuations, analysts opine that quality growth companies comes at a premium and they are comfortable with their high valuations. Many fund managers and analysts are also happy with the recent FII inflows and increasing monthly SIP contributions by the Indian investor. They expect the stock market to remain at an elevated level till the Union Budget in January next year. Investors can look at Bank of Baroda stock quoting at Rs 95 for a two-month investment perspective for short-term gains.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

*

*

*