Sunday 7 January 2024

Financial Markets @ January 2024

 

Dear Patrons,

 

Season Greetings!

 

We are getting ready to step into 2024 with markets at record highs in India. There are expectations that the Indian economy is poised to be one of the fastest-growing economies in the world. However, globally, an economic slowdown is expected in 2024. Politics may also create turbulence and uncertainty, as there are 40 upcoming national elections representing 41% of the global population in 2024 alone. Russia, India, the European Union and, the United States, will hold elections that will likely re-shape the path of global affairs in the second half of the decade. Security and defence spending, both in the United States and globally, are likely to increase in almost any political outcome, given the disappearance of the “peace dividend” in Europe, the Middle East, and the Far East. A major surprise for 2024 would be an end to regional conflicts, namely the war between Russia-Ukraine and Israel-Hamas. This could provide a more favourable economic backdrop than is currently discounted in markets.

However, market volatility in the short term can create attractive investment opportunities that investors should be prepared to take advantage of. Investing in the appropriate diversified mix of stocks, bonds, and alternative investments, will be particularly important in navigating these difficult conditions.

Happy Investing

(Inputs from Franklin Templeton)

Sunday 3 September 2023

Financial Markets @ September 2023

 

The Indian economy is all set to generate exceptional growth

India’s recent economic growth is nothing short of a perfect winning-against-all-odds script, and the world (most of it, at least) wants India to deliver a happy ending. Organization's like the IMF and World Bank have raved about India’s resilience amid global chaos.

So, the question is what happened? What helped India to defy the odds and become the bright spot in a dull global economy?

The government’s push for better infrastructure is fueling India’s economic growth.

More roads, more flights, more business

Nearly doubling of our highway network from 79,116 km in FY 13 to 1, 44,955 in FY 23.

Domestic air passengers have risen rapidly from 11.6 cr in FY to 27 cr in FY 23

One Nation one Tax - GST truly was a game-changer. It brought a uniform tax structure, reduced compliance, made logistics more efficient and eliminated the cascading effects of tax (i.e., taxing at each successive stage in the supply chain). The annual GST Collection has gone up from 7.4 Lakh Crore to 18.10 Lakh Crore.

The digital revolution

The India stack has been one of the greatest financial revolutions in recent history through Identity, Payments and Data.

Simply put, using a three-layered framework, the India stack addressed the three requirements for access to financial services: identity (aadhaar – more than 95% of population having it and more than 80% had Bank accounts by 2018, payment (The second layer introduced Unified Payments Interface (UPI), a payment system (73.50% of total digital transaction done by UPI) and data (India Stack’s final grand act will be establishing ownership over your data. The government will implement it through an account aggregator (AA) network. The AA network will help individuals securely share their information from one financial institution to another and fast-track document verifications for loans and investments)

The path ahead

India Stack is one of the greatest feats of the Indian economy. It has successfully brought a vast informal economy into the formal fold. Also, the potential uses of the India stack are limitless. Apart from financial services, it will make waves in other areas, such as healthcare, e-commerce, etc.

The growth drivers

Here are the unique Indian growth drivers that have and will continue to drive India’s economic growth: Between FY13 and FY23, India’s real GDP has grown by 74 per cent. This growth was led by the growth in private consumption (81 per cent), i.e., the amount spent by households on goods and services. In the last 10 years, its contribution to real GDP has averaged 57 per cent.

We are a services-led economy its share has been increasing slowly over the years - Services, such as financial services, information technology, trading and tourism, on average, accounted for 62 per cent of the GDP in the last 10 years. Agriculture – 20% and Manufacturing – 18%.

 A sleeping giant

India’s manufacturing sector had an average GDP share of only 18 per cent in the last 10 years. But, India’s dormant manufacturing sector is about to wake from its slumber.

#Since the pandemic, the government has tried to spur manufacturing sectors. Its latest attempt includes the “Make in India” initiative and production-linked incentive schemes. # Global players want to reduce their dependence on China. India’s low labour costs, improving infrastructure, and digital transformation will help it become a global manufacturing hub. # India has the largest youth population in the world. A recent Deutsche Bank report posits that India will add close to 10 crore people to its labour force over the next 10 years. As a result, it will account for 22 per cent of the global workforce growth.

So, India’s sturdy growth engine has capable drivers. But a few more changes are brewing, which might make India richer and greener.

A new green revolution

 India’s efforts to reduce its dependence on imports for its energy needs will boost growth and create jobs.

India’s imports of crude oil and petroleum products have averaged about 20 per cent of its total imports in the last 10 years. So, India must look for greener and more sustainable fuel sources to sustain its current GDP growth. The good news is that change is already underway.

The government has announced that it plans to make India net carbon zero by 2070. And non-fossil fuels already account for more than 40 per cent of its installed capacity of electricity generation. In fact, it has overachieved its commitment made at the COP-21 Paris Summit. The Deutsche Bank report estimates that by 2030, India is expected to add over 340 gigawatts of renewable energy capacity. It will take renewable energy capacity to over 60 per cent of the total installed capacity.

The response from the private sector has been equally heartening. Reliance Industries plans to invest `75,000 crore by 2035 to establish the ecosystem for various renewable energy solutions like hydrogen, wind and solar. Adani Enterprises has announced investments for energy transition worth $50-70 billion over the next decade. Tata Power and JSW Energy plan to invest `75,000 crore each in the foreseeable future as well. Also, according to a recent report by the National Resources Defense Council, India’s renewable sector can potentially create 10 lakh jobs by 2030.

India’s growth would not come at the cost of the environment...”

Happy Long Term Investing

(extracts from Value Research)

Saturday 29 July 2023

Financial Markets @ July 2023

 

Dear Patron,

Equity Market Review

·       In the month of Jun'23, equity markets surged significantly with Nifty 50 rising by 3.53% on m-o-m basis attributed by favourable domestic macroeconomic data and strong buying by foreign institutional investors for the month ended Jun'23. 

·       Foreign Institutional Investors (FIIs) were net buyers in Indian equities to the tune of 47,148.45 crores 

·       Goods and Services Tax (GST) shows highest ever collection of 1.61 lakh crore for Jun'23, which is 12% more than the corresponding period of last year and this points towards the growing trajectory of the Indian economy.

 Debt Market Review

Global Economy Update:

·       Macro Backdrop: 

·       Global economic activity has sustained its growth momentum in the second quarter of 2023, albeit with two diverging roads. 

·       The world composite purchasing managers’ indices (PMIs) rose to an 18-month high in May, powered by the vibrancy of the services sector. 

·       Global food prices have fallen to their lowest levels in two years, with declines in prices of grains, vegetable oil and dairy offsetting higher sugar and meat prices. 

Indian Economic Growth:

·       Macro Backdrop: 

·       India’s real gross domestic product (GDP) recorded a growth of 7.2 per cent in 2022-23, stronger than the earlier estimate of 7.0 per cent. 

·       It has surpassed its pre-pandemic level by 10.1 per cent. Real GDP growth in Q4:2022-23 accelerated to 6.1 per cent (y-o-y) from 4.5 per cent in Q3, aided by fixed investment and higher net exports. 

·       On the supply side, real gross value added (GVA) accelerated from 4.7 per cent in Q3 to 6.5 per cent in Q4, driven by rebound in manufacturing activity which moved into expansion territory after two quarters of contraction.

Inflation:

·       Global: 

·       Inflation eased further across most economies. 

·       In May, consumer inflation cooled off in the US for the 11th consecutive month to 4 per cent (y-o-y) 

·       Inflation based on the US personal consumption expenditure (PCE) index, however, edged up to 4.4 per cent in April from 4.2 per cent in March. 

 

·       India: 

·       CPI inflation moderated to 4.3 per cent in May 2023 from 4.7 per cent in April. 

·       The fall in headline inflation was driven by food and fuel sub-components while core (excluding food and fuel) inflation remained steady. 

·       CPI food inflation (y-o-y) moderated sharply to 3.3 per cent in May from 4.2 per cent in April on account of a large favorable base effect of around 145 bps, which more than offset a positive price momentum of around 55 bps. 

It’s the time we should start participating in the equity market with long term objective, weakening of dollar will be strong signal to do so going forward.

Happy Investing.

Source: RBI, MOSPI, CMIE, FIMMDA, NSDL, Bloomberg, Canara Robeco

Tuesday 7 March 2023

Financial Markets @ March 2023

 

Dear Patron,

Presently market is treading between inflation and growth. Inflation in India is well within the RBI predictions and which is managed effectively. Hence we would most likely not see runaway of interest rate cycle.

However with Europe showing no sign of recovery till date and with America poised to hike interest rate, certainly global investment scenario is looking gloomy.

Back home, Ex Bankers and Economist are confident about India growth story. They have reason to believe the same. Banking segment is more efficient today to manage even at lesser margin  

Demand for Agriculture, manufacturing and agriculture is strong. Digital India presents tremendous opportunity for growth. Top 500 Corporate hardly need any debt, which bodes well. The BSE Sensex PE at 23.20 gives good opportunity to rebuild your Portfolio. The all time high PE was at 36.210 in Feb 2021. Market saw V shape recovery only because the fundamentals of the economy were strong.

Participation in equity through mutual funds will be the great idea with long term in mind. Systematic Investment Plan as always is the best disciplined way of participation in same.

 

Happy Investing

Sunday 8 January 2023

Financial Markets @ January 2023

 

We saw fall in S&P BSE Sensex by 4.35% month on month basis. Midcaps & Small Caps indices were also down around 4%. Same trend was observed in international market too, lead  by Nasdaq Composite Index falling by 8.6%, Hang Seng 7.98% & Nikkei 225 (Japan) 6.86%.

Global Growth slowdown, especially in US & Europe, is expected in 2023 with rates remaining on higher side. India is in transition phase and relatively better placed with more domestic demand driven and, political stability with a progressive reform agenda.

 According to the National Statistical Office (NSO) data, India’s preliminary GDP growth is expected to grow at 7% in fiscal 2023 from an 8.7% in the previous year. Still very much in a zone to

This New Year could be safely termed in Indian market context as stepping stone year, from long term perspective. We have seen Price Earning valuation adjusting amicably vis - vis earnings, making market more transparent. There is possibility of further adjustments in market valuations with the advance tax season approaching and liquidity might be a slight concern. No major downside risk seen to earnings growth in the near Term as domestic demand is resilient

 Present Interest rates Scenario:

1 Year Benchmark G-Sec prevailing rates @ 7.68. 5 Year Benchmark G-Sec prevailing rates @ 6.79 (yields given in semi-annualized).10 Year Benchmark G-Sec prevailing rates @ 7.26

Yes there is a inflationary pressure on interest rate & Liquidity which can be observed with above yields trend.

Happy Investing

Tuesday 27 September 2022

Financial Market @ September 2022

 

Corporate earnings in Q1FY23 came below expectations. On one side Bank led the earnings growth trend buoyed by credit cost moderation and loan growth momentum. On the other side sectors like, Oil & Gas, metals, healthcare, cement led to reduction in EPS estimates. Technology & Real estate too shown decline in YOY earnings.

Globally, pandemic and geopolitical conflicts have sparked inflationary conditions through excess stimulus and commodity price shocks. It has in turn warranted higher rate regime. Fears of Global recession (decrease in oil demand by European countries) and covid lockdown in China are impacting demand are keeping energy prices in check.

Equity Outlook:

So far so good. Domestic macroeconomics strength is reflected in a way Indian equities have substantially outperforming the emerging markets and has shown relatively better resilience to global market shocks. The country weight for India has inched from 6% in 2020 to 14.50% by August 2022.

Investor should participate in staggered manner or systematically for the long term.

Debt outlook:

Establishing price stability is taking precedence over short term growth in order to achieve long term goal. The monetary policy measures will be aimed at anchoring inflation expectations. We expect terminal rate to be lower at 6% to 6.25% by end of FY23.

Domestic growth is expected to hold up in the months to come. Broad domestic Market movement is expected to be range bound between 21 PE to 25 PE until inflationary pressure is there in economy…

Happy Investing

(Inputs from Franklin Templeton has been given weightage in reading global economy including India) 

Sunday 17 April 2022

Financial Market @ April 2022

 

Equity Market:

RBI has trimmed the real GDP growth forecast for FY23 to 7.20% from 7.80% estimated earlier.

Continuation of the geopolitical conflict causing supply chain disruption and high global commodity prices for longer may weigh on the fiscal situation, trade deficit and currency weakness.

High oil prices may place a drag on the cyclical recovery for Indian economy.

On the positive side, various domestic macro factors such as tax revenue growth, improvement in consumption and industrial high frequency indicators, e.t.c. remain supportive of the economic growth.

Markets are on expected lines, searching for support levels. World is waiting for the war to end, so as India. With the ease in energy prices new opportunities will be driving the markets.

SIP / STP are the valuable tools to participate in the market rather sitting on sidelines…

Debt Market:

RBI has raised inflation forecast for FY23 to 5.70% from 4.50%, due to broad based jump into global energy, commodities and food prices.

The RBI intends to reduce the liquidity in gradual and calibrated fashion over multi-year time frame.

We can see 3 to 4 rate hike in this financial year by the Central Bank.

Given the expected rate hikes, gradual reduction of liquidity and substantial supply of Govt. securities, yields are expected to harden further in future.

As it is, stay invested in shorted end of the yield is always a defensive approach and we are maintaining the same going forward suggesting Floating rate funds for conservative outlook.

Happy Investing!

(Blog has inputs from Franklin Templeton)