Category: Market Outlook

India’s long-term growth story intact:
The growth story of the Indian economy has been remarkable over the years. The structural transition in the Indian economy has started taking off since 1991, the year when India introduced the LPG policy. Since then, India’s GDP has grown by 12x from USD 0.3 trillion to now USD 3.7 trillion; per capita income has grown by 9x; exports by 43x; imports by 47x; forex reserve by 496x and stock market (Sensex) by 31x.

Amidst the many challenges faced by the world economy over these past few years, India has remained a safe harbor in the storm. With the pandemic shutting the world down in 2020, we have seen great changes in how we live and what we seek from life. With a greater focus on the integration of technology and AI into business, and with sentiments turning against Chinese manufacturing, India finds itself in a position to leapfrog to the front of the pack.

Disclosure: This article is published in the July edition of ‘The Chartered Accountant’ journal.

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Indian equity markets continued their positive momentum in May following a good April. Improving domestic macros, better than expected Q4FY23 earnings, US debt ceiling extension and strong FII inflows into Indian equities; led to an improvement in sentiments. In May 23, benchmark NIFTY50 was up 2.6% while broader markets represented by S&P BSE Midcap and S&P BSE 250 SmallCap did better rising 6.3% and 5.4% respectively. Flows into Indian equities picked up pace – FIIs buying USD ~5.3 bn worth of Indian equities, highest monthly buying since August 2022. FIIs have now been net buyers for three consecutive months. DIIs were marginally negative to the tune of USD ~0.4 bn.

Market Outlook
We continue to maintain our stance of a good second half 2023 for global economies. Inflation is surely trending down and should surprise positively from here on. We also believe that the global interest rate increase cycle is more or less done, and it is possible that towards the last quarter of 2023, we might in fact start to hear of an interest rate cut. Global risk on is also visible as confidence among investors improves. From an India perspective, economic indicators are coming in quite positive. Corporate performance has been good and the outlook also appears decent. The move globally from asset allocators to move away from China to other markets like India is also being felt, with a net inflow of almost USD 5 bn from foreign investors into Indian equities in the month of May. There is though a forecast of El-Nino impacting Indian monsoons and that is the key monitorable in the near term.

We continue to maintain our recent view of being positive on Indian equities and any global event led correction should be used as an opportunity to add Indian equities. Discretion though is advised as the broader markets have been seeing huge momentum. Fundamentals over momentum is what we would advise

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I happened to be in the United States for the second time post covid this month. My last visit was in September/October 2022 and was for a short period of 5 days, on the East Coast. This visit in early May was a good 11 days, one of my longest work visits in years. The itinerary of Mumbai – New York – Omaha – San Francisco – Mumbai meant that it was a full circle of the earth, something like “Around the world in 11 days.” It was interesting and I am sharing a few observations and anecdotes of this visit with you. Hope you find them useful.

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