Indian market's benchmark index Nifty 50 reached another milestone today. It reached 9000. Thirty share sensex is also close by trying to scale 30000. Around mid september 2013 the indices took a decisive turn in reposing faith in the markets with Mr Narendra Modi as the Prime Minister. Prior to that there was a phase of de-growth lasting about 4 years mainly due to inflation playing havoc and rising interest rates.
From then the sensex has risen by 10000 points from 19600 around mid september 2013 till date.. In percentage terms that is 51% over a period of around 1 1/2 years. For a market which had been eroding investors wealth such improvement has helped shore up their finances and even allowed them to profit.
Where from here.
By now and after the recent budget presentation, it is becoming clear that the present government is serious about walking the talk. Things are beginning to take place on the ground. Govt has embraced digital technology . This will bring in much needed transparencey. It will help introducing procedures to plug leakages, monitoring results etc. Various auctions through e-tendering have already been seen and direct transfer of benefits into bank accounts are already taking place.
Govt has given emphasis on industrial production particularly in defence sector and has invited the world to invest in India. For that it has given a call for improvement in "ease of doing buisiness" i.e. cutting on red tape and procedural delays. This can have a huge impact considering that India is a huge importer of defence equipment and any savings on import will be immensely beneficial to the counrty's finances as also generating employment..
Govt has made enhanced allocation for infra spend. Toilet for all will also see spending hitherto unknown.
On the taxation front reduction in corporate tax by 5% has been promised over a period. Corpotates profitability will shore up which has been severely hurt during the past few years due to high interest costs. Personal income tax will also follow suit as it is expected that it will not remain higher that corporate tax. This will put extra money in peoples hands which in turn fuels consumption.
So far corporate earnings have not justified the rise in the market. The rally has been fuelled by foreign inflows on the back of vastly improved sentiment and global liquidity. Corporate earnings will have to do a catch up.
Getting Indian Companies on the world stage is going to be a tall order, what with high fund costs. No wonder inspite of having a sound ability to manufacture, we import a great deal from China. Pharma industry is one example. We have good number of pharma companies which have been globally successful but have miserable dependence on China for many essential drugs. We will also have to work a great deal to formulate labour policy acceptable to foreign investors. Such invigorated labour policy will benefit Indian industrialists also.
A begining has been made at least. We will have to wait and see. Till then there is going to be a consolidation at this level untill there is a clearer picture of earnings pick up.
Global events, as usual, will be important. Flight of capital will be equally fast and merciless. Investors should therefore remain careful. Those who are not invested should wait for corrections to enter the markets as equities will be the best asset class in the coming years. They should therefore build a portfolio gradually Those who are invested should not be tempted and should review after another 150-200 poits on the Nifty.
Until my next, Happy investing
Basudev .
From then the sensex has risen by 10000 points from 19600 around mid september 2013 till date.. In percentage terms that is 51% over a period of around 1 1/2 years. For a market which had been eroding investors wealth such improvement has helped shore up their finances and even allowed them to profit.
Where from here.
By now and after the recent budget presentation, it is becoming clear that the present government is serious about walking the talk. Things are beginning to take place on the ground. Govt has embraced digital technology . This will bring in much needed transparencey. It will help introducing procedures to plug leakages, monitoring results etc. Various auctions through e-tendering have already been seen and direct transfer of benefits into bank accounts are already taking place.
Govt has given emphasis on industrial production particularly in defence sector and has invited the world to invest in India. For that it has given a call for improvement in "ease of doing buisiness" i.e. cutting on red tape and procedural delays. This can have a huge impact considering that India is a huge importer of defence equipment and any savings on import will be immensely beneficial to the counrty's finances as also generating employment..
Govt has made enhanced allocation for infra spend. Toilet for all will also see spending hitherto unknown.
On the taxation front reduction in corporate tax by 5% has been promised over a period. Corpotates profitability will shore up which has been severely hurt during the past few years due to high interest costs. Personal income tax will also follow suit as it is expected that it will not remain higher that corporate tax. This will put extra money in peoples hands which in turn fuels consumption.
So far corporate earnings have not justified the rise in the market. The rally has been fuelled by foreign inflows on the back of vastly improved sentiment and global liquidity. Corporate earnings will have to do a catch up.
Getting Indian Companies on the world stage is going to be a tall order, what with high fund costs. No wonder inspite of having a sound ability to manufacture, we import a great deal from China. Pharma industry is one example. We have good number of pharma companies which have been globally successful but have miserable dependence on China for many essential drugs. We will also have to work a great deal to formulate labour policy acceptable to foreign investors. Such invigorated labour policy will benefit Indian industrialists also.
A begining has been made at least. We will have to wait and see. Till then there is going to be a consolidation at this level untill there is a clearer picture of earnings pick up.
Global events, as usual, will be important. Flight of capital will be equally fast and merciless. Investors should therefore remain careful. Those who are not invested should wait for corrections to enter the markets as equities will be the best asset class in the coming years. They should therefore build a portfolio gradually Those who are invested should not be tempted and should review after another 150-200 poits on the Nifty.
Until my next, Happy investing
Basudev .
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