Wednesday, March 7, 2018

What is bothering Indina markets?

"A rich poet from Harvard has no sense in his mind, except the aesthetic."
—Beatrice Wood (American, 1893-1998)
Word for the day
Ergophobia (n)
An abnormal fear of work;
An aversion to work.
Malice towards none
If my memory serves me right, earlier, RSS and therefore all its affiliates, used to dislike Buddhism.
What is the current status on this?
 
First random thought this morning
The CBSE Board examination for class 10 and 12 started from Monday. A visit to one of the examination centers confused me a lot. There were many things, but this one thing was seriously bothersome.
Students from 7 different schools have been assigned to this particular center (also a school) for writing exams. Most students, this being their first "Board Exam", appeared nervous. The alien place further compounded their anxiety. The parent accompanying the students waited outside the center for hours, helpless, anxious and distressed.
This very concept of making students to go to different place for writing exam, smacked of a "serious mistrust" of the system in its own schools, teachers and students. It should be completely unacceptable; and is also contrary to what PM Modi promised when he took oath of office in 2014.

What is bothering Indina markets?

In past one month there has been a definite change in the market sentiment. A significant number of market participants, who hitherto held an unqualified positive view on Indian equities, have turned conspicuously cautious. A number of legendary investors and reputable fund managers have sounded multiple notes of caution.
Even Rakesh Jhunjhunwala, fondly termed Warren Buffet of India, has also opined, a couple of days back, that Indian market might have already logged their intermediate top and may not rise from current levels in a hurry.
Foreign bankers like CLSA and Morgan Stanley have reduced the weight of India in their model emerging market portfolios by 1-2.5%, in past few weeks.
This caution is on the back of incessant selling by foreign investors in past many months. Out of past 9months, FPIs have been net sellers on stock exchanges for 8 months. The domestic mutual funds and institutions have however bought whatever FPIs have offered to sell. Nifty has is higher by ~3% since its July 2017 highs.
The bearish view amongst the domestic participants however is still tentative and lacks strong conviction. Hence, the domestic flows remain unabated.
What I gather from the popular commentary is that the participants are worried about a variety of factor. Some prominent of these factors could be listed as follows:
1.    Earnings growth has been below expectations, and may see downgrade in coming months. The valuations appear elevated.
2.    The rate cycle appears to have turned. The next RBI may be a hike.
3.    Banks may see a fresh round of slippages.
4.    Continuation of production curbs by OPEC could see crude prices remaining firm and rise further. Inflation & CAD situation may worsen.
5.    Higher US yields may see acceleration in FPI selling, even in debt, putting further pressure on INR.
6.    A spate of election in next 15months could lead the government to focus more on rural areas (higher farm subsidies and MSP) and less on urban infrastructure.
7.    GST stabilization may take longer than estimated, thus keeping the fiscal at elevated level.
8.    We may see higher supply of PSE stocks to meet the fiscal gap.
9.    Global growth may falter as inflation and rates pick up.
10.  Market needs to cool down after a sharp run up.
I shall present my views on each of these concerns in coming days.

No comments:

Post a Comment