In the past one week, I discussed the current situation in the Indian financial markets with some seasoned investors and experienced market participants. It was after almost three months that I got an opportunity to discuss the markets with such an enlightened group of people. Mood of markets definitely appears to have changed remarkably since June 2022.
After my interaction with some senior market
participants (bankers and investors) I had noted that the mood was rather
despondent. The consensus in June appeared strongly in favor of a slow grind
over the next 6-9months. The reference point of discussion was mostly the 2008
market crash. The market participants sounded cautious about rising cost of
funds and drying liquidity; and feared major defaults that could trigger a
global contagion. (see here).
Reactions of the market participants this time
were diametrically opposite. Most of them were in fact trying more to convince
themselves about “all is well” rather than discussing the market conditions
objectively. They refused to acknowledge that the global macro conditions have
deteriorated materially in the past three months, led primarily by Europe and
China. They argued forcefully in favor of a “decoupled India” and “TINA”.
Despite no visible improvement in Indian macro conditions; below par corporate
performance in 1QFY23 and dark clouds over export growth that have sustained
the 1.4% CAGR for India’s GDP in the past three years.
The platitudes like “Decade and century of India”; 5th largest economy ahead of the UK” were advanced with impunity; as if they are trying to justify change in their stance from “extreme bearishness” to “cautious optimism” and “uber-bullishness”. Some of them even claimed that they did never advise underweight on Indian equities.
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