I had a chance to meet a small group of seasoned market participants yesterday. The group included a couple of brokers, some investors, a banker and a few analysts and advisors. After exchanging pleasantries and going through the mundanity of “kya lagta hai?” (what’s happening in the market?), the discussion veered around “what could go wrong to make Nifty fall 20% from the present level”.
Not surprisingly, only one broker participant outrightly rejected the idea of a potential 20% correction in Nifty. He felt that the worst is over and it is going to be a blue sky scenario in 2023, with India continuing to lead the charge. None of the other participants was so sanguine, though.
The surprising part however was to note the participants’ arguments to support their “expectation” of a major correction in Nifty, sometime in the next 6 months. The usual suspects like global slowdown, inflation, geopolitics, valuation and technically overbought were cited by everyone. In fact I have also cited these obvious reasons in a few of my recent posts.
Some who are more active on social media reiterated the complicated Armageddon jargon; the doomsayers are spitting on their timelines. However, no participant appeared to be having their “own view” about the current market conditions and the direction it may take in the next 12 months.
To be honest, I was more focused on the snacks being served than the discussions. I did not want to be rude to the host by telling them that discussing media reports and sensational headlines does not make much sense. I would rather like to hear the personal views and opinions of the participants based on their experience, research, observations or their interactions with their other participants.
It is a common saying in the market parlance that the outcomes which are widely expected or spoken about, do seldom occur. I however did not want to use this maxim this time, since I also feel that we may see a material correction in the market in early part of 2023; even though I am not sure if the correction will happen because of the reasons most obvious to everyone. Since everyone is expecting fall of Swiss bank Credit Suisse, an actual failure may not bother the market beyond a few hours, I guess.
In my view, the correction in Indian markets may be triggered by the disappointment and accentuated by global problems. The disappoint may be driven by the factors like (i) the wide divergence in promise vs performance of the government; (ii) much less than expected gains from trends like China+1, Production Linked Incentives (PLI), capex; (iii) worsening of external account; and (iv) poor earnings growth; etc.
It is pertinent to note that Russian and Canadian oils are selling at US$52/bbl. Reportedly, in the current year we have bought huge quantities of crude oil from Russia at a steep discount to market rates. So far the savings have not reflected anywhere – current account, fiscal deficit, profitability of OMCs, pump price of fuel, or LPG price. Don’t you find it disappointing?
The most worrisome thing for markets (domestic as well as global) presently, in my view, is that the policymakers’ appear clueless about the solutions to the pressing problems of mistrust in political & financial systems; worsening demographics; and worsening climatic conditions.
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