Economy, markets and Raktabīja - Some random thoughts
Many people I regularly speak with have expressed surprise over market’s resilience despite (i) worsening pandemic conditions; (ii) persistent FPIs’ selling; (iii) downgrade of economic growth forecasts for FY22; and (iv) likely earnings downgrades due to renewed mobility restrictions. To be honest, I am not at all surprised with the market resilience. I believe market resilience is underlined by the following five major factors – 1. Sharp rise in global commodity prices and consequently elevated inflationary expectations fuelling a rally in commodity stocks, especially metals and agro commodities. 2. Extreme pressure on MSME sector, especially those in unorganized sector. This is resulting in accelerated consolidation of business in top companies resulting in sharp rise in their valuations. 3. RBI commitment to lower rates. 4. Consistent rise in non-institutional participation in market. This segment ...