Markets
BSE See NSE See 39,187.35
141.01 (0.36%)
collapse Related Readings collapse

India still under pressure

| 11/4/2011 4:22 PM Friday

Pallav Sinha
President & CEO
Fullerton Securities & Wealth Advisors


Over the past couple of months, the Indian economy (in fact, all global economies without exception) has faced multiple headwinds due to various factors like the sovereign debt crisis in Europe, rising unemployment and political tensions in the developed world, domestic macro concerns, especially related to rising inflation in emerging markets, along with the balancing act between monetary tightening and finally, policy inertia. The global and domestic slowdown fears have resulted in dismal investor sentiment and the flight of capital, leading to a sharp 15 per cent correction in Indian markets over the last two months. Foreign Institutional Investors (FII) have pulled out around USD 2 billion from the equity markets during this period. To add to the woes, retail participation has dried up and the corpus available with domestic institutions in also limited.

On the earnings front, the first and the foremost thing that has come to light are the advance tax numbers for Q2 FY12, which are not encouraging. Sequentially, the growth in Q2 FY12 advance tax collection for the top 100 companies has almost halved to 9.9 per cent. A growth below 10 per cent indicates a weaker earning season ahead. If corporate growth starts faltering, we will witness significant downgrades, leading to a further weakening of the markets going forward. The other imminent issue is that of a potential Greek government default, which could drag markets down across the globe, though the impact will depend on various aspects of the default, as and when it transpires.

Inflation rose to a 13-month high in the month of August 2011, and is pretty close to being in double-digits. Going forward, inflation may cool to six-seven per cent by March 2012, on the back of a good monsoon and a high base effect, bringing it well within the RBI’s comfort zone. It does appear that we are at the top of the interest rate cycle, and as interest rates and inflation ease, we expect consumption-driven and rate-sensitive sectors to benefit. We are probably getting closer to the end of a rate hike. From the RBI’s point of view, commodities have come down globally, but against that, the rupee has depreciated. So, there has not been a great impact yet. Currently, the inflation figure is still looking closer to the 10 per cent mark.

The global economic situation continues to remain uncertain, with the debt crisis spreading to other economies of the European Union. Economic data from other parts of the globe, like the US and China, shows a worrying trend. We expect the pressure on the markets to continue until there is some resolution to the crisis, which may entail things getting worse, before they get better. In our view, some level of default by Greece is now a given. It is more an issue of the process of the default and how the EU manages the fallout.

Two positive outcomes that we see from the current scenario are the effects of an exceptional monsoon and a softening in global commodity prices, which should bring inflation down faster than expected. The valuations of quality scrips are below long-term averages in India. Long-term growth on the back of India’s demographic dividend and improving ROEs for quality listed companies will continue to drive growth. In the near-term, some decisive policy actions and progress on GST, Direct Tax, FDI in retail and insurance etc. will be the triggers.

The long-term growth story of the Indian markets is still intact, and corrections like these make the market attractive. Investors should use these dips as entry opportunities, given the valuations. Also, one should not try to time the markets, as it is very difficult to predict the lowest point with certainty.

 

Find More Articles on: DSIJ Magazine, Broker's Best, Markets, Market Outlook

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Markets may open with a gap-up riding on global optimism

Karan DSIJ / Article rating: 5.0

The outlook for the Indian markets is a gap-up opening on the back of optimism in the global markets. The US and China will restart trade negotiations to reach a deal, Also, the ECB President surprised the markets by hinting at more stimulus if needed. At the time of writing, the SGX Nifty was trading higher by 50 points at 11,762.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.