“For every economist, there is an equal and opposite economist…Generally, both are wrong!”
Since the budget 2016, markets have been digesting hiccups and inching towards the green. Every time there has been red sheds, the bulls have come together to make it green. And, I would say, there is a confirmed signal that India is now in a buy on dips stage. Every investor is likely to make a 14-20% return by the end of this financial year if he is patient. Nifty is most likely to hit the 9000 mark.
Why do I think Nifty will hit 9000?
- My first reason is based on common sense. There is a turmoil across the world market and Investors all over are looking for a growth story. Of course, China saw its world-beating rally in 2015 but, the story turned around in June and July and the markets fell sharply (-30%). There were days when even trading was suspended. Brazil, which was once seen as a potential took the hit on its chin because of corruption and, it is into deep crisis now. Russia is also facing turmoil because of crude oil prices. Well, I can’t think of a reason why India will not be a pick for an investor. If I am an investor looking for a growth opportunity with a multiplier effect, I would love the Indian market.
- My second reason is operational efficiency. In the past two years, when, the Indian growth numbers were not great, the companies have learned to optimize from high debt, high P/E to high earnings. They are now better in terms of cost of production and they know how to deal with the crisis better.
- My third reason is Brexit.
On the day of Brexit, Indian investors felt as though India was a part of Britain. But, the panic was taken out in two trading sessions and Brexit became history to FII’s and Indian Bulls.
If we were to analyze, The UK has only 2 percent share of the Global GDP, and only 3% of India’s export. Hence, there should be less worry about it. The good news is, that India is currently the second biggest source of FDI for Britain. So, they will try to woo Investors from India by easing tax regimes.
Investors from Britain need to park their money in diversified investments, to avoid the devaluation of assets because of fall in the Pound. Hence, India will attract more capital from Britain in the coming future.
- My fourth reason is the key structural tax reform, that is about to take place in India.
GST will bring all the companies in the same playing field. Some industries that will gain from this are: Adhesive, Footware, Entertainment, Batteries, Plywood, telecom, Auto and Consumer durables.
- My fifth reason is the ‘micro growth story’. The way in which an Investor looked at the Indian Economy two years back is very different from, how he/she looks at India now. It is a growth story, a consumer driven economy and most of all the outlook and mindset of people is positive.
Why will the Dollar/Rupee will hit 70?
- Rupee gets stronger every time the nifty hits higher highs. When Nifty hit its life time high at 9003 levels, on march 3rd 2015, the rupee was trading at 61. Look at the rupee now, we are a bare 500 points away from that and we are trading at 67-68 levels. We have psychologically accepted these levels. Hence, I think, rupee will not follow the rule of thumb Nifty positive-Rupee positive this time. We are more likely to hit 70 than 65 or 64.
- Another reason that drags rupee to 70 is that, we want to be competitive and we are not ready to lose out on exports. Make in India initiative had the focus to discourage imports, and shift the focus to exports.
- If there is a ‘Fed rate hike’ from Janet Yellen US dollar would appreciate.
The chances look bleak right now as Janet Yellen called Brexit a ‘period of uncertainty’. Brexit might lead to volatility in the stock Markets as investments will be drawn towards US. I feel the Brexit reading is not as bad as it looked like on that day.
The U.S. has had flat markets for past six quarters, and now the outlook looks little positive because of good earning expectation.Once the markets are fundamentally strong, and the world is not under a turmoil by the financial year end. A good reading of the labor market data can make the fed hike rates.
*Having, said the above these are my views on the markets and, any investor who makes an investment should always do his/her analysis.