Indian stock market where it is heading

NITA RAJESH DHRUVA

As India is heading towards opening of the lockdown and economic and financial activities are starting to crawl back up, we would like to share few facts and also our views on present and future scenarios of the economy and stock market. The Prime Minister of India has given a slogan to people of India during Covid-19 situation: “Jaan Hai To Jahan Hai”. How true it has proven that on one side India is controlling the spread of virus and on the other taking all the steps to boost the economy and extend a red carpet for foreign investments.                                                       

The Government has already announced a Rs. 1.7 Lakh crore economy stimulus package.

In a big push to revive economy the Prime Minister announced on 12th of May a Rs. 20 Lakh crore stimulus package equivalent to about 10 percent of GDP (It is the 2nd highest percentage of GDP package by some G-20 nation’s so far), pushing economy on self-reliance & big-ticket economic reforms.  

It is also focusing on attracting Foreign Direct Investments in various sectors in India and the major avenues where the Government of India is working to enable this are:

1. Availability of Land: A total area of 461589 hectares of land identified for setting up Industries. US, Japan, South Korea, China and others have shown great interest in investments.
2. Availability of Power: Permits have recently been given out for commercial coal mining to domestic as well as foreign investors.
3. Ease out of Transportation: Increasing efficiency of ports is on the priority list of the Government to maximize exports.
4. Labor force: Affordable skilled labor & also readiness of Government to make changes in labor laws to make hassle free manufacturing process.

This four-fold exercise will definitely give a positive result to boost economy.

Falling Oil prices have given India the opportunity to fill up all its reservoirs & it has helped with fiscal deficits as well. Important fact to be noted here is that research shows minimum impact on GDP growth on Indian economy compared to all other leading countries like China, US, Japan, Germany etc. due to the Covid 19 pandemic

India has the ability to lead in a digital world with an unparalleled entrepreneurial base and the third largest startup ecosystem in the world.

In this difficult time investment of Rs.43574 crores by FACEBOOK with RELIANCE & Right Issue of Rs.53125 crores brought by Reliance and it’s plans to raise Rs.11300 crores by overseas loans; and also APPLE thinking of shifting  nearly a fifth of its production capacity from China to India,  are few examples of strength of Indian economy and a glimpse of the foreign investment opportunities that are on the rise in India.

We are all aware that ECONOMY and STOCK MARKET always go hand in hand for any country. Let’s share some views on that:

If we go back to past, after the financial crisis of 2008 and later crisis of 2013 the stock market has revived very fast. No doubt in present crisis it will take some more time and the market will be more volatile but it is very important to remember: when markets are low, returns are negative, but when markets are up returns are very impressive. In short term they will be driven by flows but in LONG TERM fundamentals will prevail & will definitely reward investors.

At present very high quality stocks have fallen such that valuations have become reasonable and attractive. In addition, India has a lot of pent-up demand from consumers across all industries. The fall of the market and reopening of the economy has given good opportunity to START and ADD to your investments. The Price/Earning Ratio levels of many fundamentally strong companies have become very attractive and some have even gone down to 2008 levels presenting a strong case of graded investments. Taking a glimpse of trend of Indian Stock Indices:

The above data shows that the stock market will not only stabilize but also slowly recover and head on to a strong growth path. In our opinion the best option to invest in stock market is to go for Investments in EQUITY ORIENTED MUTUAL FUNDS more particularly in Diversified Equity Schemes. Yes definitely not in Debt Schemes.

LAST BUT NOT THE LEAST & TO SUMMARIZE: India can emerge as a strong alternative for investments and diversification, and one has to leverage this once in a lifetime opportunity. We strongly recommend investing in India whether it’s business or the stock market & be part of an amazing growth story that’s about to begin.

ITA RAJESH DHRUVA 
Chief Executive email: rajesh@femaonline.com; keynote@nribanks.com