Stocks
Ignore the bears: It's a great time to 'Buy in India'
At 9,120, nobody could have called the top on the Nifty after a surprise rate cut by the RBI. Upside momentum was too strong and global equities were also trading near or at record highs.
 
Similarly, after breaching and trading well below the crucial psychological and technical level of 7,800, it is difficult to ignore further downside and call a bottom, especially taking into account the global volatility in the financial markets arising out of China and the potential US Fed rate hike. We may test 7,500 or even worse, this selling climax may drag the Nifty to 7,200. 
 
The Indian retail investor has largely been on the sidelines after the nightmare of the 2008-09 crash. At each new high the market made, it was largely the institutional money enjoying the party.
 
The question the retail investor should ask is: Is this a good time to accumulate stocks? Further, should he or she be buying on every major price decline from now as valuations become more reasonable and tend towards the cheaper side? The answer is a compelling and a screaming yes!
 
It is in these times of panic that retail investors should be looking to build a long term portfolio. With a longer term time frame it is a prudent strategy to start and keep accumulating quality stocks given the current downtrend. Many blue-chips are now trading at attractive long term valuations. 
 
This column has long called for further reduction in policy rates. Indian earnings have remained stuck in single digit growth territory for the past three years. Weak revenues are ostensibly to blame, though a closer look indicates top-down issues led by high real interest rates and a negative WPI culminating in lackluster IIP growth are the real culprits according to Barclays. 
 
RBI Governor Raghuram Rajan has been singing his own lonely hawkish song for many months now but surely rate cuts are coming very soon. Real rates are at a two decade high. India is under a serious threat from disinflation as Arvind Subramanian pointed out recently and the investment cycle will only turn with a substantial fall in the cost of capital. Time is running out. Expect 75-100 basis points of easing in the next twelve months.
 
Stalled projects were at Rs 2,586 billion at the end of the December 2013 quarter. By June 2015, the value of stalled projects was down 70 percent to Rs 793 billion. Government capex has taken off. The new investment projects for the past four quarters have totalled Rs 10,566 billion, almost double the number at the end of March 2014 (Rs 5,807 billion). Listening beyond the perma bears and Modi bashers, optimism is still sky high. 
 
Sentiment is crucial to investment decisions and the current leadership has been quite successful in boosting the outlook for the future which is also a critical ingredient to growth. It is visible in FDI flows as well as in stock market multiples which even after this steep fall are right in the middle of historical ranges. Gross FDI inflows rose to $46.6 billion (at all time highs) in the 12 months ended May 2015 (up 24 percent year on year), according to Morgan Stanley. 
 
Regarding government spending, National Highway Authority of India (NHAI) road awards for the first three months of FY16 are exhibiting strong momentum and overall government capex for the fiscal year to date is the highest in the past five years according to Barclays.
 
Barclays estimates suggest the cumulative consumer spend (both retail and corporate) will decline by Rs 666 bn (0.5 percent of GDP) in FY16 (assuming petrol and diesel demand growth at nine percent and six percent respectively), if crude averages $60/bbl this fiscal year. These drivers are likely to spur consumption demand growth.
 
On the global front, the European Central Bank revised its inflation forecasts downwards last week and many are expecting another round of quantitative easing in Europe. This will surely support equities in Europe. A US Fed hike certainly seems unlikely this month even after a solid jobs data release last Friday. 
 
But even if US Federal Reserve head Janet Yellen hikes rates, it is very unlikely the US markets will witness the kind of capitulation they did a couple of weeks ago. Yellen will be undertaking the loosest monetary tightening in the history of monetary policy and there is absolutely no reason or evidence that a September hike will be followed by another in December. 
 
China is still a big risk but the past few weeks have given markets enough time to factor in the implications of the Yuan devaluation. Further volatility in China may not be as painful going ahead.
 
It is true that India's macro fundamentals are relatively solid as compared to much of the developed and emerging markets. However, the key point to remember is that while economies like India can decouple and sail through troubled waters as the global economy faces headwinds, global markets cannot do so easily. 
 
Serious money has always been made being long. Stay optimistic and believe in the India story. Keep faith and patience in the 15 month old NDA government. 
 
It’s time to Buy in India. 

User

COMMENTS

Sudharshan Katipally

1 year ago

Is this also moneylife's view on the current market?

HK Krish

1 year ago

Very disappointing the Monelife chose to reproduce this article in their website while the stock markets are capitulating and searching for the bottom. This damages your credibility, please do not post such articles blidly without going over the contents.

Adarsh Dogra

1 year ago

I'm slightly confused about this article considering the following points and not sure what message to pick from it:

The stock letters (for the last few months) have been suggesting the market is grossly overvalued and not as attractive to go for fresh buy though there are recommendations still being made.

There was a recent article detailing the market conditions after massive selling by FIIs in a day and month, which translates in to market troubles.

Best

Sachin Bhutada

1 year ago

Who is the author of the article?

REPLY

MDT

In Reply to Sachin Bhutada 1 year ago

This is a report from IANS and not an article by Moneylife.

subramanian dharmarajan

In Reply to Sachin Bhutada 1 year ago

same question here..is this a news report or moneylife article

MDT

In Reply to subramanian dharmarajan 1 year ago

This is a report from IANS and not an article by Moneylife.

Sudhakar Ojha

In Reply to MDT 1 year ago

What is Moneylife view on this IANS report?

Is Modi euphoria over? Markets decline to level last seen when BJP leader won
On May 16, 2014, the general election results were announced sending Modi to 7 race course road, the PM's residence, triggering a bull run which had rarely been seen in Indian stocks
 
Monday's stock market decline marks a landmark of sorts for Narendra Modi government. The markets have come back to levels they had last seen when Modi went on to take over the reins of State. Is the Modi exuberance over?
 
The BSE sensitive index closed at 24,983, down 308.09 or 1.22 percent from the previous close. The Nifty saw a fall of 1.26 percent or 96.25 points at 7558.80.
 
On May 16, 2014, the general election results were announced sending Modi to 7 race course road, the PM's residence, triggering a bull run which had rarely been seen in Indian stocks.
 
Monday's decline brought that steady rise to the level seen on that fateful day last year, when the BSE sensex went up to 25375 before closing at 24121. Nifty went up to 7563 and closed at 7203, echoing the trades done one year and four months later.
 
This may not indicate the end of the Modi government-led exultation, but it does indicate that markets can decline at the best of times and the euphoria seen may not last forever. 
 
Monday's slide was led by lacklustre Chinese markets coupled-with weaker-than-expected monsoon rains and a falling rupee. All this eroded investor confidence leading the barometer index of the Indian equities to shed over 308 points.
 
The Sensex touched a high of 25,387.32 points and a low of 24,851.77 points in the intra-day trade.
 
Analysts elaborated that the markets were in an over-sold position, which hindered the investors to chase higher prices. In addition, lack of any positive triggers and the expectation of a US rate hike had flared anxiety amongst investors. 
 
"Investors were reluctant to chase higher prices, as markets were already in an over-sold position. There were also no new triggers for the markets to react," Alex Mathews, head, research, Geojit BNP Paribas Financial Services.
 
Mathews further pointed out that the Asian cues remain negative, after the downward revision of Chinese gross domestic product (GDP) growth figures. 
 
Among the Asian markets, Hong Kong's Hang Seng dropped by 1.23 percent, China's Shanghai Composite Index lost 2.55 percent. However, Japan's Nikkei inched-up by 0.38 percent. 
 
Furthermore, the rupee's continued slide spooked investors. 
 
The rupee hit a new two-year low of 66.86 against the greenback in the intra-day trade. It closed at 66.86, losing 40 paise from its previous close of 66.46.
 
The Indian currency had last breached the 66.80-level to a greenback on September 4, 2013.
 
Rupee came in for a beating, as frantic dollar-buying in China devalued the off-shore yuan and other Asian currencies, including the rupee.
 
The volatility started after reports from China suggested that the central bank there was planning to impose stringent regulations on foreign exchange purchases from October to curb speculation and volatility.
 
Interestingly, the Chinese yuan was two percent weaker in off-shore markets than domestically. 
 
"The rupee was impacted from the pressure put on yuan and the expected shortfall of dollars in China due to the reports on new regulations," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities explained to IANS.
 
Other triggers, such as a lowering of monsoon rainfall projections subdued investor confidence. The India Meteorological Department (IMD) lowered its long period average rainfall project from 88 percent to 81 percent.
 
The IMD had earlier said that the overall monsoon deficit would stand close to 14 percent. 
 
The weakening of monsoon might end up having a negative bearing on the Reserve Bank of India (RBI)'s decision on a next phase of rate cuts. 
 
"Despite positive opening for the markets, the Nifty is down around 1.26 percent, due to weakening of Indian rupee and also IMD's further lowering of the monsoon forecast," Vaibhav Agrawal, vice president, research, Angel Broking explained to IANS.
 
Sector-wise, all 12 sub-indices of the BSE closed in the red. Intense selling was observed in BSE's healthcare, banking, capital goods, automobile, metal and fast moving consumer goods (FMCG) stocks. 
 
The S&P BSE healthcare index plunged by 440.18 points, banking index plummet by 387.15 points, capital goods index receded by 291.75 points, automobile index declined by 196.48 points, metal index was lower by 1164.30 points and FMCG index dropped by 114.39 points.
 
Major Sensex gainers during Monday's trade were only: HDFC, up 0.64 percent at Rs.1,149.45, Tata Motors, up 0.23 percent at Rs.323.60, ONGC, up 0.18 percent at Rs.226 and Maruti Suzuki, up 0.07 percent at Rs.4,072.05.
 
The major Sensex losers were: Axis Bank, down 3.90 percent at Rs.450.55; Vedanta, down 3.59 percent at Rs.89.95, ICICI Bank, down 3.34 percent at Rs.249.25, Hindalco Industries, down 3.05 percent at Rs.71.60 and Lupin, down 2.96 percent at Rs.1,804.20.

User

COMMENTS

Senior Citizen

1 year ago

This has nothing to do with PM Modi. Stock Market knows Emerging Markets including India have wasted 5 years of cheap money and malinvested in projects which do not make economic sense. This is vote against elites of the Emerging Markets. But this malinvestments will continue irrespective of Congress or BJP. Japan and Germany after WW2 had incentive to come up but our elites have no incentive except to protect and add to their wealth, powers and previlages. That is why we are 100 in human index. Shameful.

vnrao

1 year ago

i DO NOT THINK STOCK MARKT GOVT HAS ANY CONNECTION IT IS ALL SITUATION OF THE DAY EVERYTHING IS SPECULATIVE

Meenal Mamdani

1 year ago

The markets are not the economy. As long as the basics of Indian economy are sound, India should do well.
I hope that GST is approved in a mini session of the parliament. That will really help the economy.

Kinshuk Chandra

1 year ago

Good that we have God and Husbands...otherwise everything will be blamed on Modi only :P :)

Reliance Defence, UAE firm pact to make naval ships for GCC
Reliance Defence Ltd (RDL), a subsidiary of the Anil Ambani-led Reliance Infrastructure (RInfra), said on Monday it has signed a MoU with Abu Dhabi Ship Building (ADSB) for construction of naval ships for the Gulf Cooperation Council over the next 10 years.
 
"Under this MoU, RDL and ADSB are investigating the opportunity to set up a strategic partnership for the construction of naval ships - including frigates, destroyers and other specialized vessels - to address the Gulf Cooperation Council (GCC) over the next 10 years," said a Reliance Group statement here.
 
The agreement could also see ADSB delivering maintenance, repair, overhaul and refit services to the vessels, in line with regional requirements, it said.
 
Abu Dhabi Ship Building is a provider of construction, repair and refit services for naval, military and commercial vessels.
 
The Reliance Group is likely to use its newly acquired ship-building facilities at Gujarat's Pipavav for this partnership.
 
In March, the Reliance Group had announced its acqusition of a 18-percent stake from the then promoters of Pipavav Defence, apart from a 26-percent mandatory open offer.
 
Pipavav's facility is at the location by the same name on the Gujarat coast and claims modern, versatile engineering and fabrication facilities with shipbuilding infrastructure that is also suitable for the construction of a wide range of warships and submarines.
 
The company is said to be a strong contender for a tender, potentially worth Rs.60,000 crore, to build six advanced submarines for the Indian navy along with five other private and state-run firms such as Larsen and Toubro, Pipavav Defence and the state-run Mazagon dockyard.
 
The MoU follows the joint statement issued during Prime Minister Narendra Modi's recent visit to the UAE, which highlighted "cooperation and manufacture of defence equipment in India", the company said.

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