The State of the Market Note
You have heard of the ‘The state of the Nation’ address, here is the State of the market note! Or what I think the Equity Market will do in the next few months. There are no numeric targets saying “Sensex will reach.xyz” nor are the examples to be taken as ‘buying’ tips. You also need to remember that I do invest in equities and like all investors I would love there to be a bull market.
First let me start with the negative forces!
Many youngsters believe that the market is in a permanent bull run, and it can never come down. In fact, there can be NOTHING called a permanent bull market. If you have not seen the market in a bad phase, wake up and smell the coffee. The risk is lurking just around you and the fall will be brutal. Many of the new entrants in the market believe that “the bull runs are very long and the bear markets are quick brutal and vicious”.
Too many ever-optimistic traders in Futures and Options think of Equity markets as Public Provident Fund on steroids. I have no clue as to how these investors will react to a 2 year bear run! More importantly, will they have enough liquidity to pay for the losses that they incur? Will it just wipe them out or create a debt burden?
Many are worried about Inflation. Well, Inflation is bad for people who invest in debt instruments. A longer view on equity markets will show that inflation is good for equity markets, so that should not worry the long-term investor.
Sectors like Banking (BFSI), and Healthcare are biding their time and are likely to ask for their rightful place under the sun. The government has spent a lot of money on infrastructure - and now it is the turn of the private sector. The Government of India (along with the states) hopes to have 100 airports operational and about 100 Medical colleges up and running. Just imagine the impact that just these two initiatives will have on the markets. There has got to be a huge demand for private sector in the Infra space.
What makes me optimistic about the BFSI space is the strength of the balance sheets of companies and the banks that will fund them. Corporate and Bank debt reduction has happened well - and they are looking for business opportunities.
While preparing for a Post-Covid world, you may have seen the jump in tourism numbers. The occupancy in Thomas Cook and Mahindra Holiday Resorts, the increasing number of flights by almost all the airlines. The increasing market share of the big companies like Reliance, Maruti, Indigo, etc. are good indicators of the forthcoming markets. The lag indicators like GST collection, the robust Income tax collection, et al are again good indicators of the good things to come.
Yes, we are preparing well for a Post-Covid world, the government schemes like PLI are at work, the lowering of Income-tax, etc. has empowered us to take on the Chinese juggernaut! Of course the China +1 and other things are also helping and make us feel optimistic!
PV subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’