when the market was rising without any correction for the last 9 months, no one ever bothered to ask why the market was rising. If you look at the last few months, Nifty was the lowest on 26 Dec 2016, at 7908 and over the period of next 9 months, the Nifty rallied to hit a high of 10,178.95, implying a return of 28.71%. No one bothered to ask why the market was going up.
Not only the Nifty and the Sensex, most of the indices have given excellent returns. Metal, Oil & Gas, Realty, Consumer Durables Indices have recorded more than 30% returns in the last one year (after accounting for today and last week’s fall). Check the SME IPO index - a staggering 360% returns.
Now, coming back to why the stock market is falling? There are quite a few reasons. Corporate earnings and GDP growth, fiscal deficit target of 3.2% being missed incase of an economic stimulus, geo-political tensions across the globe.
Make no mistake that this is still a BULL Market Run, which is going through a much needed correction, to assess where it is going to head in the future. The short term outlook maybe confusing with analysts and fund managers expecting 9700 - 9800 levels on the Nifty, but the long term bull run remains intact.
Unless there are serious geo-political tensions escalating into a war like scenario, the govt. will surely look at improving the macro economic indicators by giving a boost to the economy. Rating agencies have expressed their view that, even if the govt. misses the fiscal deficit target of 3.2% to improve growth in India, they will not be too bothered about changing the ratings of India.
So, the ball is in the Govt’s court, to take necessary steps to boost the economy and stop taking any measures or reforms, that can impede the long term growth story of India and make the markets go into free-fall spiral, back to 7000 -8000 levels.
Now, coming back to why the stock market is falling? There are quite a few reasons. Corporate earnings and GDP growth, fiscal deficit target of 3.2% being missed incase of an economic stimulus, geo-political tensions across the globe.
- As economic Survey has also pointed out, a number of indicators like GDP, IIP, credit offtake, investment, capacity utilization, etc., point to a deceleration in real activity since first quarter of FY2017. Farm loan waivers expected to cut economic demand up to 0.7% of GDP
- Industrial economy is yet to pick up – the Gross Value Added (GVA) growth in manufacturing came in at mere 1.2% in Q1FY2018 as compared to 10.7% in Q1FY2017. 74% of manufacturing GVA was accounted for by the corporate sector, which has posted very poor performance in Q1FY2018
- Banking industry credit growth hovers around 6%, at decades low level and, bad assets remain at record levels (9.6% for the banking system) and they are expected to taper off by March 2018
- A sample of over 1,000 companies’ results (excluding banks & finance companies) indicate 9.7% y-o-y growth in net sales, but 1.7% y-o-y decline in net profits in Q1 FY 2018. Only hopes on forward corporate earning remain alive: Since 2013 the Sensex earnings moved up mere 3% cumulatively (from Rs.1,322 in 2013 to Rs.1,360 now)
- Today’s latest news is that the crop production of Rice, Pulses etc are going to be lower than expected and will impact prices. Only Sugarcane production is good for this year, better than last year production.
- The Prime Minister is going to announce a Rs. 17000 cr outlay spend for rural electrification today, to boost the economy.
Make no mistake that this is still a BULL Market Run, which is going through a much needed correction, to assess where it is going to head in the future. The short term outlook maybe confusing with analysts and fund managers expecting 9700 - 9800 levels on the Nifty, but the long term bull run remains intact.
Unless there are serious geo-political tensions escalating into a war like scenario, the govt. will surely look at improving the macro economic indicators by giving a boost to the economy. Rating agencies have expressed their view that, even if the govt. misses the fiscal deficit target of 3.2% to improve growth in India, they will not be too bothered about changing the ratings of India.
So, the ball is in the Govt’s court, to take necessary steps to boost the economy and stop taking any measures or reforms, that can impede the long term growth story of India and make the markets go into free-fall spiral, back to 7000 -8000 levels.