A common question my friends always ask me is, Which stocks to buy or where should I invest? This is because I have been working as a finance journalist and earlier was with business news channels where stock market coverage was an integral part of the job. Though the overall financial inclusion is a challenge in India and penetration of the stock market is very less, what happens at BSE at Dalal Street and NSE at BKC determines India’s economic picture. Last week we celebrated the Azadi ka Amrit Mahotsav and this week India’s benchmark index, Sensex, reclaimed the 60,000 mark.
If I borrow from veteran fund manager Nilesh Shah: “Sensex at 60,000 is just a number. As an investor did you benefit from it? Were you able to average at lower levels? Keep faith in India’s growth story and use corrections as an opportunity to add to your equity portfolio.”
There is no doubt about India’s growth story, but we have to analyse what side of the economy the Sensex at 60,000 showcases. First and foremost, it feels good and makes the right impression. Global investors, various funds and multinational companies generally follow the geographies by their benchmark indices. For them, that’s the only parameter. So the Sensex milestone is positive and will ultimately benefit the country. Also, foreign investors generally invest in benchmark indices. But I think the benchmark indices offer a skewed view and do not cover the whole picture of India as Sensex has only 30 companies and Nifty has 50 while scores of firms are listed on the stock exchanges.
The local economy should flourish
Apart from benchmark indices, there are many moving parts. Last week in an India @75 article, I wrote about the factors driving growth in the country (Click Here ). There are two factors where we can look at the economy now. First is, the growth which is coming only because of global reasons, and the second is the domestic levers, which the Prime Minister is also pitching for. So, how is the local economy shaping up? I have a few questions.
In Mumbai where I live, vehicular traffic has quadrupled in just the last few years. I can see new cars like Tata Nexon, Hyundai Nios and Skoda Slavia in large numbers. But are these old orders, which faced delays due to a shortage of semiconductor chips, and were delivered recently? Is the production-linked incentive (PLI) scheme making a difference? Are there more trucks on the roads? The government brought in the Emergency Credit Line Guarantee Scheme for SMEs and MSMEs, but in what state the SMEs are? Are they expanding? Are their invoices getting cleared? Or are they holding capex plans since interest rates are on the rise? Nobody has a clear picture of where it is heading.
The tussle over a Chinese spy ship in Sri Lanka is an indicator that tension may rise in future, whereas the visit of US officials to Taiwan and China’s response with military drills is taking us closer to the fire. This is happening while the war in Ukraine has not ended. With the situation tense, the rally in inflation and interest rates may continue.
So 60,000 is a milestone, but before we begin celebrations, let’s be sure about how the coming quarters will be. And specifically at this juncture where we have not moved far away from the pandemic and are yet to reach a safe zone, we need to look at various other factors to note how the world and specifically India will head ahead. The situation is still very volatile.
Amol Dethe is the Editor of ETCFO. Click here to read his columnns.