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Thursday, 21 September 2017


Nifty touched its lifetime high of 10171 on 18th September to the delight of our domestic institutional investors. Our MFs are driving the party. Plowing in some Rs. 15000 crore in August when FPIs sold equivalent cache from Indian markets was commendable. Now why FIIs are selling is no mystery at all, thanks to the now more expressive, humble & transparent US FED under Madame Yellen. But how long our MFs would charge taking out their “Make In India” weaponry as “kings in shining armor” of the so called overheated or over- valued market. Are we really over-valued? Investors who are busy thinking that and waiting for a correction might miss out the burgeoning bull rally. In the absence of earnings recovery hit by GST & Demonetization, NPA woes and lack luster private investment, burgeoning stock market indices seems to be a scary phenomenon moving in just one direction. Is it because of the inundating monthly inflows received by the Mutual Fund industry or the GREAT EXPECTATIONS theory resulting in an inflated bubble? I think it’s Both.

Tata Steel jumped 1% in early trade as the company announced 50/50 joint venture of its European operations with ThyssenKrupp of Germany. The joint venture is expected to benefit through cost synergies, higher quality and technology up-gradation. The agreement between both the companies is also expected to result in job cuts of about 4000. But who is worried about that till earnings visibility looks promising. Now if one stock can jump 1% on higher expected earnings in the near future, can anyone estimate the bouncing spree of the Indian stock markets after roll out of GST or the undergoing digital revolution in every sphere of our economy? Informed investors are able to estimate the benefit accruing to the economy with parallel cash economy coming under formalized or legal tax net. Not only that the organized established players will benefit further with unorganized sector losing its cost advantage. Sectors from FMCG, to Auto to Footwear have been rallying after the GST rollout. Sectors like logistics are getting benefited as transit time has been trimmed down aggressively. Transit time between Kolkata & Mumbai has come down by one day and transporters are able to commute from Chennai to Gurgoan in 72 hours. This feat could be achieved by dismantling check posts in every state after implementing GST. All this cannot appear in immediate quarterly numbers but are going to be a major game changer for the economy as a whole. Not to mention the input credit advantage, Good & Service Tax is a long term benefit and is therefore expected to increase the GDP beyond 8% which in the current quarter stands at 5.7%. Coming back to the expectation theory which is also playing out in the Financials space moving northwards even as NPA woes and Bankruptcy code plays out. Even with lower corporate credit growth, investors are betting on retail and housing incentives given by the government. Public sector Banks are expected to get back to their feet by the end of the next financial year nudged by government policy and prodded by RBI. Private sector banking has always been a happy space for investors fulfilling their long term expectations. In addition to all of this, sectors like cement & auto considered as proxies of economic growth are consolidating. So is this just a BUBBLE. No it’s not, as this run up is not fueled by hot foreign money but by patient domestic investors who have waited for these economic reforms for decades. As for retail investors, information & analysis would be the key for investment in this bull market. And don’t miss out on Fundamentals as Fundamentals Create Wealth.