WishFull Thinking for Stock Markets
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A quick glance at the NSE India website depicts that as on 14 June 2019, only 17 stocks are at a 52 weeks high and 189 stocks are at a 52 weeks low, some of them showing abysmal market prices!
I can see steel, tea, agriculture, jewelery, NBFCs, banks, logistics, shipping, real estate, paper, sugar, hospitality, pharma, TV channels, DTH operators, manufacturing, FMCG, OEM, cars, and every other perceivable industry in that list of 189 companies.
Right since January 2018, the cursed omen which has hit the Indian stock market seems to have ruined it completely.
Is this a systematic failure of businesses across industries in India?
Is this lack of foreign investor confidence in India?
Is this because India is seeing the end of many well conceived scams which blossomed for decades and took the Indian stock market up into an astronomical and fudged bubble?
Is this the outcome of businesses suddenly falling bust and the hard earned taxpayer’s money going in to recoup promoters’ sins (DHFL, Indiabulls, PC Jewellers, Mallya, Modi, Manpasand Beverages, Yes Bank, and tons more)?
Is this because the world suddenly starts realizing that 70 percent Indian listed stocks are heavily debt leveraged and already in a debt trap, waiting to see their end one fine morning?
Is this because growth has seen its end in India? Is it because India is a market of abundance and plenty with supply exceeding demand by several times across industries’, le ading to an 'over competition catastrophe'?
Is it because the heavy clean up and fumigation done by the NDA government was too hard for corporate India to digest? Is it because business in India permanently perished with the death of the cash economy? Is it because the fear of cleanliness, no corruption and ethics purported by the NDA government was too hard for a growing and historically corrupt economy like India to digest?
Is it because India was not ready and too shocked to adopt the inorganic change of moving from a corrupt, cash driven and non tax compliant economy to a clean and tax compliant one?
Well, the possible reasons could be one or many, but the outcome was singular and grossly undesirable.
Somewhere, the stock market exhibits the true financial health of the economy. And surely, all is not well in the Indian stock market since January 2018.
With mid caps
and small caps kissing historic lows and never really rising back again in the last 1.5 years, the question is will the Indian stock market now really see a recovery far too soon?
I don’t see a logical and scientific reason for this recovery. The economy never did too badly for the markets to systematically collapse. It just tanked in an up and running economy. So, for sure, any growth stimulus shall not bail out the market. In fact, we cannot expect any exceptional growth too hereafter.
The big hope was that Modi being re-elected would build investor confidence, and foreign funds, that had exited India in January and February 2018, would somewhere return back. But, things turned otherwise. Perceptions seemed to have worked otherwise. Possibly, foreign investors are cautious and wary of extremist populist steps like demo and GST which the NDA government is well capable of.
These noble but rather drastic and badly administered steps could help build a vote bank for sure, but they have also thrown out foreign investors from the country, possibly for a few years now. The optimistic hope that the Indian stock market would revive with a perception change if Modi were to be voted back to power, seems to have smoked off in thin air.
Only All Mighty knows what would have happened if the election results went the other way.
The NDA government will have to focus on the middle class and upper middle class for sure hereafter. Let us accept the blunt reality that till date, they have only focused on the poor and the ultra poor. While poverty alleviation is a must in India, grossly neglecting the middle class and upper middle class will only increase the malady further. Nobody can refute that 70 to 75% of the money of the economy vests in the stock market. By systematically ignoring it and killing it, one shall kill business, agriculture, education, rich, poor and virtually everything which currently exists in the economy.
A poor man on whom the government is over focusing today may not hold shares in the stock market. But the person who employs him does hold shares or is a listed company, and if the employer perishes, the employee will have no choice but to perish. The government and decision makers need to realize this fact. They cannot afford to neglect the Indian stock market any more. They have to take quick and massive steps to get FII and FDI money back into the country, as soon as possible.
Am amazed that no economist or market guru or financial expert has yet realized the gravity of this systematic deceleration in the Indian stock market. All seem to be basking in the hope of a miraculous revival. A revival was first predicted by end of 2018. It never happened. The next pit stop was election 2019. Nothing happened with it too. Now, it shall be US elections next year. Then something else, so and so forth.
No event seems to be bailing out the politically cursed Indian stock market for a while now. I hope this phase passes off, and we see the small caps and mid caps booming once again. The Sensex and Nifty alone do not exhibit the health of the stock market. Small caps and Mid caps are equally important, if not more important. That is where more than 80 percent market investors invest.
I hope that sooner than later, the battered and dusted small caps and mid caps rise from the ashes to cast their success story once again.
Wishful thinking though. The heart says, “yes, the samurai will rise again someday”, and the brain says, “alas, the samurai is badly wounded and has lost his sword!”
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