By Kunal Sanghavi
With the year gone by with tremendous downturn more in specific stocks than in broad-based indexes, one can only be left with fear rather than greed at the end of the year along the story of greed and fear that investors experience in equity markets. Further to add fuel to fire this is coupled with unprecedented volatility making it even worse. The biggest beating was undertaken in mid-caps where investors lost the most which can be experienced by mayhem in the street however hardly any depreciation in a broad-based index.
In such times I see two key things in the future. First, the key parameters of economy i.e. GDP growth, fiscal deficit, and inflation look in control and in fact better. GDP continues to be fastest growing GDP among major economies surpassing China with we achieving growth forecast of 7.3% even this year and maintaining consistency of 6-7% since 1991 liberalization, fiscal deficit at 3.2% of GDP is well better than last several years and in lines with targeted numbers and inflation continues to be below 5% making India the best investment destinations in the global scheme of things from long-run perspectives.
It’s only a matter of time that global investors realize the aggressive short-term impact steps taken by US President Donald Trump being reflecting the US at growth maturity on various parameters and they decide to return to India for investment as being consistent high growth rather than temporary good parameters.
One of the examples is US employment rates which before a couple of months went to lowest ever, however, it will not fall further reflecting growth maturity. In light of these factors, I believe India continues to be best investment destination and long-term story perceptually and fundamentally will continue to remain intact making this as best of the times to invest.
Question is where to invest coupled with timing. While we are in a state of fear of greed and fear, it can be said that one invest in indexes which is diversified and broad-based at the same time provides upside potential mitigating company-specific risk. While one can invest in broad-based indexes, a part of the portfolio can be diversified in the mid-cap index which has already fallen by 15% and may provide good rising potential when overall markets see the demand by the flow of monies due to the overall fundamental strength of the economy.
Digital disruption and evolution of start ups: while everyone is talking about disruption on account of digital initiatives, I will highlight disruption in the energy sector on account of spurting rise in alternative energy. Globally the use of alternative energy has been continuously on rise enabled by innovative ways leading to a continuous reducing cost of Alternative energy infrastructure. Over a period of 5 years making traditional sources of fuel and energy redundant in the future.
This is evident from the fact that future decades may require lesser oil on account of solar and other alternative energy developing at great pace which is reflecting in constant reduction of price of oil which as a fuel may get disrupted by solar over years and so the demand of oil marketing companies will perpetually reduce as trade reduces over time in terms of volume and value.
The curse to PSU is unfortunately not gone. With the onslaught of Modi government in 2014 everyone hoped that the Gujarat PSU prosperity story will be experienced in the whole of India and all PSU’s will prosper like the ones in the state of Gujarat when Modi was Chief Minister of state examples include GSFC which surged to give more than 100% return during his regime.
One of the key reasons for PSU’s struggling is their structure wherein there are no appropriate public-private partnerships and there is no single strong driver making it organizations where skin in the game is very limited of the people who are managing these organizations.
Secondly, limited policy and changing process, servicing and systems are making it limited support to PSU’s who are struggling from government leading to slow death example being various PSU banks are under PCA were unable to do business even though they had people and infrastructure ultimately leading to the destruction of institutions.
The author is CFO of Metropolitan Stock Exchange (MSE). The views expressed here are author’s own.