In this edition, we talk about why Jeffries’ Christopher Wood thinks the Sensex is poised to scale 100,000 points. We also talk about why the Indian government sees robust economic growth ahead and what it is doing to attract more foreign investment into the country.
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Well, if you were a student of Chemistry, you’d be inclined to say vapour. And you’d be right.
But if Christopher Wood, the global head of equities at brokerage Jeffries, is to be believed, the BSE Sensex is likely to keep going up, all the way to 100,000. (We know, we know, the stock market never follows a linear path and does come down before going back up again, but you get the point, right?)
Wood said this week that he believes the Sensex hitting the magical 100,000 mark is only a matter of time. He went on to add that the Indian stock market will continue to climb the proverbial wall of worry.
“It will only be a matter of time before Sensex reaches 100,000 level…One obvious worry over the next 12 months will be the inevitable questioning of the current consensus, namely that Modi will be re-elected,” Wood said as quoted by reports.
On May 24, Jefferies said in a note had said that the Indian stock market may outperform its Asian and emerging market peers in the long term as lofty valuations ease and investors look to bet on the economy’s growth prospects.
The 30-share benchmark index is currently around 62,000 levels and 100,000 certainly seems like a far cry from here, especially with the threat of a global recession still looming and inflation nowhere under control.
But who are we to second guess someone like Wood, who, given the pole position he sits at, should know.
And yet, we’d say, don’t get carried away by any hype. Remain a cautious investor, even as you continue to make your way to fabulous riches!
Economic Delight
The top boss at Jeffries is not the only one bullish on India. The Indian government too reckons the country’s economy is ready for world-beating growth.
India’s Chief Economic Advisor V. Anantha Nageswaran said this week that strong credit demand and softening crude oil prices could buoy the economy, putting the South Asian country on course for a 6.5% expansion this fiscal year. These indicators, together with an uptick in construction activity, may shield the economy from slower global growth and weather-related risks, India’s top finance ministry mandarin said in an interview.
Data next week is likely to show the economy expanded 7% in the year that ended March, according to Bloomberg estimates compiled on Thursday. While higher borrowing costs might have slowed some activity, India remains the world’s fastest-growing major economy, outpacing China, and drawing foreign inflows into the equity markets.
So, barring the monsoon and geo-political risks, India’s economy is on a “steady auto-pilot” and “ticks all the right boxes at this point,” Nageswaran said.
So, what does this mean for you, the retail investor? For one, it might mean a buoyant market in the near future. But higher growth levels could also mean higher inflation and therefore elevated interest rates.
Just as we said before, remain cautious and keep investing wisely.
FDI Bump
While economic growth may be looking up, long-term foreign investors seem to have turned cautious on the India story, at least as far as inflows into the country are concerned.
For the first time in a decade, the gross foreign direct investment (FDI) flows witnessed a decline of nearly 16% to $71 billion in 2022-23, recent data from the Reserve Bank of India (RBI) shows.
According to reports, the decline was mainly due to a slowdown in the global economy. In 2021-22, the FDI inflows were $81.97 billion, up 10% over the fiscal 2019-20.
The net FDI also witnessed a decline of nearly 27% to $28 billion in 2022-23 from $38.6 billion a year ago, mainly due to moderation in gross inflow and an increase in repatriation.
The highest decline in FDI inflows as against the previous year was recorded in manufacturing, computer services, and communication services and the countries that were the major contributors to the fall during the period were the US, Switzerland, and Mauritius.
RBI data added, ‘FDI Intelligence’, to say India was the second largest recipient of FDI ($26.2 billion) in the semiconductor industry for the year 2022, second only to the US ($33.8 billion).
Angels get wing
But the government seems to be leaving no stone unturned in a bid to attract foreign investment into the country.
The Central Board of Direct Taxes said on Wednesday that certain classes of persons and foreign entities had been exempted from the angel tax provision.
The move would encourage foreign portfolio investors from 21 nations to invest in startups with an exemption from angel tax. The list includes Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Iceland, Israel, Italy, Japan, Korea, New Zealand, Norway, Russia, Spain, Sweden, United Kingdom and the United States, according to a notification.
The notable miss were Singapore, the Netherlands and Luxembourg, despite a large number of investments being routed into India through these jurisdictions.
Limited relief has been granted to certain categories of investors, such as category one FPIs, pension funds and broad-based investment funds.
Ola Electric IPO?
As markets are on a high, Ola Electric, India’s largest electric vehicle company, is said to be in talks with financial and legal institutions for the much-awaited initial public offerings (IPOs), likely to be slated for early 2024. This comes just days after it secured $300 million in fresh funding led by a sovereign fund.
Reports say the company has already begun the process to prepare its draft prospectus for the IPO and will file it latest by September. The company is reportedly in talks with Kotak, Goldman Sachs, Citibank, and others as banking partners for the IPO. It has hired law firms Cyril Amarchand Mangaldas and Shardul Amarchand Mangaldas as legal advisors.
Market Wrap
This was a good week for the capital markets with both the broader indices- Nifty and the Sensex- ending the last five trading sessions firmly in the green.
While the 50-share Nifty ended the week just a shade below the 18500 mark, up more than 1.3%, the 30-script Sensex gained nearly 1% to close above the 62500 mark.
Among the stocks that gained the most this week was Adani Ports and Special Economic Zone, a part of the Adani Group, which seems to have emerged out of the shadows of the Hindenburg report that had hurled several allegations against its promoters.
Other shares that gained over included Vedanta, Tech Mahindra, Infosys. ITC, HCL Technologies and Indian Oil Corp. Also among the gainers were Wipro, Maruti Suzuki, Cipla, Mahindra & Mahindra and Tata Consultancy Services.
Among the counters that lost this week were the HDFC twins- HDFC and HDFC Bank, ONGC, Grasim Industries, Zee Entertainment and Yes Bank. Some others that ended the week in the red were ICICI Bank, Hindustan Unilever and Powergrid Corp of India Ltd.
Other headlines
- IMD predicts 2023 monsoon to be normal
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Page Industries hits 19-month low on disappointing Q4 results
- Anil Agarwal’s Vedanta pledges nearly all its HZL stake to raise funds
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Inflation war not over; FY23 growth may top 7%, says RBI Guv Shaktikanta Das
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Reliance completes acquisition of 51% stake in Lotus Chocolate Company
- Tata Group expected to pick UK as site for new JLR battery plant
- Alibaba refutes job cut rumours, likely to hire 15,000 people this year
- DoT against giving 5G spectrum to enterprises for private network
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets? Read more: Zen And The Art Of Investing
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