Good tidings are near
The slowing of growth expectations has been a global phenomenon in recent times. The US economy once again lowered its growth estimates to 2%. How does this affect India? Our growth expectations have anyway been dropping for the past two years. In this scenario, will we see a further reduction in our growth estimates? Fears on this count are natural given the regular lowering of estimates. But, the last two years were quite extraordinary. We had two deficit monsoons that hit agriculture very badly and created a ripple effect on consumption. This year should see this trend reverse. With Mining showing return to growth and with power generation likely to crank up, we should see an end to the phase of falling growth. Growth should recover in FY 2017. What the markets await is a recovery in the capital goods cycle. This is likely to take time given that corporate balance sheets aren’t yet in a position to grow. The first burst of recovery will not see a great comeback in Capex. Utilization of existing assets will improve distinctly in FY 2017. This will catalyse an earnings upgrade. Good times are definitely near.
“If an investor had bought at the absolute lows, it would have been more a matter of luck than anything else.” – Philip Fisher.