The much awaited surprise
An upgrade of India’s sovereign rating right in the middle of one of our history’s toughest economic reform programs is clearly a shot in the arm. It is a booster shot for global sentiment on India, capital raising exercises by government and companies, and domestic sentiment. This will further speed up reforms and public investment.
But, should the markets runaway? Possibly not. The markets need greater evidence on the ground to become more expensive than they already are. Current valuations of several market-leading companies are already discounting much of the good news.
And, the spoiler could be in the form of public issues that mop up much more liquidity. IPOs could play spoiler. Mutual funds are also mobilising huge sums in already overvalued categories and themes through their IPOs. This could lead to misallocation of capital. Corrections usually follow such misallocation of capital and are triggered by an accidental scarcity of capital on a temporary basis.
Measured investing is the need of the hour.
“Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.”– John Bogle