The Indian markets have rallied continuously from January 1, 2017. The Indian markets moved towards making new highs post-election results in Uttar Pradesh, India’s largest and politically significant state. Sentiment among Indians towards equity remains high. There is a sense of urgency to move money from other asset classes towards equity.
A similar sentiment prevailed in 2014, after the results of India’s general elections. The indices made new highs in 2014, only to lose momentum as corporate performance could not keep pace with the market’s moves. The current rally is also going to be tested by domestic corporate performance. Most Indian investors seems to be underestimating the impact of the Trump rally on global markets. Investor confidence has been driving global flows. And, that confidence has a Trump connect. From what is evident, the Trump rally will meet the same fate as our own Modi trade did in 2014. This would change global investor sentiment. Global flows can become volatile. This volatility will further be fuelled by economic instability in commodity dependent nations. The collapse of the Brazilian markets and its currency, the Real, is an ominous sign of things to come. Investors must re-calibrate their strategy to a potential shift in global sentiment.
The good news is that Indian corporate earnings revival seems far more imminent that ever before.
Opportunity is not always at an opportune time.- Diane Hendricks