Rotation returns

Fear returns exactly when nobody expects. Bad IIP numbers, widening deficits and a weaker rupee are seen as provocative symptoms. Doom saying can’t get more absurd than this. Falling oil prices and new multi year lows in crude is the greatest news for the Indian economy. Falling inflation is another huge positive that seems ignored. Clearly, the markets are forgetting the basic truth about our economy’s structure. More businesses gain from falling oil and commodity prices. The make in India theme gets a major fillip to create value addition across sectors. The markets are paying the price for the excessive concentration of capital in the defensives. With consumption, IT and durables showing signs of cracking, the markets seem set to panic. Investors feel that their bottom has been taken off. This is the perfect setting for sectoral rotation. With defensives going out of favour, commodity user industries, auto and exporting businesses are set to make a steady comeback.

Iwiz: When growth slows, investors mistake consistency for excellence.

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