Reserve Bank of India raised the policy rates by 25 BPS. It signifies that the growth is picking up, which has improved the sentiment among investors. However it’s not the complete story, there are looming headwinds which can spoil your investment.
Let’s first see the positive side of the story: According to the recent data, GDP growth is at 7.7 % for the March quarter. This was the highest in the past 7 quarters.
Also, capacity utilization of the manufacturing industry as per the latest survey has improved sharply by 74 percent in December quarter, that is highest in FY18.
Additionally, Exports grew @ 5.2% whereas import has increased by 4.6 % in April 2018. So we are net exporters in the scenario. By improving capacity utilization and credit scenario, we hope that investment activity is expected to remain robust and active exports are likely to improve as Global demand is still showing positive signals.
Investor, on the other hand, has been disappointed for past 5 years. As earnings fell short of the expectations. Also, if you believe the analyst, they downgrade earnings of FY19.
RBI is expecting a growth in the inflation estimates. Also, there are chances of a further increase in the interest rate.
Two game spoilers in the scenario could be elevated crude oil price and as a consequence a weak rupee. If we see any adverse movement in these two factors, it can alter the growth expectations.
Experts suggest that currently, it’s better to stick around the large-cap and selected mid caps with strong management and positive growth. As we also see the valuation of the stock is on the richer side. So we expect that safety in the investment is currently limited. So be smart.
Experience of 8 years in stock investment. I learned everything by making a lot of mistakes and losing a good amount of money, I am here to make sure you don’t lose on either: Hope or Money.