March ending: My outlook
Nimit Brahmbhatt
Entrepreneur | Finance Storyteller & Author of “Investing over a cup of tea: My not so profound thoughts on investing”
It has been quite a gap and I am not able to write frequently even though there are many things to tell you. This time I have decided to give my outlook towards the global scenario and the equities that are impacted and the future changes that I expect to see.
In the near term that is when we talk about a year, the Indian markets have performed relatively well off when compared to Europe and America as well as other markets.
Why do we invest in equities?
You might be investing in equities through mutual funds or purchasing the shares directly of the companies you might have analysed. Sometimes this volatility of the markets might give you better returns and sometimes it may not, this year it hasn't been able to provide good returns. When I compare it with real GDP returns (6.8%) and our market returns of 10.08% we are not well off. Our markets have given 1.48 times return without considering inflation.
When I would add inflation which comes to the nominal GDP growth rate of 10.05% you understand that we have not gone anywhere and our markets have not been able to give you better returns.
What has really happened?
If someone had really been a patient passive investor, the markets have provided returns of 45% to the investors in an absolute manner. But hey we are talking about the current financial year so I will avoid even long-term comparisons of the equities.
Since the war started between Ukraine and Russia there have been efforts to de-dollarize the whole world economy. Even though it might take years to achieve that but the innovations in financial systems make it seem like many countries coming together might be able to achieve that. Having a reserve status means you can print as much as you want and never pay your country's debt when the debt is in your own currency.
Recession kicking off
Many experts as well as analysts are saying that there might be a recession coming and that is the reason they are laying off their employees from their firms because of relatively less demand, but somehow I wonder whether the number speaks good things or not
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Over the year Banks and Financial services have performed the best whereas the IT sector has performed the worst while comparing the overall sectoral performance. We all have the labour shortage problem, people who are having businesses or even employees who are in HR find it difficult as there has been a labour shortage.
The first half of the ongoing financial year (H1 FY23) saw 87.1 lakh new formal jobs being created across the country, according to an analysis of the data put out by the Employees’ Provident Fund Organisation (EPFO). This is a 35% increase compared to the year-ago period.
In the first halves of FY21 and FY22, 24.6 lakh and 64.72 lakh formal jobs were created in the country, respectively. EPFO’s payroll data covers the organised sector workforce for establishments that employ more than 20 workers and have provident fund accounts opened for them. Q2 FY23 saw a slight increase in formal job creation, to 47.4 lakh, compared to Q1 (39.3 lakh). In this fiscal, most jobs were created in September — 16.82 lakh
So now there has been job creation I know there is demand and people also love to spend their money. I have always been listening to complaints about unemployment rising. There have been problems regarding labour shortage because many don't want to come to the office and just want to work from home, not all jobs are like that, now that the work environment has become normal, companies are expecting employees to show up to their offices and work to get more things done. Some might agree to what I just said and some might even disagree.
But is there a lack of demand in our country or are we having so much population that we don't think of that? When I look at the car sales figure it seems astonishing. Makes me think of taking out the total data of all the sectors but then the article would be way too long
Why haven't equities picked up growth?
There are usually 2 ways in which the government supports growth for the longer term. 1st is Monetary policy, when you look at the RBI data hikes even recently it has hiked interest rates making the cost of capital dearer. This would lead to reduced investments by the private sector in the economy. The 2nd approach is the fiscal approach wherein the government is spending on infrastructure which takes a long time to give results and directly and indirectly over 3-5 years creates huge employment which can be seen in the above data.
This time, the government has chosen the 2nd approach and if you are a passive investor, you need not worry about the things happening in the markets in a short period of time because the good times are coming up.
Conclusion
This time I just wanted to focus on things that have happened over the current financial year and not throw out predictions on what might happen later in the future with some factual data points and a story. This is just the market update.
Refrences
Co-founder, GLSN | India's first & foremost Platform for Learning Spaces & Educational Architecture
2 年Pretty interesting. Your elaboration is so easy to understand. Taking home the point of fiscal policy. Hope the results turn out to be good in long term. Thanks for sharing this article ??