The current year has been a complete washout. Everything that could have gone wrong, did in this Samvat 2074. Crude prices have surged 47 per cent till October and the Rupee plummeted 13.3 per cent against the dollar. Monsoon, too, was below normal.
As if that was not enough, the US Federal Reserve (US Fed) went into a rate hike frenzy – hiking rates four times. Trump out-competed himself in tearing out one trade agreement after another and re-wrote almost everything, except the Bretton Woods Agreement.
On the political front, the ruling party couldn’t fully utilise the tailwind of Tripura win and could emerge only the largest party in Karnataka. The desperate opposition is throwing all kinds of allegations on Prime Minister Modi in the hope that some of the muck will stick.
We have the state elections and then the Lok Sabha elections and there is a near consensus that Bharatiya Janata Party (BJP) will lose Rajasthan and will have a tough time getting a majority in the Lok Sabha.
The logic is that the markets have priced in all the negatives but has not taken cognisance of the possible positives.
Our biggest worry, crude oil prices, will only go downhill from here. The ongoing trade wars will ensure that the global growth slows down. Saudi Arabia, which finds itself in a tight spot following the murder of Khashoggi in their Turkish consulate will bend over backward to ensure that they that they tow the US demand of making good the loss of every Iranian barrel. Russia will be more than willing to produce as much as it can, ensuring that Crude remains in the barracks.
With the GST (goods and services tax) in place, the next Government will have its cash registers ringing. Inflation will further come down with the fall in crude oil prices.
We are the world’s fastest-growing economy and we will continue to be so. Our per capita income will continue to rise fuelling consumption. Our demographics remain the best in the world.
Well capitalised larger private sector banks that lend to retail consumers will outsmart the competition. Pharma stocks, especially those in API business will also do well.
As regards the general election outcome in 2019, whosoever comes to power, whether it is a Congress-led coalition or the NDA, the markets will remain on an uptrend.
If the NDA (National Democratic Alliance) comes to power, the markets will see a sharp rally. On the other hand, in case of a coalition government, there is a good chance that Long-Term Capital Gains Tax (LTCG) on STT (short-term tax) paid shares will be abolished, which can single-handedly turn the markets around.
The opposition is again making the mistake of making this a presidential style of election, targeting Modi.
If I were to put my common man’s thinking hat, I see the NDA romping home to power with ease for the simple reason that the common man is not a fool. If political parties of all hues are coming together with a negative agenda of ensuring that Modi does not come to power, the common man will understand whom to vote.
That said, the main risk for the global markets is China. If it depreciates its currency, it will have an adverse impact on our currency as well. But if the US and China were to talk amicably, things could turnaround much earlier than expected.
I see a bright future for our markets amidst this gloom. That is what Diwali is all about.
The writer is the Head – PCG & Capital Market Strategy, HDFC Securities. Views are personal