“An Investment in knowledge pays the best interest”
25 Nov 2021by R&R Admin
All of us saw the stock markets tumble in the last few days. Some news channels wrote, “Stock markets witnessed a bloodbath”.
To be honest, one should not call a decline of ~5% a bloodbath. The stock markets tend to be volatile in the short term.
We request you not to pay attention to such dramatic headlines.
While you were busy reading what’s happening in the stock markets, international financial services company Goldman Sachs (GS) released a report titled “GS Macro Outlook 2022: The Long Road To Higher Rates.”
Let’s understand what this report has to say about India and why you need to pay attention to it rather than how the stock markets are swinging on a daily basis.
For starters, Goldman Sachs releases a global macroeconomic outlook report every year. The report forecasts countries’ real GDP growth. US, Germany, France, and Japan are some of the developed markets economies covered in the report. Emerging markets economies covered are India and Russia.
Per the latest report, the global GDP is expected to grow 4.5% in 2022. This growth will be attributed to continued medical improvements, a consumption boost from pent-up saving, and inventory rebuilding.
Among the countries covered in the report, GS is more optimistic about India because of the remarkable growth it sees in the economy.
GS sees a comparatively subdued performance in the Chinese economy owing to a slowdown in realty. Brazil is likely to move at a slow pace because of the financial crunch and election woes.
Per the report, developed market economies should see rapid growth through midyear before it moderates gradually as the near-term triggers vanish.
GS revised its estimates for India’s GDP growth to 9.1% from the previous estimate of 8% for the calendar year 2022. For FY22, it pegged the economic growth at 8.5%.
The report’s co-author Andrew Tilton wrote, “We expect consumption to be an important contributor to growth in 2022 as the economy fully, driven by a notable improvement in the virus situation and adequate progress on vaccination. We also expect government capital spending to continue, seeing nascent signs of a private corporate capital expenditure recovery and a revival in housing investment.”
While the GDP figures for Q2FY22 are not released yet, India’s GDP in the June quarter rose at a record 20.1% compared to the same quarter last year. This double-digit growth came on the backs of Q1FY21 low base.
It’s not just GS who’s positive on India, several domestic and global organizations echo the same thoughts. However, Fitch Ratings is an exception.
State Bank of India Ecowrap report released on Monday upped its GDP growth forecast to 9.3% – 9.6% from 8.5%-9%. SBI revised the estimate as India recorded only an 11% rise in COVID cases during the third quarter of 2021, second-slowest among the top 15 most affected countries. So far, 1.15 bn vaccine doses have been administered, with 81% of the eligible population receiving at least one jab.
A Swiss brokerage, UBS Securities revised its growth forecast owing to faster-than-expected recovery, growing consumer confidence, and the resulting spending growth. Per the new estimates, India is likely to witness 9.5% real GDP growth from the earlier estimates of 8.9.
CARE Ratings and RBI retained their earlier estimates of 9.1% and 9.5%, respectively. However, the government projection is ~10%.
While others feel confident about India, an American credit rating agency Fitch Ratings cut its recent projection to 8.7% from its earlier estimate of 10% citing the impact of the second coronavirus wave in the country.
The stock markets may correct today and tomorrow. But they will never go to ground zero. As the Indian economy flourishes, the markets are expected to follow suit.
Given the increased government spending, progressive economic reforms, rising private consumption, strengthening balance sheets of India Inc., India is all set for exciting times ahead. Being one of the largest and fastest going economies in the world, major global investors and businesses have eyes on India.
So, if you truly wish to build a fortune from equity investments (and it is possible), don’t fear the short-term downturns. Invest wisely with the guidance of a SEBI registered Investment advisor like us.
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