One year of Pandemic and the Stock Market
Around January 2020, the Indian stock market which had been scaling lifetime highs in the run-up to the Union Budget started to sense something ominous. Across the world, countries started…
Inflation and Stock Markets
When important government institutions announce critical decisions, one has to go beyond the obvious implications of those decisions. This is clearly evident in financial markets. When central bankers worldwide almost unanimously cut policy interest rates and infused liquidity in financial markets to revive economic growth, there was a critical outcome which prudent investors and observers had to bear in mind: Inflation. The resultant impact simply can’t be ignored. Increasing supply of liquidity and loose monetary policies globally ensured rapid resumption of asset prices and economic activity. But the increase in money supply also creates a real inflation challenge.
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Unbundling the ‘progressive’ toolkit
One of the recurring arguments that we hear whenever the country launches a new project or buys an expensive piece of essential equipment is that the money could have been better utilised for feeding quite a few less fortunate people. Capital, especially in a developing country like India, is somewhat scarce and there are several competing uses for the available capital. As a society, there is no doubt that we should endeavour to use the capital resources to create a just and fair system where economic opportunities are available to all but at the same time generate the best possible returns on the capital employed. While it cannot be anyone’s argument that the destitute amongst us should be left to fend for themselves, the effort should be to support them till they become self-reliant. The Government should take the responsibility of skilling the needy and create the required growth momentum in the economy such that the newly skilled find gainful opportunities to earn a decent living. It is important to recognise that beyond a point, doles offer a perverse incentive to remain unskilled and push the lazy and unambitious to remain a drag on society. Such instances among some of the idle and able-bodied menfolk are well-known even as political parties compete with each other in doling out freebies indiscriminately out of tax-payers’ money. Governments would do well to strictly direct doles to the really needy and keep it at a level where the recipients do not feel comfortable enough to avoid exploring opportunities for earning a decent livelihood. This is an ongoing process and if anything, has gained significant momentum in recent times.
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UNHOLY TROIKA OF RISING BOND YIELDS, DOLLAR REBOUND & SOARING COMMODITY PRICES
Led by the US, most global markets started to get the early quiver as Bond Yields rose to lead to the strengthening of the Dollar and as the commodity cycle continues to put pressure on the upside. With US Bond yields breaching the crucial 1.6% mark, Equities got into a Risk-off as global allocations became less attractive. Rising bond yields is inversely correlated to its prices impacting the risk premium enjoyed by Equities during these cycles
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Stockz Genie
Over the past year, most global markets have continued to delight investors with their uni-directional and upward trend. The stellar budget has not only reassured the markets but has also nudged fence sitters to finally overcome their reluctance and enter the stock markets! The progression of India to a 5 trillion dollar economy would provide massive wealth creation opportunity for various businesses, sectors, households, market participants as well as the new age investors, over the next decade.
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GameStop & Start of the Retail Investing Revolution
Over the course of the last one week, GameStop – a US based omni-channel retail company that offers gaming and entertainment products across 5000 stores over 10 countries became the cynosure of Investor attention and wild frenzy as a previously unthinkable saga started unfolding at break neck speed.
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Budget highlights 2021
In the wake of a bold & modern India, the FM announced the six significant areas of growth in the Union Budget for FY 2021-22 namely – Health and wellbeing, infrastructure, inclusive growth, human capital, R&D and minimum government and maximum governance.
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Union Budget and Stock Markets
A key annual event that is keenly observed and followed across the socio-economic strata is the Union Budget. Normally, the Budget has a bit of everything which affects not only the rich but also the marginally rich, the middle-class, and the poor. It is an event that has the potential to change the way we deal with our expenses, ambitions, plans, and desires. It also contains path-breaking reforms that can change the course of the economy, sectors, and businesses. The Union Government, as part of this massive exercise, seeks feedback and holds series of discussions from various Industry bodies, trade associations, thought leaders, economists, experts from across sectors and reviews them as a part of the Budget preparatory exercise.
Going much beyond the stated purpose of articulating the “Statement of Accounts and Allocation of Funds”, the Budget attempts to incorporate various policy reforms and measures with the objective of achieving economic growth and progress, social welfare and upliftment.
Among other measures, changes in policies especially taxes have a distinct correlation with stock markets. Whilst some Investors build speculative positions based on their expectations from the Budget, others wait for the Budgetary announcements to happen and then take a more considered view on their investment decisions. Both are guided by the underlying relationship between the Budget and its impact on the economy and the stock market. Let us go back in history and try to get a deeper understanding of how this crucial aspect has indeed played out, in the past.
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What does the recent broad-market rally in markets tell us?
A key characteristic of the rally in Indian stock markets since April 1, 2020 is its broad-based nature. Contrary to the polarization seen in CY2018 and CY2019 when a few high quality names kept the bellwether Nifty 50 up, the recent rally has witnessed broader participation of mid-and-small cap stocks. This broad nature of the rally has clearly provided opportunity to investors to make money. But this does not mean that everyone invested made handsome money.
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Alphaniketan is an Investors Education initiative from Alphaniti
The GDP vs Stock Market Conundrum