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Market rally: Driven more by relief than optimism
Retail investors should stay cautious and focus on fundamentals, despite the market’s sudden spurt (a sudden increase of activity; गतिविधि में अचानक वृद्धि)
Monday’s market rally which helped the indices post their highest single-day gains in a decade, and put the Sensex within hair’s breadth (a very small amount or margin; बहुत कम / हाशिया ) of a new high, seems to have taken even bullish market participants by surprise (to shock someone by one’s action; किसी कार्यवाही में किसी को झटका / सदमा देना ). But the market’s reaction to the exit polls predicting a clear majority for the ruling NDA, seems to be driven more by relief than optimism about India’s economic or earnings prospects. The relief is on two counts. One, with exit polls playing down (to try to make a problem or difficult situation seem less important than it is; किसी समस्या या कठिन परिस्थिति को कम महत्वपूर्ण बनाने की कोशिश करना जितना महत्वपूर्ण है उससे कम ) the probability of a hung Parliament and the prolonged political haggling (the act of arguing about the details of something; किसी चीज के विवरण के बारे में विवाद करने की क्रिया ) accompanying it, the market is betting on the new government getting quickly down to business (begin matters in earnest; जल्दी से जल्दी काम शुरू करना ). Two, with the post-poll surveys discounting the possibility of a win for the Indian National Congress, over-the-top populist initiatives such as NYAY which would have likely created fiscal challenges, may now be off the table. Given that exit poll predictions have been known to go even directionally wrong on occasions, retail investors should remain circumspect (wary and unwilling to take risks; खतरों से बचना /सावधान होना ) until the final verdict on May 23 is out.
In fact, caution should be their watchword (a guiding principle; केंद्रबिन्दु ) even if the final election results end up closely mirroring the exit polls. Trends in stock market performance after earlier general elections suggest that once the immediate excitement of the results dies down, markets turn their attention to more prosaic (ordinary and not interesting; साधारण और दिलचस्प नहीं ) matters such as the economy and corporate earnings. On this score, the news is not good, with industrial growth floundering (be in serious difficulty; गंभीर कठिनाई में होना ), consumption on a slow track and the NBFC liquidity crisis shaking up debt markets and hurting credit flow to the economy. India Inc’s earnings scorecard for January-March 2019 quarter has also been a mixed bag. Though aggregate profit growth rates are at a strong 20 per cent plus, aided by a turnaround in banking, sales growth is at its lowest ebb in the last six quarters hinting at a demand slowdown. With the Sensex price-earnings multiple at a lofty 28 times, India’s stock valuations factor in a 20 percent plus profit growth not just for this fiscal year but for many more to come. There’s risk of a sharp de-rating should the actual trajectory (the way in which a process or event develops over a period of time; जिस तरह एक प्रक्रिया या घटना एक निश्चित समयावधि के लिए विकसित होती है )
Should it return to power, the NDA will have to double down (to continue to do something in an even more determined way than before; अधिक प्रयास से ) to the challenging task of stimulating the economy, without over-relying on the stretched fisc. For all its pro-business credentials, the NDA didn’t really manage to deliver on its promise of ‘minimum government, maximum governance’ in its current term. Even as India managed a brisk climb in the World Bank’s ease of doing business rankings, domestic businesses have complained of increasing regulatory intervention on the ground. Expanding discretionary powers to the taxman, ad-hoc tax demands on start-ups, frequent policy flip-flops on GST and FDI and wild card (an opportunity to enter a sports competition without having to take part in qualifying matches or be ranked at a particular level; (क्वालीफाइंग मैचों में भाग लेने या किसी विशेष स्तर पर रैंक के बिना एक खेल प्रतियोगिता में प्रवेश करने का अवसर)) interventions in the workings of PSUs haven’t helped. India also remains a global outlier on high corporate tax rates. Trimming these and scaling back regulatory interventions in business are critical to acche din sustaining in the markets.
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