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Stock market focus to shift to earnings growth

Yatheendradas C.k. at 07:21 PM - May 25, 2019 ( ) Views: 216

After Modi’s historic election win, stock market focus to shift to earnings growth
Published: May 25, 2019 6:13:13 PM  The Financial Express
The government has to now look for a revival of private sector capital investment and exports both of which had seen a recent slowdown.

By Ashutosh Bishnoi

The equity markets celebrated the recent election verdict for political stability and policy continuity. The broader markets cheered the results as the NSE Nifty index breached 12,000 and BSE Sensex crossed 40,000-mark for the first time ever.

The markets had anticipated a similar verdict, if not better, and had surged over 10% since February. However, more than the short-term gains, this is a verdict for long-term hope, continuing economic reforms, and a better life for all people across sections.

The markets reflect this and sanity has dawned upon investors after a short exuberant run, as was evident from the way markets behaved on the day of result.

After a big jump following a ‘favorable’ exit poll verdict, for stability and continuity, the Nifty closed 80 points down on the day of the result. Mostly because everyone who wished to take profit did just that. From now however, the focus has shifted to corporate earnings and such government policies that would pave the way for a long-term favorable business and investment environment.

The government has to now look for a revival of private sector capital investment and exports both of which had seen a recent slowdown. Given its track record, we believe the government may continue its pursuit of improved infrastructure.

Another recent challenge is slowing domestic consumption with some segments, like auto and FMCG, reporting a drop in sales. Rural distress might have contributed to it. However, we believe that this is set to change and the domestic consumption is all set to increase over the next few years.

We saw the government announcing PM Kisan Samman Nidhi, under which it promised Rs 6,000 annual cash transfers to small land-owning farmers. The other government schemes like Ujwala, Swachh Bharat and Atal Pension Yojana and financial inclusion efforts like Jan Dhan Yojana have already started delivering benefits to rural poor. Even employment guarantee scheme – MNREGS — has seen its allocations increasing over the years.

Moreover, now, with the government gaining a bigger mandate for the next term, we believe that its agenda to double rural income will find more impetus. Schemes like PM Kisan Samman Nidhi would be rolled out on a larger scale, and existing projects like MNREGS are likely to be scaled up. All these would lead to a greater regular income flow and boost financial savings in rural India.

(Ashutosh Bishnoi is the MD & CEO at Mahindra Mutual fund. Views are the author’s own.)

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