Delay in the conversion of government intentions to actions
coupled with weakness in domestic currency, developed nations self-centric
monetary policy approaches, etc. are some of the factors responsible for
India's lower growth trajectory.
Also, these factors also acted as impediment in policy
actions whenever manoeuvring was warranted to boost growth.
The growth that was earlier suppressed in a few sectors,
namely, capital goods, realty, metals, etc., was largely due to muted
confidence among corporates, lower core sector growth and higher cost of
capital.
The above given factors have slowly engulfed the entire
economy giving a spiral effect. The supply side issues together with high
inflation have now resulted in lower consumer demand.
Testimony to the same are FMCG companies which are lowering
product prices to gain market share and volume growth. Automobile companies are
giving full page advertisements in daily newspapers giving hefty discounts and
schemes to lure buyers.
Huge capital investments in sectors like energy, mining, etc
have got struck in various stages of development, which has not only sent the
Indian economy on back foot but is also indicating that the seeds would not
turn to become tree to shower growth in future.
Delay in infrastructure development has led to the
challenges for the banking system where banks are facing rise in delinquency
rates and in non-performing loans.
Some of the mid-size public sectors banks' problems have
risen to such gravity where it is looking that the net worth may take a bigger
knock.
Indian stock markets are behaving in no different way and
reflecting the concerns, stock prices are walking towards new normal, that is
certainly towards the down side.
Even though with no conviction about future growth, many
stocks prices are definitely looking cheaper, reminding the famous approach of
buying in the times of pessimism and selling in the times of optimism.
Now the question that arises to every mind is what to buy
(in case of sign of bottoming out) and where to seek shelter (in case situation
remains as it is).
For the latter one, the shelters at the moment are
information technology stocks, pharmaceuticals, FMCG, etc. and because of lack
of opportunities the shelters have rewarded investors meaningfully in the past
and in future they are expected to repeat the same.
In case of the former scenario, i.e. if the markets bottom
out, then banks are expected to take the front seat and the core sector stocks
would make a U-turn.
