I think there was a lot of disruption in the rural disposable income on account of the disruption in jobs in the urban area on a post COVID basis. But I think with manufacturing picking up several of those jobs are coming back and those transfers from urban to rural India might be getting back.
And if you go back in history and see the longer-term trajectory of the market, it is very unnatural. I mean, typically through the noughties, which is 2000 to 2010 period, I mean we would see a 10% correction every quarter and every year we would see a correction closer to 20%.
Ashwini Agarwal says “booms and busts all produce extraordinary gains and extraordinary losses and this is part and parcel of it. I do not think it damages the underlying story for India or the global sentiment on India in any way. That is how I look at it. So it is not such a big deal in my personal opinion.”
Ashwini Agarwal of Demeter Advisors hopes for a more even recovery in the Indian economy, rather than just benefiting the rich. He expects the release of government capex to ease liquidity and boost consumption. He sees opportunities in attractive consumer staples stocks with benign raw material prices and constructive margin outlook.
“We are pretty much at a peak but this market cap to GDP is a misnomer in my view because large parts of the GDP are not listed. So, how do you correlate market cap to GDP? Our agriculture, which is a large part of the GDP, does not trade ; a large part of the SME sector does not trade; a large part of government services which make up the GDP do not trade.”
So that is kind of putting some pressure in terms of where the funds can go. So if you take all of this into account, my sense is that the domestic sentiment will not allow the market to sink a lot unless the domestic sentiment caves in for some reason and there is not much room for upside either.
“I continue to look for ideas in the small and midcap space because the overall economic growth environment in India is going to be very conducive. I continue to find opportunities both in the lagging frontline names with good prospects as well as select smallcap industrial names or even some of the services names.”
“Historically we found that the further out into the future that you are willing to discount, the more are chances of disappointment. Obviously, some of these prices have stopped making sense a while ago and it is a bull market so who knows where these go but I would be very worried as to what the outlook for these stocks will be at some point.”
There is a hope of recovery for the sector with trade volumes likely to improve in the second half of FY24 as global retailers order their summer and spring 2024 collections, some analysts said.
Agrawal provides valuable insights on the stock market, offering a comprehensive analysis of various sectors and identifying potential investment prospects. From the IT sector's resilience amidst AI fears to the manufacturing sector's positive outlook, Agrawal's observations shed light on opportunities in an uncertain market.