Will Muhurat Trading Herald Good Times for the Nifty 50?
Since 1957, Indian stock markets have observed the customs of Muhurat trading as a good omen for the business year to come. Falling in the festival of Diwali, the practice signifies Indians’ belief that their economic wellbeing rests in the hands of God – not their own hands or those of foreign fund managers. Muhurat trading, which was held on the first day of November this year, gave traders a well-timed refresher course on Who holds the reigns of their nation’s economic future. This was because October had seen $11 billion sail out of Indian stocks after foreign funds sought out alternative destinations for their capital. As a result, the benchmark Nifty 50 index lost as much as 6.2% in that month.
One destination preferred by global traders was China, whose stocks were riding the wave of government stimulus meted out in September. Besides this, global traders had noticed that India’s economy had lately slowed the pace of its expansion, and that its equity valuations were not as tempting as they once were, having grown inflated. On the domestic front, consumers in cities were not in the mood to go shopping, intimidated as they were by the high rate of inflation.
Since this is the time of year when Indian traders look to the positive and turn their backs on the negative, what buds of hope can we see in the nation’s present predicament?
Q2 2024
For the quarter ended in June, Indian GDP climbed 6.7% over last year’s period. Although that might sound like good news, many traders viewed things differently. This was, firstly, because it undershot the central bank’s forecast of 7.1% and, secondly, due to the fact that it came in below the growth recorded in the previous five quarters. The causes for the weak performance, for Upasna Bharadwaj of Kotak Mahindra Bank, were the “likely fatigue in urban demand, private capital expenditure and the pace of the global slowdown”.
One voice that stood out from the rest, though, was Deloitte’s, who called the 6.7% growth “resilient” in the light of the political volatility surrounding the national elections, and in the face of a sluggish global economy. Indeed, Deloitte wrote that the figures have “increased our confidence in India’s outlook this year, suggesting strong economic fundamentals driving economic activity”. What were the green buds Deloitte saw that kept their optimism so high?
Reasons for Optimism
Urban consumer sentiment has been down in the dumps lately, but the rural scenario gives us reason to hope. India’s growing manufacturing sector has been drawing in rural workers at a steady pace, and the prospect of more widespread formal employment means this segment of the population may be increasingly equipped to make purchases. There is already heartening evidence that this is the case.
India is making a concerted effort to establish itself as a world leader in green energy, which looks set to generate lots of new jobs for its growing population – some say as many as 35 million jobs by 2047. The government wants to turn the nation into a major producer of green energy, green transport, and green manufacturing en route to their goal of net zero emissions by 2070. In addition to this, waste management, water management, and construction all have the potential to turn themselves green, and India’s government wants to help them make the change. This broad-based drive may draw substantial capital into the nation and create employment for millions of country dwellers.
Prime Minister Narendra Modi is consciously aiming to make India economically mature by 2047 – a century after she gained her independence. The project, called “Viksit Bharat 2047” encapsulates the Prime Minister’s vision of expanding local participation in the economy on a large scale. On a closer time horizon, Modi would like India to grab third place in the rankings of largest world economies within the next five years. Aside from bolstering efforts in sustainable development, this will entail improving business conditions, infrastructure, and social welfare projects to meet world standards.
To put October’s losses in perspective, the Nifty 50 index was still in the green for more than 11% this year after recording them, putting it on track for an impressive ninth consecutive year of gains. This makes India’s economy one of the fastest growing in the world. Also, remember that China’s weak growth at present is likely to translate into modest oil prices down the line, which would lower India’s import bills and even make production cheaper. This could assist India in continuing to demonstrate her resilience in swimming against the general tide of slow global trade in months ahead.
Wrapping Things Up
The monsoons came in plentifully this season, and this put something in the wallets of the rural population. This boost to their consumption sentiment may be another good omen for the year ahead, especially considering the expansion of India’s manufacturing sector, which looks set to transition large numbers of workers into formal employment over the coming years. There is, then, plenty of reason to remain optimistic on Indian stocks and the Indian economy as we look towards the future.
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