stock market outlook: India@75: Can markets and micros only go up now? Vallabh Bhanshali answers

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stock market outlook: India@75: Can markets and micros only go up now? Vallabh Bhanshali answers

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“We have seen commodity prices soften around the world. We have seen freight rates starting to come down. The Baltic has almost crashed which are all very good pointers and this cycle is becoming short by better use of data and more proactive action,” says Vallabh Bhanshali, Chairman, Enam Group



What are your return expectations from the market?
I think the one big thing is that the interest rates are much lower now and therefore the base of my risk-free return itself has come down and my expectation of return from risk capital must also come down.

Number two, we are in a world which is going from quantitative easing (QE) to quantitative tightening (QT). Some part of our stock market returns came from foreigners coming and buying at super prices. Some of that may be suppressed, I do not think that the world will not participate in India’s growth and that will also happen.

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I must temper my expectations in alignment with lower interest rates. If interest rates go up, that will mean we will have a higher nominal economic growth rate because of higher inflation. My returns may be better. I need to align my inflation rate, my interest rate and my expectation from the market. The stock market will continue to give superior risk-free returns by a good margin, I will continue to remain invested in the stock market.

But do you think a large part of the inflation scare is getting priced in both in the bond market and the equity market?
One hopes that we do not have negative surprises on oil and some of the sensitive areas. The central banks are again moving well. They are not moving in as tight alignment as they moved after 2008 but they are more or less moving in alignment. They are all tightening. They all want to get ahead of the curve and that is great news.

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We have seen commodity prices soften around the world. We have seen freight rates starting to come down. The Baltic has almost crashed which are all very good pointers and this cycle is becoming short by better use of data and more proactive action. I think that is playing out. I hope it continues to play out and then the pain will not be that long. Returning to healthy practices is only good and the better players will benefit from it.

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