Strong India, Cautious Investor

The Indian economy appears stronger than the nervousness visible in the stock market might suggest. Corporate earnings are improving, domestic demand remains reasonably resilient and several sectors are reporting healthy growth. Yet investors are facing an unusual mix of risks: crude oil is moving towards $100 a barrel, global bond yields are rising, foreign investors have turned sellers again and parts of the Indian market remain expensive. That leads to a simple investment message: India's...

min read

The Indian economy appears stronger than the nervousness visible in the stock market might suggest. Corporate earnings are improving, domestic demand remains reasonably resilient and several sectors are reporting healthy growth. Yet investors are facing an unusual mix of risks: crude oil is moving towards $100 a barrel, global bond yields are rising, foreign investors have turned sellers again and parts of the Indian market remain expensive. That leads to a simple investment message: India's growth story remains intact, but investors should not mistake a strong economy for a risk-free stock market. The latest corporate results offer considerable comfort. The economic momentum built over the past few quarters has not been derailed by geopolitical tensions. The margin pressure feared across several industries has also been less severe than expected. More importantly, earnings growth has been reasonably broad based. Large, mid and small companies have all shown healthy growth. If oil-related businesses, which are somewhat different in their earnings pattern, are excluded, the gap between the three market segments is not particularly wide. Financial services have been among the strongest performers, with banks, NBFCs and capital-market businesses reporting good growth. Capital goods, metals, telecom and power have also done well. For investors, this is significant. A stock market supported by genuine improvement in corporate profits has a much stronger foundation than one driven merely by enthusiasm. Domestic Risk The monsoon, however, remains an important domestic risk. Rainfall has been below normal so far, although the impact on the rural economy has not yet been alarming. Tractor and two-wheeler sales remain reasonably strong, suggesting that parts of rural India continue to spend. At the same time, increased demand under the rural employment guarantee programme suggests that weaker rainfall may be affecting poorer rural households more severely. Food inflation adds another complication. Higher food prices may improve the income of farmers who sell their produce, but they also increase the expenses of families who buy food. Therefore, higher food inflation cannot automatically be interpreted as stronger rural purchasing power. India is nevertheless better prepared than it once was. A healthy IPO market is a positive development. It allows companies to raise capital and gives investors fresh opportunities. But there is a point at which too much supply begins competing for the same pool of money. The current market provides a striking example. The much-awaited IPO of the National Stock Exchange is reportedly being considered at a size of around Rs. 24,000 to Rs. 25,000 crore, down from earlier expectations of Rs. 30,000 crore but a very large issue nonetheless. The message is not that investors should avoid IPOs. It is that an exciting new issue should not automatically be preferred over an established company merely because the new issue is attracting headlines. The bigger uncertainties are global. Brent crude has moved close to $100 a barrel as tensions in the Middle East have intensified. For India, which imports most of its energy requirements, expensive crude can mean higher inflation, a wider trade deficit and pressure on economic growth. US bond yields are another concern. Higher yields make dollar investments more attractive and can reduce the appetite for emerging markets such as India. This does not necessarily mean that global investors have abandoned India. It shows how quickly investment decisions can change when oil prices, interest rates and currencies move. Domestic investors, particularly mutual fund investors, therefore have an important role in providing stability. Their regular investments can partly offset foreign selling, although domestic flows cannot make the market immune to global shocks. Faster Growth The enthusiasm for small and mid-cap stocks is understandable. Many of these companies offer faster growth and have rewarded investors handsomely. But if investors pay too much for expected growth, even a good company's share price can disappoint. Large-cap companies, after a period of relative underperformance, may offer more comfortable valuations and greater stability. The right mix will depend on an investor’s financial goals, investment horizon and ability to withstand market fluctuations. India’s economic story remains encouraging. Corporate earnings are healthy, domestic demand has resilience and the economy has become better equipped to absorb individual shocks. But the stock market is not the economy. For the common investor, therefore, the most useful question today may not be, “What should I buy?” It may be, “Is my portfolio balanced enough to withstand what I cannot predict?” (The writer is a retired banker and author. He can be reached at krs1957@hotmail.com. Views personal.)

Dangerous Departures

Correspondent

Oct 29, 2024

2 min read

Updated: Oct 30, 2024

In yet another shocking incident adding to Mumbai’s infamous tryst with stampedes, chaos erupted at Mumbai’s Bandra Terminus following a weekend stampede that left at least ten persons injured, two critically so. A crowd surged toward the Gorakhpur-bound train with nearly 1,500 people vying for seats in 22 unreserved compartments, leading to the stampede. Several others narrowly avoided tragedy, with some even pushed onto the tracks. This is not a unique episode but rather a recurring theme in Mumbai’s bedevilled crowd management, one that has haunted the city’s public spaces, particularly as festive seasons magnify the crowds.

Mumbai is no stranger to stampedes. A horrifying incident in 2017 at Elphinstone Road Station left 23 people dead and nearly 50 injured. The cause was a familiar one: an overwhelming crowd confined to a narrow footbridge during peak rush hour. The tragedy sparked an outcry, with promises from authorities to upgrade infrastructure and enhance safety protocols. Yet seven years on, crowd-related incidents continue to be a constant danger. Today’s incident reveals a similar lapse—a lack of foresight in managing the thousands who gather on platforms ahead of Diwali, eager to return to family. That the Gorakhpur Express was unreserved and heavily crowded was predictable.

The issue lies beyond simply crowd density; it is emblematic of deeper systemic negligence. The Brihanmumbai Municipal Corporation (BMC), responsible for local public safety, along with the Railways Ministry, bear responsibility for ensuring order at such high-risk hubs. Although the BMC acknowledged the “festive rush,” it appears little was done to pre-empt it. Swift action could have been taken to either disperse the crowd or reroute passengers. Instead, chaos prevailed.

Political reaction has been swift but uninspiring. Aaditya Thackeray, son of Uddhav Thackeray, launched a scathing attack on the Union Railways Minister, Ashwini Vaishnaw, branding the incident a result of the minister’s “incapable” leadership. This hardly addresses the immediate need: a substantive plan to manage crowds and prevent similar incidents.

Mumbai’s transport infrastructure remains sorely outdated. Platforms are undersized, signalling systems frequently falter, and crowd control mechanisms are grossly inadequate. Despite repeated accidents, there has been little investment in comprehensive crowd management systems or the deployment of personnel trained in emergency response. While railway footbridges were widened after the Elphinstone tragedy, Bandra’s incident demonstrates that such incremental changes are insufficient. Mumbai, which sees a swelling populace during festivals, demands a robust strategy to address its vulnerabilities. This should include technology-driven crowd monitoring, clear communication channels to inform passengers of platform conditions, and additional security and medical staff on high-demand days. It is essential that crowd management training for personnel becomes a priority rather than a reaction to tragedies.

Strong India, Cautious Investor

Dangerous Departures

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