New Delhi: A pick-up in consumer demand, record-low interest rates and improving prospects for the manufacturing sector will likely fuel a rally in stocks, even as a brisk pace of gains poses risks to the economy.
These are the findings of new research by Bloomberg Intelligence and Bloomberg Economics, when the NSE Nifty 50 index climbed 130% in March 2020 from a record low backed by central bank liquidity injections, millions of new retail investors and regulatory crackdown. in China.
The rally has added about 1 percentage point GDP growth Every quarter from October-December.
Gaurav Patankar and Nitin Chanduka, analysts at Bloomberg Intelligence, said, “While the case for India’s equities remains structurally positive, we believe resurgence consumer demand, manufacturing in the ‘China plus one’ world, regulatory overhauls and monetary and fiscal Amidst the trajectory of the policy.” , is written in a note.
However, the sharp rise in profits has increased the economy’s vulnerability to market shocks.
The Nifty is now trading at 22.2 times its 12-month estimated earnings, well above its five-year average of 18.5. In comparison, MSCI Emerging Markets Index is trading at a multiple of 12.7.
A return for the Nifty, trading nearly 35% above its historical trend level, would result in a shock GDP reduction of 1.4% in the same quarter and 3.8% in the next year, wrote Ankur Shukla, an economist at Bloomberg Economics. separate note.
“The higher stocks climb, the greater the risk to the economy if they do right — an important consideration at a time when the Federal Reserve is weighing the timing of tapering stimulus,” Shukla said.
These are the findings of new research by Bloomberg Intelligence and Bloomberg Economics, when the NSE Nifty 50 index climbed 130% in March 2020 from a record low backed by central bank liquidity injections, millions of new retail investors and regulatory crackdown. in China.
The rally has added about 1 percentage point GDP growth Every quarter from October-December.
Gaurav Patankar and Nitin Chanduka, analysts at Bloomberg Intelligence, said, “While the case for India’s equities remains structurally positive, we believe resurgence consumer demand, manufacturing in the ‘China plus one’ world, regulatory overhauls and monetary and fiscal Amidst the trajectory of the policy.” , is written in a note.
However, the sharp rise in profits has increased the economy’s vulnerability to market shocks.
The Nifty is now trading at 22.2 times its 12-month estimated earnings, well above its five-year average of 18.5. In comparison, MSCI Emerging Markets Index is trading at a multiple of 12.7.
A return for the Nifty, trading nearly 35% above its historical trend level, would result in a shock GDP reduction of 1.4% in the same quarter and 3.8% in the next year, wrote Ankur Shukla, an economist at Bloomberg Economics. separate note.
“The higher stocks climb, the greater the risk to the economy if they do right — an important consideration at a time when the Federal Reserve is weighing the timing of tapering stimulus,” Shukla said.
.