Indian markets have already accounted for concerns regarding lower GDP growth and higher inflation projections for this year, stemming from the ongoing oil shock and geopolitical tensions, according to SEBI-registered research analyst Kunal Saraogi in an interview with ANI.
“Markets have already factored that in; this oil shock we are experiencing is significant, though we have encountered worse shocks in 2020,” Saraogi said during an exclusive interview at the event organized by the PHD Chamber of Commerce and Industry (PHDCCI) for its 8th Annual Convention on Capital Market & Commodity Market this past Friday.
His comments come in light of recent reports projecting a decline in GDP growth to 6.6 percent this year, down from 7.1 percent last year, along with a rise in inflation forecasted at 5.1 percent, surpassing the RBI’s target range of 4 percent. Saraogi noted that the market has absorbed shocks brought about by conflicts in West Asia. He emphasized that unless significant military action occurs, such as a substantial deployment of ground troops, the markets are unlikely to react dramatically.
Despite a cautious sentiment among investors due to global developments and ongoing geopolitical tensions, particularly in West Asia, Saraogi asserted that India’s long-term economic fundamentals remain robust. “While the markets have been uncertain because of global factors and other considerations, it’s crucial to focus on what lies ahead. There’s skepticism about future developments, but underlying our markets and fundamentals is strong confidence,” he stated.
Regarding the impacts of geopolitical tensions, Saraogi highlighted that India has been more adversely affected than some other nations due to its reliance on energy imports. “The entire world has felt the effects; India, being a major energy importer, has faced unique challenges that have contributed to its underperformance,” he noted.
Looking forward, Saraogi expressed optimism about the outlook for Indian equities in the coming year. “This period of challenges will be temporary, and better times are on the horizon. I believe the worst is behind us, and the coming year will be favorable,” he remarked. He advised investors to remain committed despite market volatility, emphasizing that fluctuations are a natural aspect of investing cycles and should not deter long-term engagement.
Saraogi encouraged continued investment in high-quality stocks, stating, “There is significant potential for profit in India.” He acknowledged concerns among investors regarding weak returns in recent years, explaining that many retail investors entered at market peaks and subsequently faced disappointment when expected double-digit returns did not materialize.
“The markets have seen declines over the past year and a half, which has caused frustration, as we are accustomed to returns of 10-15 percent,” he said. Regarding the shift in household savings from fixed deposits (FDs) and recurring deposits (RDs) to mutual funds and Systematic Investment Plans (SIPs), he described it as a natural progression in a developing economy.
“In the U.S., few individuals rely on FDs; most invest in 401(k) accounts linked to equity. As India develops, people will recognize the opportunities available in the stock market,” he explained. He added that the increase in retail participation signifies a broader democratization of wealth creation.
“We currently have around 24 crore demat accounts, indicating that the stock market is no longer the domain of the affluent or well-educated; participation has become widespread,” he concluded.
