NEW YORK, N.Y. – Stock markets are looking towards more broad-based rally with enough tools to kick-start investments, spur demand, and encourage growth.
The stock market’s sentiment hasn’t been as optimistic in 2019. Although the year started with a lot of hopes and optimism, especially with 2019 being an election year, market hopes with largely slashed on an uninspiring budget and the subsequent decline in the GDP growth of the country.
With the discouraging data from GDP, inflation, and the industry in general, stock markets this year failed to bring growth back to where it once was. Fortunately, both the Sensex and Nifty index were riding independently from the tanking performance of most portfolios, mostly boosted by 10-12 shares that have continued to defy the gravity in the market.
Although both the government and the Bank of India has taken a lot of measures to counter the downturn in the market, it hasn’t given any respite until recently.
On the bright side, the country’s economy is still showing signs of growth, although it has tapered down to 4.5% from the previous 7%.
Further, both the government and the RBI still has enough tools to help kick-start investments, spur demand, and reach for more growth for the country. Compared to what happened from 2009 to 2012 in the US and Europe, India is only trying to restore its growth and not tackling the worst recessions.
The recent performance of the market also suggests that 2020 is likely going to be a big year. For one, the valuations in the market, except for a handful of stocks, have sobered. The RBI’s easy monetary policy has also caused a surplus in liquidity for the banking system. Further, the central bank’s focus is towards the transmission of the cuts on Repo rates, which is at 135 bps in 2019. This effort from the RBI is expected to lead the country towards gains in credit for both the industrial and retail sectors.
The easier lending environment and corporate tax cuts are also expected to boost investments in the private sector.
Analysts also say that the government might make changes in personal taxation, which they said would increase the consumption demand.
The current USD 450 billion account standpoint on forex reserves for the RBI is also expected to be enough in terms of taking care of the exchange rates in the short term as well as any trade deficits. And with the combination of fiscal and monetary policies trying to strengthen the growth in the economy, the fruits of the government and RBI’s efforts are bound to show up in the coming year.