India’s Growth Story in 2019 and beyond

The direction of the market will be decided by many factors and events that will take place in 2019. We all know that 2019 is the year of General Elections in India. If the current NDA government regains power in the center, the market will fly like a rocket. But if it fails to achieve majority or there is a situation of Hung Parliament, we will see huge fall in the market within a very short span of time. Apart from that, our market will be derived by micro and macro Socio-economic and political scenarios developing in our country and in the world as a whole.

The World Bank has forecasted that India’s GDP is expected to grow @ 7.3% in the Fiscal Year of 2018-19 and an average of 7.5% in 2019 and 2020. It is expected that India will remain the fastest growing economy among leading economies of the world. In the same period, China’s GDP growth is expected to slow down to 6.2% in 2019 and 6% each in 2020 and 2021 as per the January 2019 Global Economic Prospects report released by the World Bank. This slowdown of Chinese economy is also expected to be boon for the Indian Economy.  The CSO of India has also predicted that India’s GDP growth rate will at 7.2% during the financial year 2018-19.  A survey has also been conducted by the PwC-FICCI among the India Inc. during July to October 2018 which reveals that India Inc. is very optimistic about Economy and expects over 7% growth in economy during next 12 months. This expectation is in line with the other institutions like World Bank, IMF and the CSO of India.

Key factors driving confidence in growth expectation is backed by strong domestic consumption, under control inflation, which is expected to remain near the mid point of RBI target rang of 2 to 6 %, strong Public Sector driven infrastructure, Continuous reduction in Current Account deficit which is targeted to be at 2.6% in next year. Indian Economy has now come out of the turbulence caused by demonetization and implementation of GST. Demonetization and GST have forced many unregulated and unauthorized business to come into main stream. This helped the economy to become more robust. Gradually Indian Banking and Financial system have embarked on a path of cleaning themselves and as a result more hidden filths are coming on the surface. This will eventually clean the system and issue of NPA will be solved. Although, it will take some time to feel the change.

Capital market of any country is considered to the mirror of economy of that country. It shows the actual health of the economy. The growth story of Indian Economy is also going to be reflected in Equity Market. We will try to understand this through the analysis of Indian market.

On 11-01-2019 India’s benchmark Index of 50 largest companies in terms of market cap, NIFTY 50 closed at 10794. Last year in 2018 market touched its all time high at 11751.8 in September and after that came down sharply to the level of 10004.55 in just over one and half month making an overall correction of 14.86% from its top.

We have already seen that the leading markets all over the world witnessed correction during the last year due to various reasons and our Indian markets also followed the trend in similar direction. But it is point worth to be noted that Indian market corrected least compare to the other markets. Now the question is, what will be the direction of market in the New Year? Whether it will correct more or will move in the upward direction and made a new high…..

Above is the NIFTY Monthly Chart from its inception in 1996. We can see that NIFTY is continuously moving in upward direction from the late 2003. The only major correction we see in 2008 that came due to global recession and many incidents took place in the world like Sub-Prime loan crisis in the US due to which banking giant like Lehman Brothers fell down. Due to these incidents Indian economy also faced the situation of slowdown. But recession never came into the Indian economy.  Apart from this, Indian economy shown constant growth and it is hoped that it will keep growing further in coming future with some technical corrections in between.   

The movement of market in 2019 and in near future can be understood with the technical analysis of NIFTY Weekly chart which is present below. From the analysis of below chart of NIFTY it can be said that a “Head &Shoulder Pattern” is in a process of making. By the Elliott Wave Analysis of the Chart, it is clear that five wave motive wave has been completed and period of  short term correction of A-B-C is underway from the top made in February 2018 and we are in the middle of this correction. This correction will be complete near (C) which is around the level of 9330-9375 and after that, the market will move strongly in upward direction. The ongoing correction should be completed within 4 to 6 months time frame from today. So this is a very good opportunity for investment for five to seven years in order to getting multi fold return. This technical Analysis also backed by our fundamental Analysis of Indian economy.

Some of the sectors like infrastructure, consumer goods, auto, cement, pharmaceutical, and power will lead the market in manufacturing sector, whereas IT and Healthcare will outperform among service sector. Systematic Investment Plan (SIP) will be the best strategy to invest in the market.

-:Neeraj Dinmani (Neeraj Sinha)

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