Economy and Markets Outlook

This report by LocalCircles is indeed the truth whether like it or not.

https://www.localcircles.com/a/press/page/rbi-household-savings-survey

Sharing Quick take on the markets:
1. Economy is slowing down, and this slow down is no longer a one quarter phenomena, the NSO has estimated Fy2025 GDP growth at 6.4% .
2. We expect this number to come down further for FY2025
3. RBI has stayed tight for too long . Now with Rupee depreciating, and US yields staying high, the room for RBI to cut has shrunk.
4. The government spending this fiscal has not been as strong as budgeted, and we will have unspent funds as of March 31st
5. Demand is not growing fast enough .
6. The need of the hour is a combination of counter cyclical fiscal spending and rate cuts on the monetary policy front.
7. Both have been lacking due to various reasons.
8. The good news is the Domestic flows into the markets, otherwise we would have seen much sharper cuts.
9. Primary markets are also holding up, showing that appetite for Indian companies remains high.
10. However, promoters and PE funds selling out has also reached very high levels.
11. FPIs are selling regularly, it is still a small portion of their total investments , but concentrated sales in Financials , Oil and Gas et al has had an impact on the markets.
12. What to do now:
a. Avoid lump sum investments
b. We dont know where the bottom will be reached on indices when sentiment goes low.
c. Markets may fall sharply and stay low for years as we saw in the 1990s or in 2008-2013, though we dont foresee such an eventuality for now.
d. The Market Cap to GDP ratio is still very high and if growth does not pick up , it will stay high.
e. Its back to Basics....revisit your financial goals, time horizon and risk appetite.
f. Based on these redo your Asset Allocation and rebalance your portfolio.
13. Not much leeway with the government to give meaningful relief to the middle classes in the Union Budget 2025.
14. Leading indicators are not showing strength for the economy
15. The Macro, Top Down approach will not work for this year and the next. Active fund managers will outperform passive index funds.
16. But we cant forecast accurately which funds/ stocks will outperform
17. Earnings season will see huge volatility , with any poor performance seeing big downsides in prices and any good result being rewarded very strongly as well.
18. Best to wait out this period. We dont see more than another 5% downside but we cant be sure .
19. Trump 2.0 remains another global pressure point.
More on that nearer to Inauguration on Jan 20th.
20. What sectors looking better: street is divided on these, my personal preference is India focussed pharma, midcap IT , large PSU banks , telecom leaders, industrials and power .
21. Key support levels have been taken out , hence the markets can fall sharply now. However, 4 days of Rs 2000 crore per day inflows by FPIs will lead to a huge rally. Both shorts and longs will hit stop losses in such markets.
22. Hence best is to focus on long term investing for your financial goals and not to worry too much about the macro or noise around us . more