Market Is Running Ahead of Fundamentals: 
Nifty Should Correct Below 9000

Photo: 123RF

It is surprising that Indian markets are moving up, when we have a dismal financial situation, with unofficial employments report showing to be 45 years low and rural unemployment touching 18%. Besides due to lack of funds in the schemes like MNREGA, the rural economy has already taken a hit. 

Moreover, according to a report published in Deccan Herald, 15 December, '18, India’s foreign direct investments (FDI) growth has slowed to a minuscule 1.23% in 2018 from a high of 20.16% in 2014 when the BJP-led government took over at the Centre. This proves the fruitlessness of Narendra Modi's numerous foreign trips, with public funds.

Besides, with abnormally low inflation of 2.18%, the growth of 7.2% looks like a manipulated figure. It is because it is always seen that growth is accompanied by inflation, as spending takes a major push. When there is already demand destruction, post demonetization and implementation of the GST, how such high growth is possible? 

Now the 2nd question is:  if the inflation is sub 4% or below the RBI's tolerance levels, why there is no cut in the interest rates by the central bank or why NITI Aayog’s Rajiv Kumar said that the RBI should cut interest by only 25 basis points, to gives legs to consumption. Why 25 bps and not more when the inflation is near historic low levels? This gives us enough clue to feel skeptic about the NDA government's growth and inflation figures.

Moreover, several economists are skeptical of the government staying within the budget’s targeted fiscal deficit of 3.4% of GDP for 2019-20, with Fitch Ratings quoting it to be around 3.6%. According to a report on News18:  India's Tax revenues are expected to fall short by Rs.1.5 lakh crore than budgeted estimates, and disinvestment revenues still far lower than the targeted Rs.80,000 crore.

Also, the latest Vote on Account (finance bill to be cleared by the next government), has been seen to be inflationary nature, with talks of tax sops to be middle class. This gives us some indication of the NDA government's spending if voted to power and it would be difficult to slash expenditure, especially capex, in an effort to contain the deficit.

Meanwhile, the Economic Affairs Secretary Subhash Chandra Garg has said GDP growth in 2019-20 will be 7.5%. Which means there would not be much improvement from the current figure of 7.2%.

However, if the next government is to implement the expansionary budget for 2019-20, then it is obvious that it will have to borrow more, especially to fund populist measures, such as a $10.6 billion-aid for farmers — seen as key lollypop to winning votes for Narendra Modi’s Bharatiya Janata Party in a national election due by May.

Besides, no one knows whether the next government will stick to the proposals mentioned in the Vote on Account or will bring in some changes in it. So, there is no reason to get unduly excited about it. We know how this government functioned during the last 4.7 years through Bluffs and "Jumlas".

Another, point which needs to be highlighted that though the media has given the BJP around 150-170 seats in the next general elections, I don't  think they will get more than 120-130, considering the DISMAL way the NDA and its constituents run the government, with Narendra Modi, acting as a DESPOT, with a central command in Hand. 

Due to strict implementation of IBC, lot of Blue Chip companies have gone belly up: Lanco Infra, IVRCL Ltd, Shiv Vani Oil, etc. In the death row are: J P Associates, Suzlon Energy, Amtek Auto, Unitech Ltd, and so. 

If NDA's policies are working MIRACLES then why are more and more companies entering the ICU? The real estate sector has crashed after the tax took a jump from around 4.5% to 12%, plus stamp duty and other fees.

MSME sector is seeing the highest loss of jobs. The diamond market in Gujarat is in terrible shape so is the gems and jewelry sector. 

A National Herald Report says that: A company owned by Union Railway Minister Piyush Goyal’s wife Seema Goyal, with a paid up capital of just ₹1 lakh, has raked in ₹30 crore over 10 years, with no questions asked.

There is probably another scam brewing in the RBI quarters: According to RBI’s annual reports, it printed only ₹14.11 lakh crore demonetized notes, but got ₹15.28 lakh crore. It indicates an excess of ₹1.16 lakh crore (₹11,66,50,00,00,000) coming back to banks.

Also, the website Cobrapost last month claimed that its team of investigative journalists had unearthed “the biggest banking scam” in the country’s history. At a press conference, it accused the primary promoters of Dewan Housing Finance Limited (DHFL) of siphoning off more than ₹31,000 crore of public money through secured and unsecured loans and advances to shell companies, round tripping, tax avoidance and insider trading.“Money has also been routed through these dubious companies and parked outside India, to acquire assets,” the website said in a press release.

I sincerely tell you without any bias, that always take the positive data presented by this Mechivillain NDA government with a grain of salt. They do very good homework to give you shrewd excuses, hoodwinking the real issues. Like if you talk of you fall in employment rate, they will talk of a rise in the self-employment rate. But then truth cannot be suppressed for too long.

You saw the ends of the dictators like Saddam Hussein or Nicolae Ceaușescu or Muammar Mohammed Abu Minyar Gaddafi (commonly known as Colonel Gaddafi). Narendra Modi, with Bluffs and Lies, is not likely to be chosen for the next term and will meet his natural fate in the days to come.

In such circumstances, I don't feel the Indian markets (Nifty) would have the luxury to move above 12000, very soon. Now BSE Sensex is trading at 36,822.52 up 205.71 points while the Nifty Spot is at 10,995.50 up 62 points.

Short Nifty corresponding to the spot rate for targets below 9000, with immediate short term target at 10700. Don't take any buy position.