In Long Term We Are NOT Dead, Bright Future Awaits India

What a year it has been. In the last year article (Click Here to read it) we had said that Sensex may touch 29140 – 29500 and if it breaks successfully then we may test 30800 – 31320. We during the year did test the first range and then the turn of events took us down sharply.

The Sensex closing on 31-12-2015 was 26117 and the close on 30-12-2016 was 26626, meaning just 1.95% over the year. This is less than even a Savings Bank Account! On 26-12-2016 the Sensex close was 25807, meaning negative 1.19% for the whole year till 26-12-16 and then in next four trading sessions, the Sensex rallied and closed higher, talking the whole year return into positive.

If someone forces me to mention and discuss the impact of Just Three Most Important things for 2017, they would be:

1. Interest Rates – Both RBI and Fed rates

2. Currency Replacement (Demonetisation)

3. GST

I would not like to discuss other usual things and make this article longer to read. Being New Year will try to keep it as crisp as possible.

1. Interest Rates

Remember when FED was decreasing rates, what were people saying? American economy is very weak, it will require many stimulus packages to revive. Rates are coming down and hence market will also come down due to poor economy. And you know what? Market did come down!

Now what discussion are these same people encouraging? Because FED has increased rates and may increase them further, the market has to come down!

Don’t get misled by people who don’t think beyond evening, let alone tomorrow or long term!

FED increasing rates is a sign of US recovering and they are much more confident today. I would be happy if rates are increased in Europe, high hopes but nothing to lose! India should be happy that US is recovering. FED may increase rates by just another 25 points in 2017, that won’t drive away FII’s from India. The small negative will be set off by better performance of the companies.

We are still dependent of FII’s, lets resolve in this year to bring in atleast one new investor!

2. Currency Replacement

Hell lot has been already spoken on this. With more than 85% circulation of high denomination notes in the system, it was need of the hour. Had government not done this now, Indian economy would have collapsed by itself like America did in 2008.

Irony is, those people who were head to toe immersed in various corruption charges are today preaching! As an Indian it is our right and duty to support what is right and what is wrong should be opposed.

As said earlier, hell lot has already been spoken hence let’s not go into the details and let’s come the point straight away. Will this whole exercise reap benefits to the Indian Economy? The answer is a Big Yes!

I totally agree that the process could have been better managed and there are certain problem which the new tax payers, likely to join the system, will face. I will be writing about them to the PM and FM. The public is heard and I ‘am sure actions to ease these problems will also be taken up.

Hence be ready to see increase in the digital economy and by March’2017 we all would have forgotten the currency ban! PM has announced certain sops yesterday, take this as precursor to the Union Budget. This will be the most important budget of the govt which try to ignite confidence in the economy.

3. GST

The day GST was passed, I had posted on facebook that it will not be implemented from 1-4-2017 and looks like the prediction would come true.

The impact of demonetisation will fully settle by March and once GST comes into force from August (hopefully) will cause another ‘shake’ in the markets, but for good.

Hence what we expect is, with Demonetisation+GST+Digital Economy, the numbers will start looking very interesting. All these put together we can term them as mother of all reforms which India has ever seen.

The end result would be that: Economy will pick pace, Companies will start performing and the Earnings Growth will start showing up. By the time you realise that earnings have picked up the market would have already rallied!

Hence use 2017 as the year of Investment Opportunities. We expect Sensex to test our second target of 30800 – 31320 this year if things go as expected. If the upcoming state elections results add up to the ruling party’s Rajya Sabha tally, the market will pick further pace. They need not form govt, adding up RS numbers itself will be big positive.

2017 will be volatile and will give both Investment and Trading opportunities. It’s up to you how you use them. Stay connected with us on Social Media: Click Here

Happy Investing

Vivek Karwa

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