Outlook - Global Markets
Though Indian economy looks structurally strong, global growth is posing larger risk on overall level. China which is called global growth engine is already facing lot of structural issues related to real-estate price drop, increased labor wage, reducing factory capacity, lower demands, debt pileup etc. On above this, US-China trade war is adding only fuel to Chinese economy worries which is pushing communist government to open up its economy more towards foreign investors and foreign companies. DAVOS 2019 the biggest gathering of renowned world economists, corporate managers and global leaders, global growth slowdown and US-China trade war are the main two issues all are highlighting and IMF has also reduced the global growth forecast for 2019 to 3.4% from earlier 3.8% but maintained India’s growth as fastest growing large economy. Any adverse effect on global growth will lead to sharper corrections in global markets and will have perfectly correlated effect on Indian markets as well.
Sectors which looks attractive in this period are Banking space, Mid-caps, high quality small caps, pharma. Some of the cyclicals like cement, fertilizers, FMCG’s also looks good for medium term investments. NBFC is the one sector where investors need to be cautious as many issues related to re-financing, debt re-payment need to be resolved. IL&FS is one classic example of how many debt mutual funds failed to understand the impact on these lending’s. IL&FS is having 300 business units with combination of subsidiaries, joint ventures and Special Purpose Vehicles(SPV). Mutual funds or debt funds who are having exposure to these JV’s or SPV’s are already downgraded by rating agencies along with mutual funds holding their debt instruments.