Indian listed equity markets started CY23 on a weak footing as FIIs majorly cashed out after a US short-seller launched a bear attack on one of India’s biggest listed conglomerates.

It did have ancillary ripple effects on the bigger economy as regulators and other powers-to-be got invariably roped in to investigate the allegations levied indirectly on India Inc.

However, since then markets have recovered handsomely and are in fact in the green on a CYTD basis. India’s macroeconomic fundamentals remain sound as ever – credit growth is booming after the nation went through a long de-leveraging cycle.

This credit growth might find its way indirectly into India’s massive capex drive – the center would be pumping in about Rs 10 lakh crore in FY24, the states another Rs 7 lakh crore and the private sector should likely in the least, match the quantum if not exceed them.

The entire globe, including India, is now on the cusp of monetary pauses (if not, rate cuts) which should provide a conducive platform for growth.

The current high-speed indicators are in explosive growth mode with India’s Services PMI going through the roof.

With the backdrop of a now pro-growth monetary stance (potential end of rate hikes given convincing cooling of the CPI) it is hard to find a needle in India’s lush green macroeconomic haystack.

Having this top-down comfort, market valuations on a trailing basis are a tad pricey and this seems justified.

FIIs have resumed investing in listed stocks and now that the central bank has indirectly given ample hints at a change in direction of monetary policy (away from rate hikes) there is a sense that India might do what China did in the 4 years starting from 2007 – at that time China had the same GDP and GDP per capita which India currently commands.

In 4 years, China’s gross capital formation, consumption component of GDP and exports nearly doubled. India might just emulate this at the current juncture given the start of a major capex upcycle propped up by our own PLIs.

Hence, growth stocks might continue to command justified valuations.

Indian IT sector (still predominantly Services dominated) is fairly different from its more dynamic nature in the US which can hence, arguably also be said to be more interest rate dependent – a conundrum given the IT sector historically has been a defensive.

Nevertheless, COVID-19 has changed this regime and the outlook for markets and growth stocks – not necessarily confining only to the IT sector – presently, seem cautiously optimistic.

The US debt ceiling is something to be monitored as a key concern in the short term, but historically there has always been a deal struck at the eleventh hour. El-Nino is another risk to be wary of though at the moment, there are no clear indications of a high probability of this event.