ONE NATION, TWO REALITIES

A strange situation is unfolding in India: The bulls are charging in a slowing economy. And economists and market pundits don’t know what to make of it.

- Neha Bothra

THE S&P BSE SENSE X breached the 41,000-mark and hit its all-time high of 41,130 on November 28, riding on the government’s push to rejuvenate the sluggish economy, and positive global cues. The barometer of India’s financial markets in the past two months (October and November) has closed above the 40,000-mark on 22 of the 40 trading days. It has gained 14.94% so far this year. The broader Nifty 50, too, hit its all-time high of 12,154 during this period. The markets seem to be in rude health and the bulls look charged up to scale newer heights in the coming days.

The stock market of a country is considered to be an indicator of the health of its economy. They surge and plunge in tandem. But key economic growth numbers from India, the seventh-largest economy in the world, these days disprove this: The stock market and the economy are throwing up two completely different scenarios. While India has outperformed major emerging economies like China (11.07% market return) and South Africa (7.68%), etc. so far, its economy is slowing. The country’s GDP growth has slowed to 4.5% in the September quarter from 5% in the June quarter. And on December 5, the Reserve Bank of India sharply cut its GDP growth forecast for FY20 to 5% from 6.1%. You may scratch your head all you want for an inference, but there it is.

“We are passing through a phase which [American economist and former U.S. Fed chair] Alan Greenspan famously described as conundrum...” says Nilesh Shah, managing director and CEO of Kotak Mahindra Asset Management Company, which has assets under management of ₹1.7 lakh crore. “It is as Charles Dickens wrote in A Tale of Two Cities: … the best of times … the worst of times.”