Equities Experiencing An Extended Ebb

Experts advise to accumulate more beaten-down small and mid-cap stocks.

- Yagnesh Kansara

By now it is pretty evident that the stock market is heading towards a phase of lower returns from equities. In fact, this downcast trend is not only expected to last for the next two to three quarters, but extend beyond. Also, if government measures fail, market mayhem can only intensify.

It is no surprise, keeping in mind that India’s economy is currently going through one of its worst phases. According to data shared by Finnovate, a leading research and events firm, India’s GDP for FY19 was 6.80 per cent —lowest in the last five years. According to another report published by Asian Development Bank (ADB), inflation rate during FY 2019-20 may rise up to 4.1 per cent.

If this situation prevails, which is more likely, then the rate of return from the equities market in the coming few quarters is expected to take a breather. The rate of return from equities is expected to range anywhere between nine and 11 per cent.

India is yet to declare its June quarter GDP numbers, which are eagerly awaited.

Commenting on India’s GDP growth, Arun Thukral, MD and CEO, Axis Securities, said, “GDP outlook looks weak for the short term and domestic demand has been disappointing as data for import and export has slowed in the past four-five months. So, the outlook for the next 6-12 months may not be the best.”

Sharing his views on the same, Rusmik Oza, Head of Fundamental, Kotak Securities said, “As we go ahead in the second phase of the earnings season, we can see hardcore manufacturing companies reporting poor results. We expect earnings forecast to be cut down as we close the Q1 earnings season by middle of August. We also expect Nifty earnings to increase by just 1.3 per cent in Q1-FY20 on a y-o-y basis.”