Follow Us:

“Unlock the potential of Indian midcaps for exponential growth by understanding market dynamics. Explore the evolving GDP landscape, stock valuations, and the changing investment climate. Stay informed for long-term wealth creation and navigate the market with confidence.”

Whenever the market goes up we lose confidence in India and its market and when it goes down we rejoice for more down. This behavioural pattern needs to change for creating long-term wealth and being a part of Indian GDP growth. Every investor is concerned about two parts currently 1) What about the current market 2) what about the non-performing ones? Well in continuation to the previous article  https://taxguru.in/finance/time-mid-caps-small-caps.html Indian economy is among the strongest economy not only in present terms but also in historical terms the Indian economy grew 7 fold in the last two decades.

In the next 6 to 7 years you will find Midcaps growing exponentially and under different market position.  Looking at the price-earnings ratio suggests that valuations have softened in n midcaps if we compare with the highs of Jan 2022. At present, the same stands at 25.11 while the average midcap valuations were being 31.27 on January 18. Hence the valuations are discounted and will interest rates getting halted and within next 1 year the same coming down (as expected) the valuations will increase from the current undervalued position. Data show the midcap index has gained close to 17.3% over the past one year, while the small-cap and large-cap have gained close to 15.8% and 10.2%, respectively.

The current market scenario is projecting that the Indian markets will witness another New High for the Nifty. The MSCI India index, which tracks the performance of large- and mid-cap segments of the Indian stock market, has shown outstanding growth up 7 % over the past 12 months. The index has outperformed the MSCI EM index (down 11 %), which measures the equity market performance of global emerging markets

Well, we all should be prepared to witness new Highs in the market till 2030 and beyond. The most important thing to understand while doing investments is that you should plan aligned with the long-term growth of the Indian GDP.

Historically it is being found that when Indian GDP grew significantly in the last two decades from half trillion to $3.4 trillion GDP the market also gave a return of around 12% to 15% in between.  Indian investors have created enormous wealth in between these times and now the size of the population of the wealth creators is increasing. As of 2022, India is home to 797,714 high-net-worth individuals (HNIs), or those whose asset value is at $1 million or more. Such individuals will double in number.

On the other hand, IMF is predicting that India would be the third-largest economy in the world by 2030, the emergence of home grown millionaires and billionaires is set to rise even further which will expand the per capita income level of India further.

The current Q4 GDP numbers speak loudly about the strength and confidence of the Indian GDP.  When we dig deep to find out who will contribute to this strong 7% GDP growth for India we find that public investments are playing a critical role despite  global interest rates getting soared. GST numbers speak loudly about the economic factors of circulation of capital and gross fixed asset formation.

Year 2017 2021 2022
HNIs 809666 763674 797714
Growth /Decline -5.68% 4.46%
UHNIs 11529 13048 12,069
Growth /Decline 13.18% -7.50%
Billionaires 102 145 161
Growth /Decline 42.16% 11.03%

Investment in fixed assets saw a strong growth of 8.92% in the March quarter, driven by the government’s capital expenditure, while household spending saw an uptick of 2.82%. Government spending too showed a growth of 2.29% in the quarter on a high base. The biggest data to watch out for in India is that there is a significant change from a consumption-driven economy to a public consumption-driven economy. The gross fixed capital formation (GFCF), a proxy for infrastructure investment, contributed 29.2 % to FY23 GDP, against 28.9 % in FY22 and 27.3 % in FY21. Signs of investment picking up, as visible in the gross fixed capital formation, reviving its share in the GDP to 35.3 % in the last quarter from 31.7 % in Q3 for 2022-23. As the GFCF keeps increasing the GST numbers will increase simultaneously which will lead to more funds in the hands of the government for investment.

This number will increase more in the coming days riding on PLI and focusing towards Indian manufacturing. The defense sector will play a big role followed by the Industrial 4.0-based model of business. The Indian startup Industry might be under pressure of valuation justification but the seeds of ideas getting converted into business is transforming the Indian investment and economic climate. This particular segment would play a critical role in Indian manufacturing and private consumption growth.

On the other hand, as inflation numbers start coming down we will find many sectors start performing much better in terms of revenue and growth followed by a stupendous positive impact on the economy. The cost of capital would decline further in the coming days which will add more value to the business growth of the Indian economy. Further as inflation and the rate of interest, both start coming down we will find that household savings will grow significantly.  India’s gross savings rose to 30.2% of GDP in FY22 from 28.8% in FY21. This is a major factor which will drive demand for financial asset investments and consumption-driven economic growth. In both ways Indian markets and GDP both will grow significantly in the coming years.

Markets will witness new highs but with profit booking in between as an act of rebalancing portfolios.  The broader rally of many sectors and stocks is yet to happen hence panic actions should be avoided. If you are investing in India invest till 2030. A long-term vision is very highly required now while doing investments in India.

The investment climate and market both have matured in the last decade with online and AI-based platforms growing at every corner to manage these clients. We find that more sophisticated and advanced models of investments will make the Indian economic investment history change dramatically.  New Financial products and more diversified asset-class investments will drive market growth for India. One should diversify investing into manufacturing sectors and new-age companies moving ahead from the heavily invested consumption segment. New highs in the market are going to be the new identification of India among the emerging economy. In the 10-year tenure, the MSCI India index has surpassed the MSCI EM index by an impressive margin of 173 per cent. This journey will strengthen more and will make the Indian market to be a leader.


Author Bio

God has been kind and the people with whom I had the journey of my career over the last 19 years have been great fortune to have as my best friends standing today in this journey. Expertise in global macroeconomic analysis, financial advisory, product development, and business strategy, I bring View Full Profile

My Published Posts

What S&P 500 Hides for U.S Economy? Where is U.S Economy Heading & Interest rate Stands if Fed Does not Cut Rates? Expect only 2 rates Cuts from U.S Fed in 2024 and not 3 Cuts Nazar na Lagey Mere India ko- Economic Growth of India Time for Mid-caps and Small-Caps View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
July 2024