- Interest rate in 2024 can be expected to be lower than those in 2019.
- Focus on long term returns
- Shift from China, PLI Schemes and Tax reductions will help Indian Manufacturing
Mumbai: Indian equity market showed a strong start with Nifty giving the best first-week gains of 2.6% this year most since 2015. Nifty too has beat major global markets while US indices underperform in the 1st trading week of the new year.
To understand the rally and whether it will sustain we spoke to Samir Arora, Founder, Helios Capital who is in the US currently and has shared his observation of inflation which has to be considered as a rate hike in us is now expected sooner. He shared that wages in the US are increased and supply chain issues are still present.
On the flow of liquidity and interest rate hikes, a detailed analysis show that the inflow of around 4 billion USD has mostly been in the primary market which is going to private equities and venture capital, which implies that the FIIs inflow are not direct towards the equity market. Considering these small inflows, it is difficult to say the rally last year was a liquidity-driven rally, however, it can still be observed as positive that India has seen net inflow while other countries have seen outflows. Also, it can be expected that even with the interest rate hikes the interest in 2024 will be less than it was in 2019 suggesting that interest rate hike is not a major issue for now.
In the last couple of years, we have seen higher returns and in the last calendar year, the Nifty 500 index showed a 30% of return. However, Samir is more focused on longer-term average returns which are higher than other financial assets. He also shared that the new tech companies that are listed have higher valuations and it will take time to clear on how this business will perform in long term.
Speaking on benefits to India due to the shift from China, a shift of investment flows of 2-3% from China to India will result in an increase of 10-20% foreign investment in India. These shifts inflows can be a win-win for financial investors as well as companies which are looking to diversify the supply chain. These are a few major parameters with the PLI Schemes and Tax reductions will help in India’s growth.