All of us are aware what is going on today geopolitically and consequently on the stock markets globally. And the media in all forms have convinced most of us that its going to be doomsday and cash and gold are the only best asset class one should hold. Let's give one look to some of the positives that happened in India in last 18 months. Why 18 months? because we topped on NAV/Indices somewhere between July/September 2024 across all the market caps.
When we entered our Union elections somewhere in May 2024 we were already an expensive market, out performing other Asian peers and having highest weightage in MSCI, closer to 21 to 23% which was highest in the history ( today 13% ) , even ahead of CHINA. We became expensive and had to correct which happened post the elections.
Always pre election the economy slows down as all the focus of the government engine is on winning the election. Indian Markets went with lot of optimism for largest win by BJP but came out disappointed as NDA won the election but with lowest seats for BJP and with support from Bihar and Andhra Pradesh . This broke the mojo of the Market. Post the union election focus shifted on winning the immediate next state election of Maharashtra and before the Government realised economy had already slowed down. Revenue and pat for the companies had already started declining. However to boost the economy and keep the middle class happy the Government in September 24 budget gave direct taxes advantage of almost 1 lakh cr to boost consumption.
However that dint suffice to bring back the economy on a roll and now we had one more problem to worry about. Mr Trump came into power in late 2024 who weaponised trade to USA’s advantage and pressurised every country to make a deal with it and accept a higher tariff. It seemed that it would be very easy for India to get a favourable deal due to our sound relation with USA. However it turned out to be the other way and we were amongst the countries which had the worst deal .We were second only country after Brazil to have 50% export tax ,25% penalty & 25% tariff .However, the government continued its effort to engage with US government to bring down the tariff and in the mean time effort were also made to stich deals with other countries and bridge the gap of export loss that we could possibly have in case we were not able to have a good deal with USA . Rather than bending to USA’s tune efforts were again made to stimulate the economy and we had GST rationalisation and more than 1 lakh cr of advantage given. This time it helped corporates their profits started soaring. In the meantime we also signed 25 trade deals with many small and large economies from New Zealand to UK and a mother of all i.e European Union. The government also tried to stimulate the economy with 10 lakh crores of additional liquidity.
Finally after almost 4/6 months of deliberation we got a good export deal with USA at 18% rate. Every effort was made in the budget to continue the growth momentum of the economy. Government chose to keep good control over expenditure and tried to improve the quality of expenditure. Earlier 75% of our spending used to be revenue spending and only 25% went to capital spending however by 27-28 we will have 30 to 32% capital expenditure and only 68 to 70% in revenue expenditure. The fiscal prudence is visible from budget figure of 4.3% this year versus 4.4% last last year. Our Debt to GDP is almost 55 and we are also targeting it to bring it down to 50 in few years, while most of the economies will have a higher Debt/ GDP in future even after being astronomically high . December 25 was the first quarter where our earnings bounced back after 7 quarters and mid and small companies gave best profit growth of 17 to 18% where large cap grew 12 to 13% . So it was very obvious that most of us thought that equities will now start doing good after 18 months of almost no to negligible returns.
FII have been big sellers in last 18 months . Reasons spoken are many
- Higher valuation
- Poor to no innovation by India, especially in artificial intelligence vs other Asian peers like Taiwan, South Korea, and China. Most of these countries enjoyed a double digit index growth last year.
- Currency depreciation, INR depreciated by almost 7% before the Iran war while most of the Asian peers had currency appreciation.
However today we are neither expensive nor very chep at 18 time fY 27. We also started attracting foreign flows if we see the month of Feb.
However if all this was not enough we had Iran war. Other than the countries which are confronting in the war the only one highly affected indirectly is India. I need not go into the details of how the war has affected oil and gas, and consequently, India will be heavily impacted as the media has been covering it in every form in last three weeks but it's important to know that the budget 2026-27 has estimated real GDP growth of 7 to 7.2% under assumption of oil remaining at or closer to $90/barrel. We have not even entered FY 27 and the oil is currently more than $110/barrel and every $10/barrel brings down Indian GDP by closer to 20 to 30 basis points. If we consider $110/ 120/barrel kind of scenario for full year it will wipe off 70 to 90 basis points of a real GDP growth. However this does not seem to be the realistic assumption as November 2026 futures of Brent crude oil is currently trading at $78 /79barrel signalling that , if and when the war stops, the prices of oil could crash down to $75-$80/barrel. If you consider this as a possibility in April/May 2026, we are talking about growth resuming closer to 7% GDP and than the current fall looks to be a very good opportunity for long-term investors .History has shown that every equity investment during crisis period has rewarded the investors. But believe me, investing during such periods and holding patiently through such turbulent times is not easy , as it will test your patience and challenge your thesis every now and then . Can the stocks come off more?? They can, depending upon how long the war continues , how long the energy prices remain elevated and how long the trade remains paralysed because of the blockage of Strait of Hormuz. The more you talk to people the more you get confused and the more you are bound to take wrong decisions. So focus on your allocation and if you cannot add during such time don’t panic and liquidate listening to others, as nobody knows anything beyond a point.
Disclaimer: This document is meant for private circulation. It is not meant for soliciting any client. Views expressed here are my own. I am not a SEBI registered investment advisor. I am AMFI registered Mutual Fund Distributor.
CA JAYESH GANDHI.
22/03/2026
