I hope you had a great 2017 and I wish you all a very succesful year ahead.
Here is what I think is in store for us in India in 2018:
- Stock market – I believe that we will be in good times in 2018 - I expect a 12-13% growth in Indices in 2018. The reasoning is given below:
- India is going through a structural change where development /reform is becoming more and more need of the hour. The average Indian is now aspiring for a better life. He/she is aware of the inefficiencies of bad governance and he/she is willing to vote for a politician who will lead him/her to a better life. No government is reformist at heart – our democratic system is forcing the governments to reform and become more efficient. This is a very basic change in India in the past two decades and is a long term trend - which means that Indian GDP will grow in the coming years – my estimate is that a 7% growth is required to stay in power and whoever comes to power will have to aim for minimum of 7% GDP growth. To this you add a 5% inflation and the actual growth is 12%. Our stock markets and our companies should grow at 12% to maintain their market share. Good companies will grow more than 12% and hence, in stock markets, one can smartly pick and make around 15%.
- Globally too there is excess liquidity due to Quantitative Easing in Europe and Japan - I do not see that reversing in 2018 – this means that there will be inflows from FII’s and India story will continue to attract FII money like before.
- You can invest in stocks directly or through MF’s and I believe that we can expect a 15% return in stock markets in 2018.
- Bonds -India will see an upward trend in interest rates. Our inflation needs to be kept under control and that will keep the RBI’s hands tied through the year. The current interest rate on FD is around 6.5-7% - it is likely to go up by 0.5% in the coming year. So those investing in debt MF’s would do well to stay away from long term debt MF’s and invest through short term debt funds only.
- Gold – I do not expect gold prices to go up or go down much – the stock market will take away all the excess cash from households and gold will hover around in the same levels in 2018.
- Real estate – With government and tax officials going hard on black money, there is a lower demand scenario in real estate markets countrywide. That pressure from government will only intensify in the years ahead and so the real estate market is going through a structural shift from black to white. This will take some time and I expect the real estate demand and hence markets to be subdued in 2018. RERA is good for the consumer and there will be a movement from unorganised to organised developers due to RERA. It will take may be two years for this shift to be visible though.
So here are my predictions. I am bullish about stock markets and I plan to invest more and more into the stock markets in the coming year.