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India to grow slower than expected!
Wed, 8 Jul Pre-Open

Reports say that India's growth rate for the current fiscal will exceed that of China's. This will occur for the first time since 1999.

However, the growth forecast for India has been lowered. As reported by the Economic times, global ratings agency Fitch has forecasted a slower than expected GDP growth for FY16. The revised figures stand at 7.8% in 2015-16 from 8% earlier and to 8.1% in 2016-17 from 8.3% earlier. This lower forecast was endorsed to the weak business environment. The report states that reforms can push the country's GDP growth higher only when they are actually implemented.

For this to happen, many reforms are required to be executed. The chance of passing the landmark Goods and Service tax bill (GST) bill by the Modi government in the forthcoming monsoon session looks slim. Further, the report points out that capital expenditure has not yet picked up its pace. Not to mention that rural and export demand is weak. The translation of monetary policy loosening into lower bank lending rates is limited. Also, an upward inflation risk is predicted due to below normal monsoon rains, crude prices and external environment volatility. The Reserve Bank of India is taking view of all these factors and, therefore, the window for further rate cuts seems closed for the coming months.

The global economy is also expected to grow by 2.4% in 2015, followed by 2.9% in 2016 and 2.8% in 2017. Globally, among the BRICS grouping, GDP growth will range from a contraction of 3% in Russia and 1.5% in Brazil this year. As regards China, the growth forecast remains unchanged at 6.8% in 2015, 6.5% in 2016 and 6% in 2017.

This volatility seems to be in the nature of every economy. No economy can stand risk proof in any given year. Many macro and micro economic decisions are also affected by these forecasts.

However, should these forecasts affect your portfolio or investment decisions? We don't think so.

One can be safe at all times if he plays by the right rules - that is, seeing the big picture rather than the short term effect. No matter where the economy goes, a company with an economic moat is bound to perform well. It can be under stress for a short run when the industry to which it belongs is undergoing many changes. However, in the long run, it stands firm among its peer group. Such companies have solid management values and high quality standards which one can rely on. That's what gives them the competitive advantage over others.

Staying calm and not letting the market movements change one's investment decisions would be the way to go. If one has bought stocks as small pieces of a business which have solid underlying business, he need not worry about these fluctuations.

Lastly, we go by quoting what Buffett has said in this context - "Stop trying to predict the direction of the stock market, the economy, interest rates, or elections. Buy stocks on the assumption that they could close the market the next day and not reopen it for ten years."

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Jan 19, 2018 (Close)