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Is the economy really recovering?
Mon, 19 Oct Pre-Open

India's economy is going through many changes. Many megatrends are playing out. These will change the face of the economy in the long term. But what about the short term?

Here the data is mixed. No one seems to be able to stick his or her neck out. Is the economy doing well? Is it struggling? We listen to both the bulls and the bears. But we don't blindly trust one over the other.

On one hand, we don't believe the government's rosy new GDP numbers. On the other, we don't place much faith in the perma-bear's predictions of doom. We can afford to do this because we are long term investors. We follow a bottom-up approach to picking stocks.

We believe, investors would be better off thinking about long term tends that would impact the economy. In this regard, we came across an interesting article in the Economic Times that seems to suggest the economy is all set to boom.

Factors mentioned in the article are; a revival in urban consumption, higher indirect tax collections, rising FDI, recovery in car sales, government capex, the seventh pay commission, rate cuts by the RBI, and the recent pick up in industrial growth. Interestingly, the article does not say how it all ties together! Unfortunately, the numbers are all short term in nature.

This is typical of a lot that you will read in the papers these days. The simple reality is that a broad based economic recovery has not taken root. Even the government admits it. In such a situation, why should anyone believe rosy short term predictions? Aren't they meaningless?

India is still some time away from achieving sustained high growth. However, the government is making progress in this regard. Unfortunately, with the reform agenda moving at a slow pace, it will be a long hard slog for the economy.

But this does not cause us to lose any sleep. Equity investors who practice value investing will do well. If you tune out the noise about the economy, you will find plenty of opportunities in the markets we believe.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Nov 23, 2017 (Close)