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Ashish Ghosh    


Ashish Ghosh is a research analyst for the global and Indian financial markets (macro/techno-funda). With more than 12 years of experience in the capital market, Ashish has been published in high-profile online media regularly. He holds a B.Sc. in Math along with NCFM certification for Technical and Fundamental analysis. Presently, Asis is working with iForex as a continuous freelancer financial analyst/content writer since 2017, analyzing mainly the global and Indian markets. You can have a glimpse of his works on his Twitter feed (asisjpg).

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Nifty stumbled on Adani chaos despite a pragmatic budget

But Nifty may scale around 21400 by FY24 (projected consolidated EPS 1070 and average PE 20)

India’s benchmark stock index Nifty stumbled on Adani Chaos despite a good budget for FY24 by the government. Adani Group’s shares tumbled after influential U.S.-based Hindenburg Research (activist investor) issued a negative report, initiating a short position in the company. Hindenburg alleged various frauds including accounting jugglery, stock price manipulation, money laundering, and other criminal activities against the Adani group, which later denied the allegations altogether.

In any way, Adani group stocks (such as Adani Enterprise, and Adani Ports) and related banks & financials having significantly higher exposure with the group (such as SBI, HDFC, ICICI, Axis, and Indusind) also tumbled. After Satyam, Yes Bank fiasco, the market is now quite concerned about corporate mis-governance. Additionally, it’s a fact that the Adani group of stocks is significantly overvalued and highly leveraged and it has employed a small unknown auditor firm, which is very surprising for a big corporate like Adani.

On 1st February, the Indian government presented the much-awaited FY24 budget:

Summary of the Union (Federal) Budget: FY23 (RE) vs FY22 and FY24 (BE)

·         Core operating tax revenue Rs.20.87T vs 18.05T (+15.62%) and 23.31T (+11.69%)

·         Non-tax revenue (other income) Rs.2.62T vs 3.65T (-28.22%) and 3.02T (+15.77%)

·         Total revenue Rs.23.49T vs 21.70T (+8.25%) and 26.33T (+12.09%)

·         Primary capital receipt (including recovery of loans and disinvestments) Rs.0.84T vs 0.40T (+110%) and 0.84T (0%)

·         Total borrowings and other liabilities Rs.17.55T vs 15.85T (+10.73%) and 17.87T (+1.74%)

·         Total receipt (including revenue, capital receipt, and borrowings) Rs.41.88T vs 37.95T (+10.36%) vs 45.04T (+7.55%)

·         Total spending Rs.32.46T vs 29.89T (+8.59%) and 34.24T (+5.49%)

·         Net interest payment on public debt Rs.9.41T vs 8.05T (+16.89%) and 10.80T (+14.77%)

·         Gross spending (including interest); i.e. size of the budget Rs.41.87T vs 37.94T (+10.35%) and Rs.45.04T (+7.58%)

·         Nominal fiscal deficit –Rs.18.38T vs -16.25T (+13.11%) and -18.71T (+1.88%)

·         Nominal basic GDP (at current prices) Rs.273.08T vs 236.65T (+10.09%) and 301.75T (+10.50%)

·         Fiscal Deficit/Nominal basic GDP around -6.42% vs -6.70% and -5.92%

·         Debt interest/core operating tax revenue is around 45.09% vs 44.60% and 46.33%

·         Gross borrowing Rs.17.56T vs 15.85T (+10.79%) and 17.86T (+1.71%)

·         GSEC/Market borrowings Rs.11.96T vs 8.15T (+46.75%) and Rs.12.31T (+2.93%)

Revenue collection and capital receipts at a glance:

Major expenditure at a glance:

·         Total expenditure (w/o interest) Rs.32.46T vs 29.89T (+8.59%) and 34.24T (+5.49%)

·         Direct Federal CAPEX Rs.7.29T vs 5.93T (+22.93%) and Rs.10.01T (+37.31%)

·         Contribution/grants for state CAPEX Rs.3.26T vs 2.43T (+34.16%) and 5.19T (+59.35%)

·         Net effective CAPEX Rs.10.55T vs 8.36T (+26.20%) and 15.20T (+44.12%)

·         Support for Railway CAPEX Rs.2.40T for FY24 (Out of Net Effective CAPEX Rs.15.20T) vs 1.59T in FY23

·         Total Railway CAPEX Rs.2.92T in FY24 vs 2.45T in FY23 (+16.6%) after Federal railway CAPEX + IEBR

·         Major increase in expenditure in FY24: Commerce & Industry (including PLI grants), general & transport infra, green energy, healthcare, education, IT & Telecom, innovations (R&D), social welfare and agri

·         A major decrease in expenditure in FY24: Subsidy (food, fertilizer, and petroleum)

·         Subdued increase in defense expenditure (+5.61%) in FY24

·         Major CAPEX support: Railways (Rs.2.40T); Roads (Rs.2.59); Defence (Rs.1.71T); Telecom (Rs.0.62T); Petroleum & NG (Rs.0.36T); Housing & Urban Development (Rs.0.26T); Atomic Energy (Rs.0.16T) and Space (Rs.0.06T)


·         Mandatory expense/tax revenue 80.31% vs 82.99% and 78.25%


·         Total spending (States + Federal)/nominal GDP around 22% on an average

·         Total CAPEX (States +Federal)/nominal GDP around 6% on an average

Other highlights of the FY24 budget proposal:

·         Seven priorities of the budget ‘Saptarishi’ are inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and the financial sector

·         The outlay for PM ‘Awas Yojana’ (Housing for the poor) is being enhanced by 66% to over Rs. 0.79T

·         Capital outlay of Rs. 2.40T has been provided for the Railways, which is the highest ever outlay and about nine times the outlay made in 2013-14

·         Urban Infrastructure Development Fund (UIDF) will be established through the use of priority Sector Lending shortfall, which will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities

·         Targeted Fiscal Deficit to be below 4.5% by 2025-26

·         Rs. 10T capital investment, a steep increase of 33% for the third year in a row, to enhance growth potential and job creation, crowd-in private investments, and provide a cushion against global headwinds

·         Investment of Rs.0.75T, including Rs.0.15T from private sources, for one hundred critical transport infrastructure projects, for last and first-mile connectivity for ports, coal, steel, fertilizer, and food grains sectors

·         Effective Capital Expenditure’ of Centre to be Rs.13.7T

·         Continuation of a 50-year interest-free loan to state governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions

·         Three centers of excellence for Artificial Intelligence to be set up in top educational institutions to realize the vision of “Make AI in India and Make AI work for India”

·         Annual production of 5 MMT under the Green Hydrogen Mission to be targeted by 2030 to facilitate the transition of the economy to low carbon intensity and to reduce dependence on fossil fuel imports

·         Rs.0.35T outlay for energy security, energy transition, and net zero objectives

·         Battery energy storage systems to be promoted to steer the economy on the sustainable development path

·         Rs.0.21T outlay provided for renewable energy grid integration and evacuation from Ladakh

·         At least 50 tourist destinations are to be selected through challenge mode; to be developed as a complete package for domestic and foreign tourists

·         Tourism infrastructure and amenities to be facilitated in border villages through the Vibrant Villages Programme

·         National Financial Information Registry to be set up to serve as the central repository of financial and ancillary information for facilitating the efficient flow of credit, promoting financial inclusion, and fostering financial stability

·         A new legislative framework to be designed in consultation with RBI to govern this credit public infrastructure

·         SEBI to be empowered to develop, regulate, maintain, and enforce norms and standards for education in the National Institute of Securities Markets and to recognize the award of degrees, diplomas, and certificates

·         The entire fifty-year interest-free loan to states is to be spent on capital expenditure within 2023-24. Part of the loan is conditional on States increasing actual Capital expenditure and parts of the outlay will be linked to States undertaking specific loans

·         A fiscal Deficit of 3.5% of GSDP allowed for States of which 0.5% is tied to Power sector reforms

·         The newly established Infrastructure Finance Secretariat will assist all stakeholders with more private investment in infrastructure, including railways, roads, urban infrastructure, and power, which are predominantly dependent on public resources

·         For enhancing the ease of doing business, more than 39,000 compliances have been reduced and more than 3,400 legal provisions have been decriminalized. For furthering trust-based governance, we have introduced the Jan Vishwas Bill to amend 42 Central Acts. This Budget proposes a series of measures to unleash the potential of our economy

·         Green Hydrogen Mission: The recently launched National Green Hydrogen Mission, with an outlay of Rs.0.20T, will facilitate the transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector. Our target is to reach an annual production of 5 MMT by 2030

·         Energy Transition: This Budget provides Rs.0.35T for priority capital investments towards energy transition and net zero objectives, and energy security by the Ministry of Petroleum & Natural Gas

·         Renewable Energy Evacuation: The Inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh will be constructed with an investment of  Rs.0.21T including central support of  Rs.0.08T

·         Vehicle Replacement: Replacing old polluting vehicles is an important part of greening our economy. In furtherance of the vehicle scrapping policy mentioned in Budget 2021-22, I have allocated adequate funds to scrap old vehicles of the Central Government. States will also be supported in replacing old vehicles and ambulances

·         Pradhan Mantri Kaushal Vikas Yojana 4.0 will be launched to skill lakhs of youth within the next three years.  On-job training, industry partnership, and alignment of courses with the needs of the industry will be emphasized. The scheme will also cover new-age courses for Industry 4.0 like coding, AI, robotics, mechatronics, IOT, 3D printing, drones, and soft skills. To skill the youth for international opportunities, 30 Skill India International Centres will be set up across different States

·         Credit Guarantee for MSMEs: Last year, I proposed revamping the credit guarantee scheme for MSMEs. I am happy to announce that the revamped scheme will take effect from 1st April 2023 through the infusion of Rs.0.09T in the corpus. This will enable additional collateral-free guaranteed credit of Rs.2T Further; the cost of the credit will be reduced by about 1 percent.

·         For commemorating Azadi Ka Amrit Mahotsav, a one-time new small savings scheme, Mahila Samman Savings Certificate, will be made available for two years up to March 2025. This will offer a deposit facility of upto Rs.200K in the name of women or girls for a tenor of 2 years at a fixed interest rate of 7.5 percent with a partial withdrawal option

·         The maximum deposit limit for Senior Citizen Savings Scheme will be enhanced from Rs.1.5M to Rs.3.0M

·         The maximum deposit limit for Monthly Income Account Scheme will be enhanced from Rs.0.045M lakh to Rs.0.9M for a single account and from Rs.0.9M to Rs.1.5M for a joint account

·         The entire fifty-year loan to states has to be spent on capital expenditure within 2023-24. Most of this will be at the discretion of states, but a part will be conditional on states increasing their actual capital expenditure. Parts of the outlay will also be linked to, or allocated for, the following purposes:

Scrapping old government vehicles,

• Urban planning reforms and actions,

• Financing reforms in urban local bodies to make them creditworthy for municipal bonds,

• Housing for police personnel above or as part of police stations,

• Constructing Unity Malls,

• Children and adolescents’ libraries and digital infrastructure, and

• State share of capital expenditure of central schemes.

INDIRECT TAXES: Indirect tax proposals aim to promote exports, boost domestic manufacturing, enhance domestic value addition, encourage green energy and mobility

·         The number of basic customs duty rates on goods, other than textiles and agriculture, reduced to 13% from 21%

·         Minor changes in the basic customs duties, cesses, and surcharges on some items including toys, bicycles, automobiles and naphtha

·         Excise duty exempted on GST-paid compressed biogas contained in blended compressed natural gas

·         Customs Duty on specified capital goods/machinery for the manufacture of the lithium-ion cell for use in the battery of electrically operated vehicles (EVs) extended to 31.03.2024

·         Customs duty exempted on vehicles, specified automobile parts/components, sub-systems, and tires when imported by notified testing agencies, for testing and/ or certification, subject to conditions

·         Customs duty on the camera lens and its inputs/parts for use in the manufacture of the camera module of cellular mobile phones was reduced to zero and concessional duty on lithium-ion cells for batteries was extended for another year

·         Basic customs duty reduced on parts of open cells of TV panels to 2.5 percent

·         Basic customs duty on electric kitchen chimneys increased to 15 percent from 7.5 percent

·         Basic customs duty on heat coil for the manufacture of electric kitchen chimneys reduced to 15 percent from 20 percent

·         Denatured ethyl alcohol used in the chemical industry exempted from basic customs duty

·         Basic customs duty reduced on acid grade fluorspar (containing by weight more than 97 percent of calcium fluoride) to 2.5 percent from 5 percent

·         Basic customs duty on crude glycerin for use in the manufacture of epichlorohydrin reduced to 2.5 percent from 7.5 percent

·         Duty reduced on key inputs for domestic manufacture of shrimp feed

·         Basic customs duty reduced on seeds used in the manufacture of lab-grown diamonds

·         Duties on articles made from dore and bars of gold and platinum increased.

·         Import duty on silver dore, bars, and articles increased

·         Basic Customs Duty exemption on raw materials for the manufacture of CRGO Steel, ferrous scrap, and nickel cathode continued

·         Concessional BCD of 2.5 percent on copper scrap is continued

·         The basic customs duty rate on compounded rubber increased to 25 percent from 10 percent or 30 per kg whichever is lower

·         National Calamity Contingent Duty (NCCD) on specified cigarettes revised upwards by about 16 percent; NCCD on specified cigarettes was last revised three years ago


·         Direct Tax proposals aim to maintain the continuity and stability of taxation; further simplify and rationalize various provisions to reduce the compliance burden, promote the entrepreneurial spirit, and provide tax relief to citizens

·         The rebate limit of Personal Income Tax is to be increased to Rs. 0.7M from the current Rs. 0.5M in the new tax regime. Thus, persons in the new tax regime, with income up to Rs. 0.7M to not pay any tax.

·         Tax structure in the new personal income tax regime, introduced in 2020 with six income slabs, to change by reducing the number of slabs to five and increasing the tax exemption limit to Rs. 3 lakh

·         Proposal to extend the benefit of standard deduction of Rs.50K to salaried individuals, and deduction from family pension up to Rs.15K in the new tax regime

·         This will provide major relief to all taxpayers in the new regime. An individual with an annual income of Rs.0.9M will be required to pay only Rs.45K. This is only 5% of his or her income. It is a reduction of 25% on what he or she is required to pay now; i.e. 60K. Similarly, an individual with an income of Rs.1.5M would be required to pay only Rs.150K or 10% of his or her income, a reduction of 20% from the existing liability of  Rs.187.5K

·         My third proposal is for the salaried class and the pensioners including family pensioners, for whom I propose to extend the benefit of the standard deduction to the new tax regime. Each salaried person with an income of Rs.1.55M or more will thus stand to benefit by  Rs.52.5K

·         My fourth announcement on personal income tax is regarding the highest tax rate which in our country is 42.74%. This is among the highest in the world. I propose to reduce the highest surcharge rate from 37% to 25% in the new tax regime. This would result in a reduction of the maximum tax rate to 39%

·         No change in surcharge is proposed for those who opt to be under the old regime


·         The limit of Rs.0.3M for tax exemption on leave encashment on the retirement of non-government salaried employees was last fixed in the year 2002 when the highest basic pay in the government was Rs.30K/month. In line with the increase in government salaries, I am proposing to increase this limit to Rs.2.5M

·         The new income tax regime is to be made the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime

·         Enhanced limits for micro-enterprises and certain professionals for availing the benefit of presumptive taxation were proposed. Increased limit to apply only in case the amount or aggregate of the amounts received during the year, in cash, does not exceed five percent of the total gross receipts/turnover

·         Deduction for expenditure incurred on payments made to MSMEs is to be allowed only when payment is made to support MSMEs in timely receipt of payments

·         New co-operatives that commence manufacturing activities by 31/03/2024 to get the benefit of a lower tax rate of 15 percent, as presently available to new manufacturing companies (optional without availing any specified incentive or deduction)

·         The opportunity provided to sugar co-operatives to claim payments made to sugarcane farmers for the period before the assessment year 2016-17 as an expenditure. This is expected to provide them with a relief of almost Rs. 0.10T

·         Provision of a higher limit of Rs.200K per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs)

·         A higher limit of Rs. 30M for TDS on cash withdrawal to be provided to cooperative societies

·         Date of incorporation for income tax benefits to start-ups to be extended from 31.03.23 to 31.3.24

·         Proposal to provide the benefit of carrying forward losses on change of shareholding of start-ups from seven years of incorporation to ten years

·         Deduction from capital gains on investment in residential houses under sections 54 and 54F is to be capped at Rs. 100M for better targeting of tax concessions and exemptions

·         Proposal to limit income tax exemption from proceeds of insurance policies with very high value. Where the aggregate of premium for life insurance policies (other than ULIP) issued on or after 1st April 2023 is above Rs. 0.5M, income from only those policies with aggregate premiums up to Rs.0.5M shall be exempt. This will not affect the tax exemption provided to the amount received on the death of the person insured. It will also not affect insurance policies issued till 31st March 2023

·         Income of authorities, boards, and commissions set up by statutes of the Union or State for housing, development of cities, towns, and villages, and regulating, or regulating and developing an activity or matter, proposed to be exempted from income tax

·         The minimum threshold of Rs.10K for TDS to be removed and taxability relating to online gaming to be clarified. Proposal to provide for TDS and taxability on net winnings at the time of withdrawal or the end of the financial year

·         Conversion of gold into the electronic gold receipt and vice versa is not to be treated as capital gain

·         TDS rate to be reduced from 30% to 20% on the taxable portion of EPF withdrawal in non-PAN cases

·         Income from Market Linked Debentures to be taxed

·         Deployment of about 100 Joint Commissioners for disposal of small appeals to reduce the pendency of appeals at the Commissioner level

·         Increased selectivity in taking up appeal cases for scrutiny of returns already received this year

·         Period of tax benefits to funds relocating to IFSC, GIFT City extended till 31.03.2025

·         Certain acts of omission of liquidators under section 276A of the Income Tax Act are to be decriminalized with effect from 1st April 2023

·         Agniveer Fund to be provided EEE status. The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 proposed to be exempt from taxes. Deduction in the computation of total income is proposed to be allowed to the Agniveer on the contribution made by him or the Central Government to his Seva Nidhi account

·         Encashment of earned leave for private employees up to 10 months of average salary at the time of retirement as per applicable rules subject to a maximum amount of Rs.2.5M from 0.3M

·          Facilitating certain strategic disinvestments: To facilitate certain strategic disinvestments, it is proposed to allow the carry forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking companies with any other banking institution or a company after strategic disinvestment, if such amalgamation takes place within 5 years of strategic disinvestment. It is also proposed to modify the definition of ‘strategic disinvestment’

·         Carry forward losses on strategic disinvestment including that of IDBI Bank to be allowed

·         Ease in claiming a deduction on amortization of preliminary expenditure

·         Extending the scope for deduction of tax at source at a lower or nil rate


·         The rate of TCS for foreign remittances for education and medical treatment is proposed to continue to be 5% for remittances above Rs.0.7M. Similarly, the rate of TCS on foreign remittances for education through a loan from financial institutions is proposed to continue to be 0.5% above Rs.0.7M. However, for foreign remittances for other purposes under LRS and the purchase of an overseas tour program, it is proposed to increase the rates of TCS from 5% to 20%

·         It is proposed to amend provisions for computing capital gains in case of joint development of the property to include the amount received through cheque etc. as consideration

·         While interest paid on borrowed capital for acquiring or improving a property can, subject to certain conditions, be claimed as a deduction from income, it can also be included in the cost of acquisition or improvement on transfer, thereby reducing capital gains. It is proposed to provide that the cost of acquisition or improvement shall not include the amount of interest claimed earlier as a deduction

·         There are certain intangible assets or rights for which no consideration has been paid for an acquisition and the transfer of which may result in the generation of income. Their cost of acquisition is proposed to be defined to be NIL.


·         RATIONALISATION: The restriction on interest deductibility on interest payments to overseas associated enterprises does not apply to those in the business of banking and insurance. It is proposed to extend this benefit to non-banking financial companies, as may be notified (positive for NBFC)

·         It is proposed to extend the taxability of the consideration (share application money/ share premium) for shares exceeding the face value of such shares to all investors including non-residents

·         Due to changes in the classification of non-banking financial companies by the Reserve Bank of India, it is proposed to make necessary amendments to align such classifications in the Act with the same

·         Estimated nominal fiscal stimulus (revenue foregone) for direct tax reductions (selective) will be around Rs.0.38-0.37T/FY

·         Estimated nominal fiscal stimulus (revenue foregone) for indirect tax reductions (selective) will be around Rs.0.01T/FY

·         Overall revenue of around Rs.0.03T will be additionally mobilized for hikes in certain indirect taxes

·         Net estimated tax cut nominal fiscal stimulus (revenue loss/foregone) around Rs.0.35T/FY; this is in addition to around Rs.0.65T/FY for the previous tax cut nominal fiscal stimulus

·         Total tax cut nominal fiscal stimulus would be around Rs.1T/FY from FY24, which would be around 0.3% of the estimated nominal (basic) GDP of Rs.301.75T


This is a very balanced and pragmatic budget considering being the last budget before the early 2024 election. PM Modi/BJP has balanced political populism/compulsion with targeted infra CAPEX, social welfare projects/schemes along with fiscal prudence. The infra-CAPEX heavy budget through railways, roads, and airports should have a spillover effect of job creation and a multiplier effect in the economy (like higher demand for steel, cement and capital goods). Except for, the insurance and media sector to some extent, almost all other sectors are positively led by infra, IT, and banks & financials.

The Modi government is now cutting various subsidies and boosting infra CAPEX for the next leg of economic growth, especially through railways CAPEX (like China). In India, there is a huge scope for improving the railway ecosystem for modern, efficient, green public transport. Even at around 3T, the overall requirement of railway CAPEX may be much higher, considering the size of India’s national transport system, which is still largely running on British legacy. The concept of Vande Bharat semi-high-speed trains will also help Modi/BJP in the forthcoming state and general elections.

India, at present, is spending around 6% of nominal GDP as infra CAPEX (Government + Private partnership). Although this is equivalent to China’s present ratio, China’s infra spending was around 20% of nominal GDP in 2010 from 7% in 1992. Indian economy needs to grow by at least 15% (at current prices) with 4% price stability (core inflation) for quality employment to improve the country’s core tax revenue.

Although India’s tax collection has improved significantly over the last few years due to GST compliance digitalization of the ecosystem, still India’s tax revenue ratio is very low compared to the nominal GDP. Thus the government is not in a position to reduce indirect taxes drastically and boost consumer spending.

The market was also expecting a blockbuster budget from the Modi admin on 1st February as it’s the last full budget before the early 2024 general election. As per various reports and BJP/RSS’ assessment, this time BJP/Modi is going to win convincingly as there is no alternative credible/acceptable national leader who can compete with Modi’s popularity and corruption-free developmental image. But this time BJP may not get have enough Parliament seats (magic figure) for a 2/3rd majority or even 50% simple majority due to various regional political factors, permutations & combinations, Muslim/minority vote bank factors coupled with general economic issues (high inflation/cost of living, growing youth unemployment and income inequalities).

Thus Modi admin has gone for a significant increase in targeted fiscal stimulus (higher infra capex, especially in railways including semi-high speed Vandebharat express promotion/expansion across the country) and various income tax sops for the middle class in the budget. The Indian government is also taking some supply-side issues to rein on surging food inflation. Unlike Europe, India is not dependent on imported food.

The Indian banking/financial system is now robust and banks are lending prudently even with +18% advance growths; banks are now writing-back NPAs from past write-offs; i.e. recovering past bad loans. Most of the major Indian corporates are also reporting +20% annual growths in core operating EPS amid robust demand and deleveraging.

Indian consumer spending is also resilient despite the higher cost of living because almost 30% of the Indian middle-class population, equivalent to the entire U.S. population has stable jobs/income (government and reputed corporate employees), and has adequate real wage growths regularly. Many Indian super riches are now growing rapidly, thanks to the vibrant stock & real estate market and digital ecosystem

Also, despite DEMO in 2016, the flow of black money in the Indian economy is still robust due to rampant corruption at almost all levels, especially in various infra projects (cut money) and even certain state levels of government employment. Thus, despite higher inflation, higher borrowing costs, and higher cost of living, the Indian consumer spending story is still robust, thanks to unaccounted money and millions of stable government jobs. But consistent wage growths in the government/private sector above productivity and huge circulation of unaccounted money is also causing elevated/sticky core inflation around +6% for the last few years despite RBI tightening.

In brief, India is now being seen as an island of stability in a turbulent ocean despite higher USDINR and higher oil. Higher USD is good for Nifty EPS as almost 60% of Nifty revenue comes from exports. If we consider Indian service export, robust remittances, and stable FDI inflows, Indian CAD (current account deficit) servicing is quite manageable; no need for any undue concern/panic. India has negligible public borrowings in FX currency and INR is also not fully convertible in capital account; i.e. residents Indians can’t hold USD/FX currency without RBI approval; there are restrictions on the movement of FX currency.

Thus India is much less vulnerable to any FX crisis, unlike some of the neighboring countries or EM peers. Precisely, for this reason, and also for the robust domestic consumption, India has not faced any meaningful recession even during 2008-10 GFC or now, when almost the rest of the world is suffering from synchronized recession/stagflation. India is a bright spot in a gloomy world and a favorite among EMs (except China) for global investment due to political and policy stability. Thus Indian stock market enjoys a scarcity premium and higher PE compared to its peers or even AEs.

BRICS (Brazil, Russia, India, China, and South Africa) were the investment theme in the early 2000s when EM investors hoped to capitalize on their economic growth and population expectations, as well as their sources of raw materials/commodities. Except for China, India now has the most political/policy and macro stability. Also growing political chaos in big Western democracies is causing policy paralysis and working advantageous for not only India but also China.

India may become the world’s 3rd largest economy by 2030 if policymakers can focus more on targeted fiscal stimulus/reform, capex, especially railway, and EV to improve productivity. India has to also improve its innovation to compete with South Asian exporters and also some AEs. India is now a major beneficiary of political/policy stability and the appeal of 5D (development, demand, demography, deregulation, and digitalization).

But at the same time, India needs to control its huge population to improve GDP/per capita and growing unemployment (8.30% in Dec’22, higher than pre-COVID levels of 7.8%). India is now around $3.4T economy, 5th largest in the world (nominal GDP at current prices) along with a population of around 1.42B; i.e. GDP/Capita is only around $2395, at 20th position in G20. Even with a projected $5T economy along with a 1.50B population by 2030, India’s GDP/Capita will be only around $3333 and should remain at the 20th position in G20; China’s present GDP/Capita is now around $11500 compared to the U.S. around $6200, Singapore’s $66300, Indonesia $3950, South Africa $6000, Brazil $8700, Mexico $9600 and Russia $10000.

There is a need for political courage/wish for a big-bang reform like India’s population control. Although various BJP-ruled states are talking about it directly/indirectly like the ban of any government job or subsidy for any family above 2 children, the Indian Federal government led by PM Modi should make it a universal policy, without worrying about certain vote banks as now BJP/Modi has virtually no credible political opponent/opposition at the national level.

Also, India’s goal of snatching the ‘world’s factory’ tag from China is being held back by the country’s inability to attract bigger container ships due to inadequate port infrastructure. Most harbors along India’s coast aren’t deep enough to handle bigger container ships. Despite India’s advantageous strategic location between the Suez Canal and the Strait of Malacca, port limitations mean it risks falling behind in the competition for a bigger slice of trade as productions/supply chains move away from China for various geopolitical reasons. India is the biggest stable democracy in SE Asia, having huge manpower (low-cost labor) to compete with China. But India also needs more deregulation and a lower direct tax structure to compete with China, Vietnam, and other SE Asian exporters.

India also pays almost 45% of its tax revenue as interest on public debt and over 40% on salary & pensions for government employees (including militaries/other agencies). Although a huge pool of government employees is also providing robust consumer spending (discretionary) amid real wage growths, job stability, and family pension security for a lifetime, India needs to control its sticky core inflation for relatively lower bond yield and lower borrowing costs for overall lower cost of living for the masses. Also, India needs to improve its innovation and productivity, which is the ultimate.

The current sequential run rate of Nifty EPS (consolidated) growths is around 3.75%; i.e. annualized +15.00%. As per the current sequential run rate, FY23 EPS may come to around 931, and assuming +20% CAGR for FY: 24-26, the consolidated Nifty EPS may print around 1070-1284-1541. And assuming a median/average PE of 20, the average fair value of Nifty may be around 18600-21400-25700-30825 for FY: 23-26.

As the financial/stock market generally acts on expectations or discounts 1Y projected/forward EPS in advance, Nifty may scale around 21400-25700-30825 by Dec’23/Mar’24, Dec’24/Mar’25 and Dec’26/Mar’27. Further, if Fed/RBI indicates rate hike pauses after March/June’23 and Russia-Ukraine/NATO geopolitical tensions do not worsen further leading to WW-III (nuclear war) situation, then Nifty may scale around 20150-450 by Mar’23 also.

In Q4FY23/FY24, Nifty earnings may be boosted by higher commodity prices amid China reopening. Although a higher interest rate regime (bond yield curve steepening) is positive for banks & financials and negative for non-financials corporates to some extent, there may be also elevated retail NPA as most of the loans including mortgages are on a floating interest rate basis. And most of the big Indian corporates are now largely deleveraged or have the sufficient positive cash flow to service loans.

In any way, both Fed and RBI may indicate rate cuts in early 2024 if there are signs that inflation is steadily easing towards targets, Dalal Street and Wall Street will also flare up ahead of the respective general election on the expectations of lower borrowing costs. Also, nominal (basic) GDP growths above +10% should help Nifty EPS to grow around 15-20% on an average in the coming years (CAGR), helped by huge/increasing government spending.

Bottom line:

Looking ahead, whatever may be the narrative, technically Nifty Future now has to sustain over 17900-18050 for a rally towards 18225/18275-18335/18450*-18515/18555 and further 18950/19025* in the coming days; otherwise sustaining below 17850, Nifty Future may further fall to 17680/17625* and further 17500-17350/17200* and 17075/16640* in the coming days.


I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure:


Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.


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