The Indian equity market continues to underperform EM peers for the second straight week. The Nifty is stuck in a tight range below the 25,000 mark. The story is not very different if you track the Sensex, either. On a 12-month basis, the MSCI India Index is down 10% compared to the MSCI EM Index delivering 18% gains (in terms of $ returns). What’s even more intriguing is that this is happening at a time when there isn’t a dearth of triggers. From Q1 GDP at 7.8% to GST rate restructure, why aren’t investors enthused, or why are they scared?
Apprehension is what is weighing on investor sentiment, say leading market observers.
Why the new GST rate announcement failed to help maintain momentum
As expected, the market did start on a positive note after the revamp announcement, but soon the enthusiasm made way for profit booking. Sudeep Shah, Head – Technical Research and Derivatives at SBI Securities, explained that “While the markets displayed a positive reaction post the GST new rates announcement, it was kind of a sell-on-news reaction with the larger focus still on the US-India trade deal, which is still unsolved.”
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Another reason why the GST cut failed to lift sentiment is the slow pace of capex allocation, as per Siddarth Bhamre, Head of Research at Asit C. Mehta. He pointed out that “though the GST new rate is a good step, the impact will be felt only if the consumption cycle starts. For the consumption cycle to start, one needs to see strong capex. The best way to improve earnings visibility is undertaking big capex projects that guarantee job and industry growth.”
Vinod Nair, Head of Research, Geojit Investments, added that “Domestic growth-linked sectors stand to benefit from GST relief, resilient consumption, and government spending, while uncertainty over global trade negotiations continues to restrain risk appetite.”
Tariff uncertainty a key worry
As the markets get set for the second week of September, a traditionally weak month for equity markets globally, worries about the US tariffs (50% headline, 35% effective) weakening exports for India take pole position on the list of concerns across the investor community.
Market veteran Ajay Bagga listed out the key worries for investors at the moment,
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