Consolidation of Indian equity prices over the past year was gradual and mostly uneventful, apart from the extreme volatility during the first two weeks of April 2025 following Donald Trump’s April 2 liberation day tariff announcements. However, the question is whether Indian equity valuation will continue to moderate gradually and uneventfully. Or would panics, market crashes, bankruptcies, and bailouts make the rest of the moderation eventful?
Margin loans, while presenting opportunities for amplified gains, also expose investors to significant risks, particularly during market downturns. As brokerages increasingly rely on interest from these loans for revenue, the current market's momentum hangs in the balance amid global economic shifts, stagnating stock prices, and faltering corporate earnings growth. Can the resilience of Indian stocks withstand the potential unwinding of these excesses?
Investors’ enthusiasm for SIPs has led to the more than doubling of mutual funds’ total assets under management over the past five years. The increased investor interest in SIPs was for the right reasons. Stocks have rewarded investors handsomely over the past five years, and as always, investors mistakenly assume those handsome returns will continue in the future. The assumption has caused them to double down on their equity investments. The assumption is mistaken because future market performance has negligible correlation with past or present performance. All manias, when they are in progress, appear to last forever. But they don’t. Eventually, all manias come to an end, most with disastrous consequences. The same could happen with the SIP mania. Determining when it will occur, how it will unfold, and the extent of the damage are unclear.
India and the US currently host the world's most expensive stock markets, indicating lower future returns for their stocks. In contrast, European and Chinese stocks with more reasonable valuations promise higher prospective returns. The US has experienced strong economic growth since the pandemic, but mounting debt and high real interest rates pose a threat to its sustainability. Indian stocks, although historically strong performers, may face challenges due to new tariffs and market dynamics. Investors should focus on underexplored, smaller-cap stocks and reconsider dependence on passive investing, as rising valuations might limit returns in traditional large-cap indices.
Though financial markets reflect economic reality, they often move in advance. It means asset prices fall much before a slowdown in corporate earnings or economic activity becomes evident. Similarly, asset prices would have risen when signs of recovery in corporate earnings or economic activity are evident. Therefore, equity investors shouldn’t rely too much on short-term corporate earnings performance for their investment decisions. Instead, stock fundamentals, valuation, and macro trends should guide his investment decisions.
April 2025 was an eventful month for the markets. Stock prices oscillated widely as investors reacted to the Trump administration's on-and-off import tariff measures. After a 6.3 per cent gain in the previous month (March 2025), the markets entered April 2025 on an optimistic note, which was soon shattered following US President Trump's announcement of … Continue reading Relative Interest Rates and Capital Flows
"The Gold Deception" explores the complex relationship between gold and economic uncertainty, examining its historical performance as a safe asset during market downturns. The piece delves into past gold price rallies, their connections to global crises, and the lessons learned about the metal's unpredictable nature. By contrasting gold's recent trajectory with historical data, the piece provides essential insights into its dual role as both a haven and a potential speculative trap. Whether you're an investor or simply curious about market dynamics, this piece informs about gold's enduring allure and inherent risks.
Analysing the Recent Decline in Indian Stock Markets Indian stocks have declined by 10% over the past four months. A recovery in late November and December was not sustained. Although mid-caps and small-caps were more resilient than large-caps during the declines of October and November, the decline over the past two months was more broad-based. … Continue reading Increasing Vulnerabilities
Stock returns are expected to trail earnings growth over the next decade. The economic environment during the forty years from the early 1980s until 2022 was characterised by low inflation and declining interest rates. From the high teens in 1980, interest rates in developed countries declined for nearly 28 years. They reached near zero in … Continue reading The Inevitable Moderation
A few investment norms we have been accustomed to for a long time are falling or getting disproved. What does it signify?
AMN CAPITAL 