India’s economy has been taking a hit for the past couple of years. And this year seems to be the worst. GDP of India is supposed to be at a seven year low at 6% for the fiscal year 2020. This isn’t a good news. Even the RBI is upset with the news because it predicted something different. RBI predicted that India’s GDP would grow by 7%, but it is only 6.1% since the last six months.
It isn’t just the RBI that made the predictions about India’s bleak economy, but many other international organisations did so too. Moody’s predicted the lowest rate for India at only 5.8%.
There are many factors responsible for the slump in India’s economy. And the slow down was evident in the last two years. But this year because of sharp deceleration in domestic demand in consumption and investment, the GDP took a big hit.
The government took necessary actions to counteract the slump. They cut the effective corporate tax rate by 10 percent to existing corporates and ~18 percent for new investments. This way the corporates will invest their money in future capacities. And this might help with the GDP as well as the equity investment. It is highly likely that the corporates will sell these gains to the shareholders through dividends. And they might invest more seeing the improvements in the market.
The future looks bleak for the stocks in India because of the failure with auto, metal and telecom sectors. But other sectors still have a future, and might still be salvageable.
This year though, the future of equity investments looks good. Risk taking ability for equity investment is improving. It is because corporates are optimistic over the recovery in the economy. And the improvement is due to stimulus, festive demand, good monsoon and lower interest.
