The Sensex and Nifty are at an all-time high, the rupee is at an all-time low and the economy is trying to get back on its feet. Overall, the benchmark indices are up 12% this year but the Indian rupee is down 10% against the greenback. Rising inflation and the fear of high interest rates hover in the background yet investors continue to be cheerful. But then, the pessimism that has engulfed the currency could end up taking stocks down a slippery path. The market breadth has been extremely narrow and that is another cause for concern. Banking and IT stocks have contributed the most to the run-up that has been underway for the past two months.
The decline of the rupee, which started because of the rise in the crude price, the turmoil in Turkey and President Trump announcing sanctions on Iran, could only exacerbate as all of them are wildcards. For a nation that imports 80% of its crude requirement and whose oil import bill constitutes 24% of total imports, an elevated crude price is surely cause for worry. Another blow has come from foreign investors fleeing emerging markets due to the rising US Fed rate. India being in a vulnerable spot has seen more than ₹372 billion in outflows from the debt market with mounting worries of a further weakening of the currency.
Sadly, domestic fundamentals are not looking any better either. Increased public spending ahead of the general elections and weaker GST collections are cited as reasons that could unsettle the macro-economic situation further. V Keshavdev, executive editor, presents the potential danger the currency and stock market face, in this edition’s cover story.
In other stories, we have a feature on media stocks that look set to benefit from the upcoming assembly and parliamentary polls. Elections are always a game of one-upmanship and political parties will outspend each other to get their manifesto across. See Election Bonanza to find out which media companies might end up minting the most.