Markets Have Factored In Lower GDP Growth, Higher Inflation: Analyst

"Markets have already factored that in; that is because of this oil shock that we are going through, and we have seen much worse shocks in 2020," Saraogi told ANI in an exclusive interview while speaking on the sidelines of an event held by the PHD Chamber of Commerce and Industry (PHDCCI) on its 8th Annual Convention on Capital Market and Commodity Market on late Friday.

His reaction came after reports in the market of projections of lower GDP this year, at 6.6 per cent against 7.1 per cent last year, and a forecast of higher inflation at 5.1 per cent against the RBI's comfortable band of 4 per cent.

He further added that the market has absorbed the shocks triggered by the conflicts in West Asia, and if the same situation prevails, no significant reaction on the bourses would be seen unless a major action is taken in the war field, like sending troops on the land in bulk.

Saraogi said, however, market sentiment has remained cautious due to global developments and geopolitical tensions, particularly in West Asia, but maintained that India's long-term economic fundamentals remain strong.

"More markets have been uncertain because of global factors and because of certain other factors," he said. "So in light of all of this, it's important to deliberate on what the road ahead will be and everybody is skeptical about what might happen, but deep down I think Indian markets and our fundamentals will reign supreme and that I think was the takeaway."

On the impact of geopolitical tensions in West Asia, Saraogi said India has been affected more than some other countries due to its dependence on imported energy.

"In the short term the entire world has been affected. Obviously, India is a big importer of energy. So because of that we have been hurt more than other countries and that has caused this underperformance," he said.However, he expressed optimism about the outlook for Indian equities over the next year.

"But it's only going to last for a while and eventually things will be better. So the worst of this is behind us and next one year I think will be good," Saraogi said.

Advising investors to remain invested despite volatility, Saraogi said market fluctuations are a normal part of investing cycles and should not discourage long-term participation.

"One should continue to invest in good quality stocks and there is a lot of money to be made in India," he said.

Referring to investor concerns over weak returns in recent years, Saraogi said many retail investors entered the market at the peak of the cycle, which led to disappointment after markets failed to deliver the usual double-digit returns.

"Markets have come down in the last one-and-a-half years or haven't performed. We are used to getting a 10-15 per cent kind of return from the market. So since that hasn't happened, all of us are disappointed," he said.

On the shift in household savings from fixed deposits (FDs) and recurring deposits (RDs) to mutual funds and Systematic Investment Plans (SIPs), Saraogi said such a transition is natural for a developing economy.

"In the US hardly anybody ever gets an FD made. Most of their money is in 401(k) accounts which is linked to equity. So as the country develops, people will see opportunity in the stock market," he said.

Saraogi added that India's growing retail participation reflected increasing democratisation of wealth creation.

"We now have about 24 crore demat accounts. So stock markets are no longer the preserve of the rich or the very well-educated. Everybody is now participating," he said.

- ANI