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The Indian indices have fallen 8-9% from the peak, wherein US indices are at their peak. This could be due to two reasons: a) Trump coming into power making US equities more attractive due to expected increase in net fiscal stimulus b) The China stimulus impact - which is now waning c) India centric slowdown in retail credit growth, overall economy and corporate earnings. All these concerns seem to be largely behind us and we are seeing a silver streak in emerging economic data. With most state elections behind us the Capex growth story should unfold in the coming months. The govt. has to spend ~Rs. 7 Trillion in the remaining 5 months to achieve its target of Rs 11.2 trillion in capex for FY2025, which would be a growth of over 52% YoY.The themes we would like to be invested in the current environment are largely domestic facing sectors like the capex related power sector, due to robust domestic tailwinds. In the global facing sector, we would like to be invested in India’s outsourcing stories like pharmaceuticals. (Source: Controller General of Accounts, Bloomberg)Post Trump election – US may become the most favourite Equity destinationWith the US elections behind us and a clean mandate given to Donald Trump, the US equity markets have given a “thumbs up”. Three expected policies leading to this euphoria are a) Tax cuts b) Increase in global tariffs to enable US increase their manufacturing set up; c) More jobs for US citizens. This would lead to an increasing fiscal deficit. However, disinflation trends and in turn interest rate cuts expected earlier would be mellowed down.Stimulus of China has made investors reassess and invest in ChinaThe Chinese government. provided a slew of measures for the bourses as well as the real estate industry. India witnessed outflows of US$ 10.4 billion dollar in October ~US$ 3 bn in November so far. From a peak of ~160% Market Cap. (MC) to GDP the Chinese indices now stand at ~60% MC to GDP, a staggering 60% discount to its peak, in line with its average. Investors who were very underweight tried to balance their position. In USD terms, the Chinese MSCI Index now stands at over 15% YTD, outperforming India after the recent fall which stands at 13%.(Source: JM Research, Bloomberg)2 H for India has been rough The Indian economy which was going from strength to strength witnessed three negative events all in 2H2024 which has led to over 10% correction in the bourses.Credit growth slowdown from 15-16% levels overall to 12-13% percent led by reduction in retail consumption. RBI too is taking a streak of measures to arrest any gross Non Performing Asset (NPA) formation. NBFCs are slowing down their retail growth and working on increasing their liquidity, tapering down their lending yields specially the Micro Finance Institutions so that the low ticket retail consumer gets the benefit passed on the economy front RBI after increasing GDP forecast in the last 4 years have reduced the current quarters forecast to 6.7% (down from 7%). A stronger monsoon limited consumption growth and industrial activities in certain regions.October Inflation is at 6.2%, due to food inflation, breaching the RBI 4-6% band. The Current account deficit has inched up to 3% due to higher crude prices and lower exports due to global slowdown in consumption. In addition, lower govt. spending has weighed on growth. Forex reserves also have plummeted from a peak of Rs. 705 Bn(Sep.) to Rs. 655 Bn. (Nov)Corporate F2Q24 results were a dampener, with overall revenue growth slowing down to 8%, profits actually declining by 2% as against an expected double digit growth. Excluding the energy sector which witnessed a 41% decline in profits, Corporate India growth was 11.6%, 4-5% lower than expectations. Overall 1HF2024 profits grew 3% which implies even if 2HF25were to grow at 15%, overall growth would be 9% as against our expectation of 15% for F2025 earlier. This has led to a 7-8% cut in overall earnings for India inc. and in line corrections in markets. 115860956(Source: JM Research, Bloomberg)Time for the Santa Claus Effect to work?We think India has gone through its trough of a relative economy slowdown in F2Q24; PMI nos. have already inched up in Oct to 57.3, GST nos. too inched up to Rs 1.87 trillion the second highest ever, festive season has led to auto sales increasing 12.2%. 115860943(Source: S&P Global, GST Council)With most State elections behind us, it's back to the BJP manifesto of “Increase in capex spend”. Our 30% of FY2025 capex has been spent so far and the government cash balance has lowered by Rs 3 trillion during Sept to Nov. implying a capex boom in 2HF2025. 115860938Typically, FIIs are muted in December, and if we see DIIs maintain their flows of US$ 45 bn which already is the highest ever in any fiscal year as a whole, markets could see a good Christmas.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

The new Trump administration is coming in hot, with mass deportations of undocumented immigrants and threats of triggering a global trade war among its immediate priorities. Fighting continues in Europe and the Middle East. And bond traders are scaling back bets on lower interest rates as the US economy risks a fresh bout of inflation.But despite all of these risks, investors seem largely unperturbed, with the S&P 500 Index setting another record just this week. Traders are piling into the riskiest parts of the market, too, with the small-capitalization Russell 2000 Index nearly doubling the S&P 500’s performance over the past two weeks and approaching its first record since 2021. Meanwhile, the Cboe Volatility Index is at levels that historically indicate serenity among traders.This degree of optimism in the face of those wider concerns is surprising even some Wall Street pros. To them, it’s also a cause for alarm.“One of my top concerns is extreme bullishness, and we are seeing signs of that,” said Eric Diton, president and managing director of the Wealth Alliance. “We know from history that when investors are too bullish, and everyone is in the market, the question is who is buying to drive it higher?” 115860165With the S&P 500 clocking 53 records this year — or about one every five days — rampant optimism in the stock market is hardly new. Still, signs of exuberance are starting to appear.Wall Street’s soothsayers expect another year of double-digit gains after the S&P 500 posted back-to-back advances of over 20% in 2023 and 2024. The index has delivered such a rally only once, during the dot-com bubble. Households’ equity holdings as a share of total assets are at a record — and so is a percentage of Americans expecting stocks to rise in the next 12 months. Data from Bank of America show retail clients have a high chunk of their investments in equities and are taking on more risk.“Investors seem to be shunning virtually any risk-averse strategy,” Richard Bernstein Advisors wrote in a note to clients this week.Muddy OutlookRisk-on momentum in equities has lately been concentrated in small caps. Since Donald Trump’s victory, the group — a laggard for most of the year — has caught up in a hurry with the broader market, and is now up 20% in 2024, compared with the S&P 500’s 26% advance. The group is expected to benefit from the new administration’s protectionist trade tactics because they’re least exposed to international markets.The thing is, while there’s a logic to small-caps rallying based on the incoming administration’s so-called “America First” agenda, that isn’t the whole story. The group’s earnings outlook isn’t great, and uncertainty is on the rise about how Trump’s plans would impact economic growth, inflation and the central bank’s interest-rate path. 115860182Small companies are particularly sensitive to monetary policy because they tend to rely on debt financing. And the Federal Reserve has indicated that it’s slowing the expected pace of future rate cuts. That may not be an ideal backdrop for small caps, which are considered among the riskiest nooks in the market.“In trader talk, this seems like a group to date, but not to marry,” said Steve Sosnick, chief strategist at Interactive Brokers.There are other fault lines in the market opening up as well. Semiconductor stocks, which have led US equities over the past couple years, are under closer scrutiny. The fervor for all things related to artificial intelligence that fueled much of their rally has started to calm down.Meanwhile, chipmakers are going to be on the front line of any trade war, given the global nature of their supply chain.“While tech remains near the top of the leader-board on a year-to-date basis, it’s near the bottom over the last one and three months,” Jonathan Krinsky, chief market technician at BTIG, wrote in a note to clients. “Bulls really need to see semis stabilize here to prevent a bigger breakdown into 2025.”Keeping the FaithThat being said, optimists still see plenty of reasons to keep faith. They point to the healthy broadening of market leadership, with stocks from industries other than technology or AI gradually taking over. And valuations, while stretched, are not quite at peak levels. While the S&P 500’s 10-year annualized return has climbed sharply, it’s not at the point where investors might want to abandon ship just yet, according to Bloomberg’s Cameron Crise. Then there’s the expectation that the Trump administration’s plans for lower corporate taxes, looser regulations and a softer stance on antitrust policies will more than offset any headwinds. Bulls also take confidence from Trump’s own penchant for using the stock market as a scoreboard for his success. Wall Street’s enthusiastic reaction to Trump picking Scott Bessent as his nominee for Treasury secretary was predicated on the idea that he would temper the administration’s aggressive trade and economic proposals. Another factor that may be driving the enthusiasm for equities is investors’ memories of how they did in Trump’s previous term — and the belief that it’ll happen again, despite the differences between 2016 and 2024. “People’s experience with the stock market in Trump’s last term is skewing their perception of what to expect in this frothy market,” said Alex Atanasiu, portfolio manager at Glenmede Investment Management. “At that time, the market was recovering, and this time valuations are even higher, we have had two strong years and it is risky to assume the market has the same kind of legs.”All together, these factors can feed the sense of euphoria and keep the rally alive for some time — whether it’s rational or not. The recommendation from market pros is simple: Be cautious at these levels and read the tea leaves carefully.“Anyone who thinks we are not in a highly speculative period, if not a bubble, isn’t really paying attention,” said Richard Bernstein, founder and chief investment officer at Richard Bernstein Advisors. “Look at crypto. There is nothing fundamental going on there.”

Ahead of the first Test, renowned Australian cricket writer Gideon Haigh had suggested that Perth could be the most alien of conditions for India. He argued that Perth would test India thoroughly and hinted that Australia had planned the series in a manner that they could be 2-0 up by the time series moved to Brisbane. With the 0-3 whitewash against New Zealand looming large in the background, the pressure was clearly on India.However, India’s 295-run win in Perth has put the pressure squarely on Australia. There is talk of divisions in the Australian dressing room. Former players are asking the tough questions and Pat Cummins and his team aren’t in the best space.“India were brilliant in Perth. (Jasprit) Bumrah showed Australia how to bowl in Australian conditions. And now the question is, can Australia comeback from this?” asked former skipper Michael Clarke. His remarks highlight the ineffectiveness of the Australian fast bowling trio -- Cummins, Mitchell Starc and Josh Hazlewood. And the upcoming pink ball Test in Adelaide could well be the last roll of the dice for each one of them against the Indians. Now, with Hazlewood ruled out and Boland likely to replace him, the spotlight will squarely be on Cummins and Starc.In recent times, Australia have beaten India in the 50-over World Cup final and also in the World Test Championship (WTC) final. However, for over a decade, Australia haven’t won a bilateral Test series against India, either at home or away. In cricket, bilateral Test series, especially away from home, are considered the ultimate challenge. And that’s what the Australians haven’t been able to do. Despite boasting over 1,400 Test wickets collectively, Starc, Cummins, Hazlewood and Nathan Lyon have repeatedly failed against India’s grit and resilience.That makes Adelaide important. Australia have played far too many pink ball Tests than India and know the conditions better than their guests. Ten days of practice, including a two-day game, is hardly sufficient preparation, giving Australia a clear advantage.Having said that, there is always the ‘Bumrah factor’. After the Perth century-makers Virat Kohli and Yashasvi Jaiswal, and returning Shubman Gill and Rohit Sharma, Indian batting line-up doesn’t look as fragile, nor their bowling as inexperienced. Ultimately, it could well boil down to who handles the pressure better in Adelaide.“Cricket is the most individual of all team sports and it only becomes a team game when individuals come together as a collective. When a batter bats out there he is all alone. It is him versus the red cherry. No one else is there to help him in the 22 yards strip. Only when each one comes together does it become a team,” said former India batter Mohinder Amarnath, at the occasion of his book launch in Delhi.That’s what Australia needs at the moment – a collective effort. They don’t have a Bumrah. But they have Starc and Cummins, two of the best bowlers in the world. They need to collectively believe they can do the job for Australia and turn the tide. Steve Smith needs to believe he can score big like he has in the past and Marnus Labuschagne needs to be Marnus and not try to be Cheteshwar Pujara. Only if the Australians come together as a collective do they have a chance in Adelaide.Adelaide could well be Australia’s last chance in this series -- make or break ahead of Brisbane. With the Indians winning in Perth, all the thinking is now for Australia to do. Can they square the series or will the Indians take a 2-0 lead to be on the verge of a third consecutive series win down under?