Indian Economy My View

Nifty undervalued in terms of Dollar

Nifty’s move to 9119 in March 2015 from the previous high of 2008 around 6330 was applauded by our traders alot but not investors. This rally i would term as “Traders rally” because fundamentally we were not globally competitive as suggested by our rupee vs dollar (Green line) which has been weakening regularly. Because of our weak rupee, Nifty in terms of Dollar (White) has not even achieved 2008 high as you could notice in the charts. This huge divergence between the Nifty (Yellow line) and Nifty in Dollar terms need to narrow down soon and we could see fast rally in equity markets. But this rally would be accompanied by strengthening rupee.

Why would rupee strengthen? because finance budget and RBI has won back trust of Investors. By achieving 3.9% of Fiscal deficit target and setting off new target of 3.5% in budget, has surely given a confidence to global investors. Secondly, PSU bank’s cleaning up of NPA’s and Basel norms restructuring has given financial sector a boost. Thirdly, investor friendly initiative by many states in form of global business summit has boosted FII flows in various sectors. Fourthly, bounce back in Commodity prices will boost companies revenues which were hard hit in last few years.

So to conclude, Nifty has yet not at par with 2008 and as  India is considered brightest spot in world map as only emerging market growing we can expect Equity market investment to be a multi-beggar even from current levels in next 5 years. Start investing if you havent yet.

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