What in 2017: GST, Demonetisation, Recapitalisation of Public

What to expect from Markets in FY2018?

Events in 2017: GST, Demonetisation, Recapitalisation of Public
Sector Banks, RERA Implementation, Sharp increase in NPA’S of Public Sector
Banks, Lowest Credit Growth in 60 years, Fall in profitability of companies,
Sharp rise in Insolvency cases filed at NCLT, Rise & Fall of GDP, Low Food
Inflation, Depressed Farm Income growth, Elections in seven states

 Financial Year 2017 was full of
Uncertainities, Volatility & Challenges posed by Structural  Reforms, Increase in Competition & many
other factors. Impact of these factors was seen across all major sectors in the
economy where exiting players lost their market share & many new players
emerged as market leaders. Manufacturing Sector dealt a Body blow after
Demonetisation & GST. Services sector with huge potential to absorb labour
also took a hit. Supply was severely hit by GST. Real Estate sector was
depressed on the back of RERA & Demonetisation which slowed Job Creation. Financial
Markets due to these factors remained volatile & Uncertain throughout the
year.

 Despite all the uncertanities &
disruptions, Indian market indices were one of the Top Performers with both BSE
Sensex & NSE Nifty giving 30% return in 2017. Investors got to make some
serious money where as many as 131 stocks from BSE-NSE combined managed to give
double or even more returns. In contrast with FY 16 only 13 stocks manged to
give double returns. Strong inflows into domestic equity mutual funds supported
this growth. Assets under management soared 38% to rupees 22.7 lakh crore from
rupees 16.5 lakh crore a year earlier.

FY18 will have improved visibility
where the transitional downturn impacts due to reforms will suffice & long
term benefits will be capitalised by companies. As per Bloomberg survey, Bonds
& Equities in Developing Countries will outpace their counterparts in
Developed countries in FY 2018. Changes to GST & stabilizing of revenues
will minimize the risk of inadvertent fiscal easing or tightening. Supply
chains will settle down & may also restart new investments. Recapitalisation
of PSB’s where 2.11 lakh crore rupees will be infused through raising of
Recapitalisation bonds will help trigger the falling Credit growth in the
economy. Major beneficiaries of the capital infusion which will have no impact
on the net outflow or on the budget will be State Owned banks. Strengthening of
Insolvency & Bankcruptcy Code will help in resolving rupees 11.5 lakh crore
of stressed assets & will further improve the Balance sheets of banks.

Investments in affordable & mid income housing projects under “Housing
for All by 2022” scheme will act as a growth driver for the Real Estate
industry & will also be a catalyst for GDP growth. Infrastructure projects
like Bharatmala, Sagarmala projects by the government will enhance the
utilisation of cement, steel & other raw materials giving a significant
push to stagnant construction activities in the country thereby increasing
employment & hence the GDP of country.

But that doesnt mean that 2018 will
be devoid of Uncertainities & Volatility. General Elections in 2019 &
several State Elections will keep the markets sensitive to Political Developments.

Increase in prices of Crude Oil to Two & Half year high & the
uncertainities associated with Future prices will contribute to fiscal Problems
& increasing the volatility of markets. Uncertainities around Fiscal
Tightening by Fed & policies of Trump administation will again keep markets
in check. Issue of imposing Long Term Capital Gains Tax on equities is another
factor which will keep markets jittery. Also Chinese Government adjustments in
its economic model in response to record high levels of debt & over
reliance on investments, the economic ripples may not be contained within the
country.

     FY
2018, hence will be year of growth for various sectors accompanied with
uncertanities from Global Political & Economical aspects. Having said that,
Credit Suisse Global strategists believe 2018 should be a year of positive
returns for Global equities. That should be supportive for Indian Equities too.