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By:

C.S. Krishnamurthy

21 June 2025 at 7:45:51 pm

Strong India, Cautious Investor

The Indian economy appears stronger than the nervousness visible in the stock market might suggest. Corporate earnings are improving, domestic demand remains reasonably resilient and several sectors are reporting healthy growth. Yet investors are facing an unusual mix of risks: crude oil is moving towards $100 a barrel, global bond yields are rising, foreign investors have turned sellers again and parts of the Indian market remain expensive. That leads to a simple investment message: India's...

Strong India, Cautious Investor

The Indian economy appears stronger than the nervousness visible in the stock market might suggest. Corporate earnings are improving, domestic demand remains reasonably resilient and several sectors are reporting healthy growth. Yet investors are facing an unusual mix of risks: crude oil is moving towards $100 a barrel, global bond yields are rising, foreign investors have turned sellers again and parts of the Indian market remain expensive. That leads to a simple investment message: India's growth story remains intact, but investors should not mistake a strong economy for a risk-free stock market. The latest corporate results offer considerable comfort. The economic momentum built over the past few quarters has not been derailed by geopolitical tensions. The margin pressure feared across several industries has also been less severe than expected. More importantly, earnings growth has been reasonably broad based. Large, mid and small companies have all shown healthy growth. If oil-related businesses, which are somewhat different in their earnings pattern, are excluded, the gap between the three market segments is not particularly wide. Financial services have been among the strongest performers, with banks, NBFCs and capital-market businesses reporting good growth. Capital goods, metals, telecom and power have also done well. For investors, this is significant. A stock market supported by genuine improvement in corporate profits has a much stronger foundation than one driven merely by enthusiasm. Domestic Risk The monsoon, however, remains an important domestic risk. Rainfall has been below normal so far, although the impact on the rural economy has not yet been alarming. Tractor and two-wheeler sales remain reasonably strong, suggesting that parts of rural India continue to spend. At the same time, increased demand under the rural employment guarantee programme suggests that weaker rainfall may be affecting poorer rural households more severely. Food inflation adds another complication. Higher food prices may improve the income of farmers who sell their produce, but they also increase the expenses of families who buy food. Therefore, higher food inflation cannot automatically be interpreted as stronger rural purchasing power. India is nevertheless better prepared than it once was. A healthy IPO market is a positive development. It allows companies to raise capital and gives investors fresh opportunities. But there is a point at which too much supply begins competing for the same pool of money. The current market provides a striking example. The much-awaited IPO of the National Stock Exchange is reportedly being considered at a size of around Rs. 24,000 to Rs. 25,000 crore, down from earlier expectations of Rs. 30,000 crore but a very large issue nonetheless. The message is not that investors should avoid IPOs. It is that an exciting new issue should not automatically be preferred over an established company merely because the new issue is attracting headlines. The bigger uncertainties are global. Brent crude has moved close to $100 a barrel as tensions in the Middle East have intensified. For India, which imports most of its energy requirements, expensive crude can mean higher inflation, a wider trade deficit and pressure on economic growth. US bond yields are another concern. Higher yields make dollar investments more attractive and can reduce the appetite for emerging markets such as India. This does not necessarily mean that global investors have abandoned India. It shows how quickly investment decisions can change when oil prices, interest rates and currencies move. Domestic investors, particularly mutual fund investors, therefore have an important role in providing stability. Their regular investments can partly offset foreign selling, although domestic flows cannot make the market immune to global shocks. Faster Growth The enthusiasm for small and mid-cap stocks is understandable. Many of these companies offer faster growth and have rewarded investors handsomely. But if investors pay too much for expected growth, even a good company's share price can disappoint. Large-cap companies, after a period of relative underperformance, may offer more comfortable valuations and greater stability. The right mix will depend on an investor’s financial goals, investment horizon and ability to withstand market fluctuations. India’s economic story remains encouraging. Corporate earnings are healthy, domestic demand has resilience and the economy has become better equipped to absorb individual shocks. But the stock market is not the economy. For the common investor, therefore, the most useful question today may not be, “What should I buy?” It may be, “Is my portfolio balanced enough to withstand what I cannot predict?” (The writer is a retired banker and author. He can be reached at krs1957@hotmail.com. Views personal.)

Can Science Predict What It Will Discover?

3 hours ago
5 min read

Science can set ambitious goals and justify public investment, but the most important discoveries are often the ones no research proposal could have predicted.

Voyager 1 had a defined mission, but its journey ultimately took humanity farther than its original destination.
Voyager 1 had a defined mission, but its journey ultimately took humanity farther than its original destination.

Discovery, by definition, is about finding something we do not yet know. Yet scientists are often asked to say in advance what their research will produce. Proposals ask for outcomes, deliverables, milestones and anticipated impact before the work has begun. Much of this is necessary. Public money demands accountability, and scientists must explain what they intend to investigate and why it matters. But how much of the unknown can honestly be predicted before we begin exploring it?


Three anniversaries falling within the same September week offer an interesting way to think about this question. On September 5, 1977, Voyager 1 left Earth for Jupiter and Saturn, eventually travelling into interstellar space. On September 10, 2008, the first proton beam travelled around CERN’s 27-kilometre Large Hadron Collider. And on September 12, 1962, President John F. Kennedy stood at Rice University and made the case for America’s audacious ambition to put a human being on the Moon.


One journey went farther, another looked deeper and the third aimed higher. Yet none was an aimless adventure. Apollo had an extraordinarily clear destination, Voyager had defined planetary objectives, and the LHC was built around specific questions in particle physics. Scientists knew what they wanted to investigate and how they would go about it. What they could not know was everything they would learn along the way or what significance that knowledge might acquire decades later. A scientific journey can have a destination without knowing everything that will be discovered along the way.


Accountable Science

Science operates at the boundary between what we know and what we do not. A scientist can reasonably be expected to define an important question, formulate a hypothesis, design rigorous experiments and justify the money required. Funding agencies should ask: What are you trying to do? Why does it matter? Is your approach sound? How will we know whether you are making progress?


The problem begins when these quietly become different questions: What exactly will you discover? What product will emerge? How many patents will result? What economic or societal impact will the research produce five or ten years from now? Such expectations may be reasonable for some technology-development projects, but not for all research. Demanding artificial precision about an unknowable future does not necessarily improve accountability. It may simply reward researchers who are better at writing certainty into proposals.


There is a deeper danger here. The safest research proposal is often the one least likely to surprise us. If researchers learn that funding depends on promising predictable results, they will naturally design projects around questions whose answers are already reasonably foreseeable. The system may then appear efficient: milestones are met, deliverables produced and reports completed. Yet something important may slowly disappear from science—the willingness to ask a question whose answer might genuinely surprise us.


History gives us reason to be cautious. Some of science’s most consequential advances emerged from investigations whose eventual uses were invisible to their pioneers. Quantum mechanics, for instance, grew from attempts to understand strange behaviour at the atomic scale. Its pioneers were not trying to invent transistors or lasers. Yet technologies rooted in quantum physics now underpin much of modern life. No proposal written at the birth of quantum mechanics could credibly have predicted that trajectory.


This is hardly unusual in the history of science. James Clerk Maxwell’s nineteenth-century work on electromagnetism was driven by questions about the fundamental behaviour of nature, long before radio, television and modern communications became conceivable. The historical record is littered with discoveries whose practical significance arrived much later than the questions that produced them.


This does not mean every curiosity-driven investigation will transform society. It will not. Many studies will add modestly to knowledge; some will lead nowhere. Uncertainty is part of genuine exploration.


Defined Destinations

The Large Hadron Collider illustrates the point particularly well. The Higgs boson had been predicted decades before the LHC began operating, and scientists knew what they were searching for. What they did not know was whether nature would confirm the prediction, what else the collider might reveal or where that knowledge might eventually lead. The discovery of the Higgs boson in 2012 mattered primarily because it told us something fundamental about nature, not because it immediately produced a marketable product.


Voyager had clear objectives for exploring the outer planets, but its journey ultimately extended far beyond them. Voyager 1 became the first human-made object to enter interstellar space. Asking for the financial return on sending our instruments beyond the planets somehow misses the point. Enlarging the boundaries of human knowledge is itself one of the purposes of science.


Apollo was not a voyage of open-ended scientific discovery in the same sense. Its lesson was different. It had a precise destination and powerful geopolitical motivations, but the path to reaching that destination was far from certain. Apollo showed that an audacious goal can be precisely defined even when the knowledge and technologies needed to achieve it are still being created.


We can demand accountability for the journey without demanding certainty about what will be found.


India’s Choice

For India, this is not an abstract debate. We need science that addresses water, health, agriculture, energy, climate and national security. Much of that research should be mission-oriented, with measurable goals and timelines. But a country aspiring to scientific leadership cannot remain merely a user of knowledge generated elsewhere. It must also help create knowledge at the frontiers, including knowledge whose applications may not yet be visible.


A country that funds only research with visible applications may become very good at applying yesterday’s knowledge while remaining dependent on others for tomorrow’s. We therefore need scientists asking different questions. Some must ask, “What problem can we solve?” Others, “What can we build?” And some must retain the freedom to ask the oldest scientific question: “Why?” Curiosity-driven research can eventually enable technology, while attempts to solve practical problems can open entirely new scientific questions.


What India needs is a portfolio of ambition and risk. Some public research should tackle urgent national missions. Some should develop technologies with clear pathways to application. And some should support excellent researchers pursuing important questions precisely because we do not yet know where the answers will lead. A system that rewards only predictable outcomes may become very good at producing what it asks for, while missing discoveries it never knew to ask for.


Voyager went farther, the Large Hadron Collider looked deeper and Apollo aimed higher. Each was purposeful, but none could know everything that would be learned along the way. Science can predict possibilities, test hypotheses and plan the journey. What it cannot promise is what nature will reveal.


We should demand rigour, accountability and responsible use of public money. But if we also insist that scientists tell us exactly what they will find before setting out, we should not be surprised if we rarely discover something truly new.


(The writer is an ANRF Prime Minister Professor at COEP Technological University, Pune, and former Director of the Agharkar Research Institute, Pune. Views personal.)

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