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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.)

Unfinished War

2 hours ago
2 min read

Twenty-five years after September 11th 2001, the most consequential question is what has the world learnt from it. The attacks killed nearly 3,000 people while shattering the illusion of American invulnerability and inaugurating two decades of war, radicalisation and instability. After all this, the enduring central lesson remains that terrorism does not disappear because its most visible organisation is defeated.


Osama bin Laden’s al-Qaeda did not emerge from out of the blue. Its attacks on American targets in the 1990s, its bombings of US embassies in Africa and the attack on the USS Cole had provided ample warning of what was coming. Intelligence failures, including the inability of the CIA and FBI to share vital information, had compounded the failure of political leadership to act decisively on mounting warnings.


The price of institutional complacency was paid in form of the shocking strikes where two hijacked aircraft wrecked the Twin Towers, one of America’s most recognisable symbols of power, while a third aircraft slammed into the Pentagon, the heart of the American military establishment and a fourth crashed in Pennsylvania after passengers fought back.


The response after 9/11 saw terrorism moved from the periphery of international security to its centre. For India, this represented a belated recognition of a threat New Delhi had confronted for years. The Parliament attack of December 2001 followed within months while in 2008, Lashkar-e-Taiba terrorists brought the same transnational jihadist menace to Mumbai, killing more than 160 people.


The quarter-century since 9/11 has demonstrated that terrorism is remarkably adaptive. Jihadist violence has become more diffuse: local franchises, online radicalisation, lone attackers and loosely connected ideological networks can achieve effects once requiring elaborate hierarchies. The Sahel, the Maghreb, Somalia and parts of West Asia demonstrate that the problem has not vanished. It has merely mutated.


That makes complacency particularly dangerous. The absence of another 9/11-scale attack on American soil is a genuine achievement of intelligence and counter-terrorism agencies. But it is not proof that the threat has disappeared. Patience, adaptation and opportunism are among terrorism’s most persistent characteristics.


There is also a danger in allowing counter-terrorism to become captive to domestic political agendas. The machinery created after 9/11 took years to build and depended heavily on institutional memory, specialised personnel and intelligence-sharing networks. Budget reductions, loss of experienced officers and the dismantling of programmes designed to prevent radicalisation can weaken that architecture precisely when governments believe the danger has receded.


The deeper mistake would be to imagine that counter-terrorism is a war that can simply be declared over. Terrorism is not a conventional enemy waiting to sign a surrender. The political grievances, ideological ecosystems and fragile states in which violent movements thrive require a longer strategy.


9/11 should therefore be remembered not merely as the day America was attacked, but as the day the world was warned. The warning was clear. The challenge today is not to wait for another catastrophe before taking it seriously.

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