GDP Number bursting ahead . WOW

Published: Thu, 03/01/18

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Dear Members,

01 Mar 2018

It is old news that the best economic news shall show up at the end of a trend and not the beginning so what does this headline from today's papers mean? Absolutely nothing. The Reason is the discounting mechanism of the market. The good news implies that growth will bounce back and that will drive demand and interest rates. However with interest rates already rising [read the 50 bps hike of deposit rates by SBI today], the markets valuations will have to adjust to the higher interest rates along with growth expectations. Today's high valuations are a function of the growth expectations built in at the lower interest rates that are already prevalent. This twists it on its head. The better the news the bigger the downward adjustment we have to make for the market to become attractive to long term investors. Twisted? Maybe. But the market was not supposed to work in a straight line.

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Rohit Srivastava
www.indiacharts.com
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