Please find below the 5 charts that tell interesting stories on Markets and Investing.

 

1) Indian Economy is Slowing Down:

 

The sales growth of BSE 500 companies in the second quarter of FY 2024-25 has increased by 8% compared to the previous year.

 

For the past 1.5 years, Indian companies have been grappling with sales growth consistently remaining below 10%.

 

One of the primary reasons for this weak growth is the global economic slowdown, driven by high interest rates since 2022.

 

There is hope on the horizon, though. As the US Federal Reserve gradually reduces interest rates, we can anticipate renewed momentum in global growth, which should positively impact the Indian economy.

 

 

2) Global Equity Valuation:

 

Indian equities are currently trading at a PE ratio of 22.8 for FY25, indicating a relatively high valuation.

 

US equities, however, are even more expensive, with a PE ratio of 24.9, making them the priciest among the major markets.

 

On the other hand, equities in emerging markets are trading at a much lower PE ratio of 13.3, reflecting the struggles faced by these countries, with the notable exception of India.

 

Its worth mentioning that both the US and India boast the highest Return on Equity (ROE), highlighting the profitability and efficiency of companies in these markets.

 

 

3) Why do Indian and US Equities perform so well?

 

Both the US and India stand out as premier markets worth investing in. These countries boast the highest number of companies consistently recording a Return on Equity (ROE) exceeding 20%.

 

In India, nearly one-third of companies have maintained an ROE of over 20%, showcasing their robust financial performance.

 

When adjusting for the Cost of Equity, the ROE remains attractive, particularly for companies in the US and India, highlighting their superior investment prospects.

 

A key driver behind the high ROE of Indian companies is the strong focus of Indian entrepreneurs on cost control, which enhances profitability and efficiency.

 

 

4) Trump's Election Win Spurs Record Flows into US Equity:

 

Following Trump's victory in the US elections, investors are optimistic about the US economy's prospects due to anticipated policies such as lower corporate tax rates, the promotion of "Make in US," and relaxed regulations for tech companies.

 

Typically, investors buy on the news and sell on the event. Consequently, US equities are experiencing record inflows driven by expectations of improved earnings growth.

 

These substantial inflows are propelling US markets to all-time highs.

 

However, its important to note that markets may have already priced in most of the anticipated Trump policies and their impacts.

 

 

5) Good Time to Gift Diamonds:

 

Natural diamond prices have significantly dropped since 2022 and are currently at their lowest levels in the past 25 years in USD.

 

A key factor behind this price correction is the rapid growth of artificial (CVD) diamonds, which are approximately 90% cheaper than natural diamonds.

 

As a result, the market for natural diamonds is expected to shrink, becoming a luxury for those who can afford them.

 

With prices at an all-time low, now is a good time to gift natural diamonds :)

 

 

Investor Guidance: At current levels, it is prudent to invest only that money in equity which is not required for next 5-7 years. 

 

Disclaimer:  The perspectives provided reflect our expectations of the economy, market, and investments, which may or may not materialize. Investors are encouraged to conduct their own due diligence before investing.

 

Read more similar articles in our blog - https://alphacapital.in/blog/

 

Best Regards

 

Dr. Mukesh Jindal CFA, CFP, CAIA, Ph.D.

Alpha Research