Once the initial euphoria in the Indian stock market around the US election verdict settles down, BSE Member Ramesh Damani is on the view that stocks could see a phase of consolidation which may last for 2-3 months before attempting highs once again. Damani added that markets may now want to spend some period in a state of time and price correction.
In conversation with CNBC-TV18, Ramesh Damani said, "Probably, we have made the high for the year," adding that this will be more like a correction in an ongoing bull market. Nifty 50 has risen by 12% so far this year, with the Mid and Smallcap indices up by 26% and 30% YTD, respectively. This rise has come inspite of a large FII selling so far this year. Foreign investors had pulled out nearly Rs 1 lakh crore from the Indian stock market in October, making it the worst-ever month in terms of outflows.
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"The fear that market has topped out is unwarranted in India, it is just moving sideways," said Damani. "We want a market that is healthy and retains a good sense of valuations. I am sitting on cash, but looking to invest back."
Ramesh Damani called the clean sweep by President-Elect Donald Trump a 'surprise', given that pollsters were projecting a tough battle between Republican and Democratic Party, but added that this was a 'great comeback' by Trump.
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Damani also raised concerns over the fact that the mandate could have far reaching implications for the global economic order, going forward. Among the key factors will be the spectre of tariff barriers on imports into USA. Trump had in the past suggested a tariff on 20-60% on all the goods coming into America, and Ramesh Damani is of the view all Indian exports to USA will be at risk here.
Trump has talked about curbing immigration in the run up to the election, which will be a factor of concern for Indian companies doing business in America. Aside of that, the China+1 factor that has been playing out could encourage more US companies to explore supply chains the world over, a factor that Damani says should be beneficial to India.
Damani also added that India's strong software skills and expertise in delivering largescale IT projects should benefit. "To remain ahead of the world in software, US will have to come to India", said Ramesh Damani.
Trump's call for a lower corporate tax rate will need to be carefully watched, as it may unleash productivity gains as well as capital and employment opportunities, but it may also cause inflation, said Ramesh Damani. He calls that in 1930, America attempted to raise tariffs with very undesired consequences. The Smoot-Hawley Tariff Act of 1930 was a law that raised tariffs on imported goods, in an attempt to protect American farmers and businesses from foreign competition. However, the tariff resulted in a lot of negative effects, and was widely blamed for worsening the Great Depression. "On tariffs, the ball is in the air," he added.
Ramesh Damani also questioned how the Trump 2.0 administration intends to fund the proposed tax cuts. The US debt has already crossed its GDP, and now stands at a record high of over $35 trillion as of October 2024, which is bigger than any other country's debt. "At some point, the bond vigilantes may force discipline on the government," said Damani. The US debt burden has been a cause of concern for economists, financial markets, as well as critics of government policies.
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