3 mins read . 20 Oct 2023
In the world of global risk assets, an intriguing question looms: are we on the cusp of an extreme breakout? Our perspective leans towards a resounding "yes."
To understand why, one must delve into the dynamics of the U.S. national debt, which is surging by a staggering $50 billion every month. As a result, the annual deficit is poised to breach the $1 trillion mark (equivalent to 1000 billion). This dramatic rise is fueling an unparalleled expansion of the money supply, and we believe it will have profound consequences, ushering in price inflation across various asset classes, from risk assets to commodities and even basic food items.
The central issue at hand is the sustainability of this phenomenon. Could it eventually lead to a currency displacement, where the established order gives way to a new world financial structure? To find answers, one must look beyond U.S. borders and consider the conditions in other significant markets, such as the European Union, China, and Japan. Contrary to those who may believe that the U.S. is in dire straits, a closer examination reveals that these other major economies are facing even greater challenges.
In light of this, we believe that while the current scenario is undoubtedly undergoing a transformation, it would be unwise to dismiss the United States. Nevertheless, the consequences of the unprecedented money printing are already manifesting as substantial asset price inflation, creating a scenario where there is too much money chasing too few assets.
India, in this context, emerges as a prominent beneficiary of the ongoing and forthcoming changes. We anticipate that Indian equity markets will experience a significant upswing, reaching new and greater heights. It's worth noting that in India, equity investments account for only 15% of its gross savings, whereas globally, this figure exceeds 70%. This highlights the immense potential for investment inflow as investors seek to seize the unparalleled upward movement in Indian markets.
In particular, mid, small, and medium-cap stocks are poised for a remarkable ascent into uncharted territory. While global challenges will continue to shape the financial landscape, India is uniquely positioned to weather these storms due to its domestically oriented economy.
In conclusion, the stage is set for wealth creation, and as we navigate this evolving landscape, India stands as a beacon of opportunity for investors seeking to participate in the exciting times ahead.