Real Reasons for the Market Fall and What next for the year 2025?

21^st December 2024

 

Real reasons for the Market Fall and what next for the year 2025?

 

Dear Investors,

 

Namaste! October to December as I write this post has been bad for the market. Nifty went down from 26277 to 23200 during October to Mid-November. From that level it moved to 24848 and fell again to 23631 yesterday. 

 

If you look at the media and listen to the typical analyst they will give the following reasons. 

 

1.   Trump will follow US first policy and increase the TARIFFS. This will be detrimental to the Indian Exporters to the USA. 

 

2.   FED will not decrease the RATE at the speed expected by the market and that will keep the DOLLAR will remain elevated against the INR. So, the USA will export the Inflation to the world. E.g. Recently, USD has moved from 84 to 85. So, if you are buying something from the USA – you will end up paying Rs.1 more for EVERY DOLLAR PURCHASE. 

 

3.   Indian Equities Valuations are higher. So, the PE contraction is happening. 

 

4.   FIIS are selling as if there is no tomorrow. 

 

What, we think, could be the real reason? 

 

Less than expected GDP growth: - 

 

If you are our long time reader – you will know that we have been telling our readers from March 2024  onwards that the ECONOMY is not doing well. Still the government kept the GDP growth rate steady at 7.2%. 7.2% had become something like a steady growth rate. If you wake up anybody from sleep, following the economy, and ask the GDP growth rate – he will say 7.2%. Post second quarter results – they have revised it to 5.4%. Government took 6 months’ time to revise their estimates. 

 

Market is always ahead of the government and the market events. 

 

Unemployment: - 

 

Recently, the Supreme court has asked the government to create employment opportunities for the 80 Crs of the population whom the government is providing free food. Almost half of the population is living on government support – this itself is a very negative point for the economy. 

 

There is educated unemployment also. 

 

With the LADKI BAHIN yojna ( Maharashtra) – the state government is giving Rs.1500 to Rs.2100 to the lady of the home every month. Other states are also picking up this kind of idea for their VOTE BANKS. This is also proof that they are not able to give gainful employment to the needy. It also means the burden on the BUDGET.

 

With the coalition government at the centre and many state levels – this kind of benefits will continue and it will increase the burden of the genuine tax payers. Tax rates will not come down.  

 

Today there was a meeting to reduce the GST on Health Insurance premium – but it seems they have not taken the decision to reduce the same. It means the real middle class who are buying insurance products for their family members safety are charged more and more taxes.

 

Less than allotted Capital Expenditures: - 

 

Government has not been able to spend budgeted capital expenditure of Rs.11 Trillion fully so far. They have around 50% remaining to spend in the last 4 months of the year 2024-2025. This has also affected the GDP growth. 

 

How does the Government compare with the NORMAL investor’s behaviour? 

 

Normal investors want fast money. They will do anything for the same. They will buy shares for long term investing and sell it for Rs.10-Rs.20 profit in the intraday. He will do tons of trading to earn money from the market. 

 

The government wated a fast growth. To achieve a goal of USD 5 Trillion economy – the government also followed the same model. They wanted speed over the stability of the growth. 

 

They focused on the big business houses and PSUs. They were given big contracts and they were asked to do the capital infusion themselves or from the market. Many like Adani stopped getting money in FEB 2023 ( Rs.20000 crs) and November 2024 ( USD 600 Million bond issue). This was the case with many of the private sector investments. Reliance is looking for refinance of its Rs.25000 Cr loan due next year. The point is – the strategy did not click as it should have. 

 

The SME segments were given loans but they have not been able to add substantially to the GDP as per the government statistics. 

 

PSUs like HAL did not get the required technology for their fighter jets from the USA companies – in spite of various presentations to the USA and visits of our leaders. This means the order book companies are having just orders and they will not be able to add to the top line and bottom line so soon. 

 

If you study the larger set of companies in detail – you will find many such stories. 

 

In short – SABKA SAATH – SABKA VIKAS had not happened in the practice. Economy is reflecting the same. 

 

What is the likely scenario in coming quarter or more? 

 

1.   We have about 45 lakhs marriages to take place in the marriage season which has started on 15^th November. They are likely to add Rs.5 to Rs.6 Trillion in the GDP.

 

2.   DIWALI and Xmas are the main festivals in which the people have spent tons of money on jewelry, clothing – travel and other expenses. This will add to the 3^rd quarter results. We will come to know as early as in January results. 

 

 

3.   Rains were good and our reservoirs are having good water levels this time. This will support farmers in farming. 

 

4.   I am expecting - in the coming budget – the government will take corrective steps to boost the economy. 

 

Knowing the above facts – I think RBI has given the revised GDP growth at 6.6% in spite of the government giving 5.4% growth rate for the year 2024-2025.  

 

What about global economic and war-like factors?

 

There will be challenges and they may increase also. However, the government has taken a stand for the first time like buying Russian oil in spite of the USA ban. ( we paid in terms of not getting technology for HAL and now the TARIFF hike is coming). However, the government is acting proactively and they are preparing a list of items where the tariff hike can come and what to do at that time. 

 

Our government is doing superb giving the world scenario and not getting into WAR like situations from either side ( Russia or the USA). This itself is a very positive strategy. 

 

How to invest? 

 

Till the 3^rd quarter figures are not out fully, the market will dance to the tunes of the FIIs. However, post the 3^rd Quarter results – FIIS and DIIS will have a fresh look at the Indian market and things are likely to change. 

 

I see a lot of sector wise rotation and company specific movement in the coming year for sure. The more clear view will emerge after the Q3 results and budget policies. 

 

What is our conclusion? 

 

On 16^th September 2024 in our post - Effects of the much talked about 7 planets combination on 29^th March 2025 we had said the following. We maintain the same.

 

Those investors who have Money ( 2^nd house), Guts ( 3^rd house), Intelligence (5^thhouse), Deep Research ( 8^th house) will make tons of money ( 11^th house) with the support of luck ( 9^th house). 

 

We can help you with DEEP RESEARCH and update you about your LUCK and your Family Luck so you can take advantage of the LUCK factor along with other factors. 

 

Follow me on Twitter @hiteshmparikh / WhatsApp - +91-9869425399.

 

Learn a Lesson. Live with Passion & Invest with Reason.

 

Hitesh Parikh.