Equities in 2017
_____________________________________________________________
What will be the outlook for equities in 2017?
__________________________________________________________
As a New Year dawns, it is worthwhile to evaluate the outlook for equities in the coming year. While there may not be too may triggers for an all-out rally in equities, the year 2017 could actually belong to equities as an asset class, in more ways than one. Here is why…
Return of US demand…
If Trump has his way then we could the see the return of US consumption. Lower taxes and a massive $1 trillion investment in infrastructure will mean big opportunities for global companies. India could be one of the key beneficiaries. While Trump has been extremely negative about trade with China, he is a lot more neutral in his attitude towards India. That should be helpful in case of industries like IT and pharma which are largely US dependent. A strong dollar could ensure a great year for dollar defensives.
Low rates will be the key…
We expect rates to be low on two fronts; inflation and interest. Both are conducive to positive returns from equities. For 2017 inflation is likely to remain subdued as a smart pick-up in agriculture and the impact of demonetization could keep inflation in check. With banks flush with liquidity and US rate differential not a major issue, Indian interest rates may be headed downward. That will mean better valuations for equities in 2017!
