This is extremely important
video for you to watch. It might look a little bit boring, but I
would highly encourage you to watch it.. Hi, everyone. Welcome to today's video. Markets right now are at
roughly 22,500, Nifty. And there is a very important
psychological level of 25,000. I definitely feel that this year
this level is going to be broken. 25,000 hit. It's only a 10% away, roughly. And it will go because there are three reasons for Number one, there is
going to be an interest rate cut. T
here is India election. Estimates are that Modiji is going to win. So that will make the market
a little bit more bullish. Third key thing is that
there is US election. And again, US is a very important
market for all across the world. Indian currency is also linked
somewhat to the US currency. Why? Because US dollar is the reserve currency
of the world, and majority of trade that happens in the world
happens in US dollar.. That is directly pegged to the US dollar. Inr, one could argue,
is indir
ectly pegged. So whatever is going to happen in the US market, it is going to have
significant effect on India. This is going to happen
in the next 6, 12 months. This is going to happen. Now, what happens after that? After that, my assessment is that
things will move as per fundamentals. Now, what is the meaning of fundamental? It means that if the world GDP is going up, if India's GDP truly is going up, if
US's GDP truly is going up, then you are to make money by investing
in the stock market.
Otherwise, there is a very
high chances of correction happening. My assessment is that there is going to be a correction after elections,
after especially the US elections. I am preparing my portfolio accordingly. Please listen to this video carefully I'm
going to do a deep dive into India's GDP.. I will show you a realistic picture. So please listen to explain
it in very carefully. It is going to understand language. Even if you are a class 10th, 12th student, you will get
what I'm trying to sa
y. I will show you. So see, two points you need to understand. Number one, that we are standing somewhere here, 22,500 , and the first major support
level comes down at roughly 10% loss. . Then please go and buy
something called as bonds. You can consider buying corporate bonds. They give higher returns
compared to fixed deposits. Or you can buy MLDs,
market-linked debentures. I have made a video on MLDs here. You can go and check it out. Both of these will hedge your stock market portfolio in a
way because you are
doing asset class diversification. I'm linking some of my favorite MLDs and
bonds in the description and comment box. You guys can definitely
go and check it out. So with that said, let us start deep
diving into the reality of India's GDP. So point number one is that there
is a lot discrepancy in the data. Now, you'll say, Akshat, you are trying
to weave a political narrative here. No. Think about it, and I will
really encourage you to think. I encourage all my students to t
hink,
all my listeners to think for yourself. So let me present two, three facts. Number one thing is that right now the India GDP data came, and it came out to be
on a quarter to quarter basis, roughly 8. 4%, which is very high
rate of growth of GDP.. Definitely. It's a great achievement,
no doubt about that. But you need to understand
the context around it. For example, the ex-RBI governor, not
Raghuram Rajanjee, the other one, Mr. C. Rangarajan, he had explained that if
India's GDP grows at r
oughly 8%, we will become a developed
economy by the year 2047.. Our GDP growth rate is coming out to be 8.
4, 8. 5%, which is absolutely massive. Now, we'll say,. But see, think practically, and I
will share two, three data points. Number one, our unemployment rate or youth
unemployment rate is very, very high. Close to so 800 million people, which is
roughly 50% of our population, depends on government hands-out in
terms of food subsidy. Number three, our savings to GDP
ratio has hit a five de
cade low. So, on the one side, 8. 5 GDP, on the other side, people don't have, unemployment situation
is there, so much is there. So what exactly is happening? To understand this, you need to get into
the core of what GDP is, how it is calculated, and what exactly are the
two sides of economics talking about. Let help you simplify that data. Basically, there are three ways
in which GDP is calculated. The first is called as the output method, the second is called input method, and
third is called
as expenditure method. But for practical purposes, the first and
the last method, which is the output method and the expenditure method, are the
two most popular ways of computing GDP. Now, ideally, whenever GDP is computed by
using either method one or method three, what I've been speaking about, you
should ideally get similar data. We are And also this will make you a little bit more aware of how GDP
is actually calculated. So first in the factor method, what is done is that core sectors of
t
he economy are identified. For example, here you can see
agriculture, mining, manufacturing. These are all what?
These are major sectors in our economy. And this year, and accordingly,
a growth rate is assigned. For example, if you look at the mining and query sector in this, for example,
here, these are not the real numbers. These are made up examples just to
help you understand the logic here. Then I will show you
the real numbers also. Here you can see that mining and
querying, this is a slig
htly older data. I'm just trying to make a point here. You will see that here for
this particular industry. But other industry like finance, it grew So you have to understand this,
you don't have to do a PhD. Now, here the thing is that see, these are
core contributing sectors of the economy. And here we just simply compute that what
is the growth rate in each of these sectors that will eventually
contribute to the total GDP. So I hope that this method
is clear to everyone. Then comes the second
method, which
is called as the expenditure method. And we see that what is the final
expenditure and its growth rate? What is the government expenditure? Private expenditure, which me and you do. Government expenditure, which
highway, road, murtions, etc. So all that will go into
government expenditure. And Gross Fixed Capital Formation, which leads to something called
Gross Value Add, GVA. Now, I will talk about this. So this becomes a very important matrix. There has to be a very strong
relat
ionship between GDP and GVA. Exactly, GVA, I'll explain. But let me first show you the current numbers and let me talk about
the reality of GDP there. What is it that the
counter side is saying? Here what you will see is, and
this is the 2023, 2024 data. So this is the latest data. What you will see is that see,
this is the expenditure method. And this is the. But there is another important tab that you will see, which is this, minus 3.
4 and 2. 8.
This is the Discrepencies tab. Now, what is the
meaning of discrepancy? So the method one that I had told you and method three, they should ideally
give almost similar 19, 20. The GDP came out to be,
let's say, roughly 7%. So it's not a difference. So that is the viewpoint there. But actually what is happening is that if
you calculate the GDP from method one versus method three, there is a
lot of discrepancy between that. There are two professors who had written an article, and I will link
it in the description box. One is a professor from P
rinceton and
one is another professor from India. He had written an article and he has
explained that see, it's not a devariance. What he has said is, and I will just quote
it out for you, that the discrepancy as a share of GDP has been seen a
sharp increase from minus 3. 4 to 2.
8. That is a 6. 2% of the GDP.
So 6. 2% variation is a very, very big
variation, which begs into question,. You have to be sure, right? You have to be sure that you are
getting the data right or not. And if you are not
getting it, then you at least need to understand what
exactly is wrong about this data. This might look a little bit boring to
you, but trust me, guys, if you watch this video till the very end, you will get
clarity as to how to apply this entire macroeconomic concept to the stock market
decisions that you are going to make. This is extremely important
video for you to watch. It might look a little bit boring, but I
would highly encourage you to watch it. But definitely, this type of
information
, no one is giving out. So back to the topic. The second key problem that is being highlighted, and I will just write it
here, that the first problem was 6. 2% discrepancy, what I just discussed. The second key problem is that
the GVA, now what is GVA? I'll explain that. And the GDP are not matching. They are not even close. Gdp is like 7-8% or something. So there is a huge
variance between the two. So now I'm trying to explain
this deeply complicated topic. What is the meaning of GVA? Why is it
a better matrix compared to GDP?
Okay. But
you need to understand that why other important economic
factors need to be there. For example, hardly anyone
talks about GDP per capita. You go and check. And let Do you know in the comment
box, what is India's ranking? If we look at GDP per capita. Do you understand what India's ranking is? If we move to the matrix GDP per capita. Similarly, you should know this. I'll tell you about GVA. So GVA, simply means, and this is the
simplest explanation that
you will find, that it is the total value of output
produced without including the intermediary cost that
went into producing them. Or in simpler words, double counting avoid That is a difference between
GDP and GVA, so to say. I'm oversimplifying it here, but
I hope that you got the concept. Now, even economists, world around, they say that GVA is a better
matrix compared to GDP. If you are trying to assess the strength,
or at least because GVA calculates,. But those numbers, GVA and
GDP, shou
ld not be poles apart. Now, in case you're not from an economics
finance background, it's completely okay. Let me give you another explanation of
GVA, which is a mathematical explanation. This is something that all of us will be able to understand if
we know basic algebra. So basically, if your economy
is a mathematical computation. Gva is equal to GDP plus
subsidies and minus taxes.. Then your GVA is going to come down. I hope that this is understood. It's very easy to understand. Now, in India
, are taxes going up? The short answer is yes,
that the taxes are going up. And on the flip side, if the subsidies are reduced, then again,
the GVA will come down. So in India's economy,
two things are happening. So one is that the taxes are actually
going up, fundamentally speaking. And second, the subsidies
are also going down. Now, I personally like
one of these things. And you guys say, I speak against
the BJP government or this, that. No, that is not the point. Whenever BJP government is do
ing something
really nice from an economic point of view, I'm not a political So what I'm
going to say is that you know what? Bringing subsidy down. Modiji is doing wonderful job in
terms of bringing subsidies down. But as far as taxation is concerned,
taxation is going to be increasing. And this indicates that if you look at the entire breakup of GVA,
what two things are happening. One is tax is going down. And the second key thing is that subsidies
is going down, which means the government's f
ocus is to
not spend the money on it. So these are two points. One is a good point, according to me. One is a bad point. Now, depending on your political ideologies, social ideologies,
etc, you might feel otherwise. So now comes the next important
point in terms of our GDP makeup. That if you break apart,
a very simple argument. So GDP is made up of private expenditure, if you're going to go with the
expenditure method, or public expenditure. Now, what is happening in India's GDP is
for the last
few years that the public expenses are rising or public
expenditure is increasing very fast. This GDP number also goes up. But the private consumption And it has not really
been productive per se. So this is up for debate. Different, different economists give
different, different viewpoints on it. You have to further research on it and
you have to reach your own conclusion. Now this entire thing is financed how? Well, it is financed in two ways.. And you are spending 110 rupees. Now what is the
deficit?
Ten rupees. So that is the deficit. So something happens
with the government also. Second key thing is that in order to
offset this deficit, we're tax-building. Now, this is not the worrying part. The worrying part is that, when I have to
be explanation, that GDP is a combination of public expense plus
private expenditure. Government in its recent budget has announced and said that our expenses
or our deficit is roughly 6. 5%.
That is what our fiscal deficit is. And in the next 2-3 yea
rs, we
are going to bring it down. We are going to cut it somewhere around 5.
5%. Now, what does that mean? So let me write this equation again. Private consumption, which is done by the government, what they are saying
is, we are going to cut it. Now, after 2024 elections, do you think that the incentive for the government to
keep on spending like crazy will be there. The short answer is absolutely not. And this is where the problem begins. So then you will have the next question
for me is, is
it possible that GDP falls. And why will the stock market fall? Well, because there is a very, very strong correlation between the GDP of
a country and its stock market. Now, this does not work for
every single country out there. For example, Japan case,
that might not be the case. But in India's situation,
that definitely applies. Every country decides which asset
class it wants to keep alive. That is an entire different
topic of conversation. But to cut the long story short, there is
a very, v
ery strong correlation between GDP of India and its stock This
correlation ranges somewhere between 0. 7 to 0.
8, 70, 80 %. For example, if the stock market goes up by 100 points, then GDP has
to go up by 70, 80 points. So that is definitely there. And up, logically, think and think, what
is the meaning of Nifty 50 in India? Now, Nifty 50 means collection
of top 50 companies in India. And what is the meaning of GDP? It is the sum total of all the goods and
services produced within the economy. N
ow, who is producing
these goods and services? Well, companies like Nifty50, of course, there are more companies in India,
but that acts as a very strong proxy. To cut the long story short, if the GDP of
India is going up like this, then the stock market
will also roughly follow this. But roughly, the long term
trend will remain the same. So coming back to the entire conversation,
the public expenditure is coming down. The private expenditure is not coming up. There is a massive Creative
differe
nce between the GVA and GDP. Election trigger will be over. If you collect all these facts, what are
the stock market decisions you can reach? Well, the news is not very happy, and this is where I will start
summarizing the video. These are some of the key things that I will be executing in my
portfolio starting right away. And if you guys need more information, I
share it via the YouTube member community. If you're a serious investor, definitely
do consider joining that member community. You wi
ll learn a lot.
Try staying on it for three months. You yourself will see a in the
way you think about the markets. So number one thing that will happen is
that this wealth difference, this chart that I'm showing in front of
you, this will keep on going up. You can see that this, the top 1%
only had 12% of India's wealth. Now this is close to 32%. Irrespective of the political party, you
will always have rich being extremely bullish about everything
because they are top 1%, guys. They are going
to make more and more wealth by being in the system and
propagating the system further. So this is one. Now the thing is that the
consumption, why is it not picking up? Because for example, if there is a top 1% rich person in India,
now he or she might own 5-10 houses.. I'll just keep on buying
all these high luxury items. So therefore, in 2022, you saw
Mercedes selling out like hotcakes. You saw expensive real estate
selling out like hotcakes. So any expensive, luxury-oriented things, they are
going to be in
demand in the future. This will become a market of monopolies, a handful of monopolies or
oligopolies will be there. I'll not name them. And they are going to make money from all this, and they are going to
sell to a handful of people. There is a reason why that almost every service/good is being
designed for the top 5% rich.. There are more and more
monopoly that is happening. Small and medium businesses
are getting crushed. You take me to see in
the next 10 to 15 years. When you
see grocery shops, at
least 60, 70% of them will go away. Why? Because of Blinket, Swiggy,
Instamart, and all that stuff. They are going to eat away
the market share of whom? Of these small shopkeepers, so to say. So India, I'm just telling
you the honest fact there. So this is one, that if you're looking to
make money in the stock market, Start investing in companies
that cater to luxuries. Number two, please do not invest in public sector companies because the expenditure
of these companies i
s going to come down.. Now, if they have to decrease their deficit, fiscal deficit, then they
will have to cut spending here. So it's going to be whatever rally that you're seeing, it will mellow down,
or at least it will go sideways. Now, my hypothesis here can be wrong in
the sense that the GDP data is very bad. Then the government continues If we have to pump in more money
in terms of government expenses, if we have to cut down our
fiscal deficit or not. So anyways, if you're sitting on a big
chunk of your portfolio in public sector companies, my advice would be to
lower it, so to say. Third key point is that consumption, there
will be a revival because of course, as the interest rate gets cut, more and more
people or consumption power will increase. That has got nothing to do with
fundamental changes in the economy. It has simply to do with interest rate. For example, you have FD. I'll just go and spend it. So that will lead to more private expenditure or private
consumption, so to
say. Number 4, things or
institutions that give credit. For example, banks, they
are going to be in power. They are going to own the next decade.. It's not a very easy industry to get into. So whichever players are there now. So that group is formed,
that team is formed. Now they are going to
churn into profit makers. So if it has even an iota of competitive
advantage, it is going to do really well. I will not name which
company I'm speaking about. You guys know which
company I'm speaking about
. You guys can comment. Final point is that there will be massive
monopolization across different industries, right from oil and gas,
right from retail, right from tech. Why?
Because in India, if Foreign players. Why do you think foreign
players are warming up to India? For
example, if Google is selling you stuff, you are paying Google some money, or you
are paying Meta some money, or you are paying Adobe some money, where do
you think this wealth is going? Well, it is going to America or
wherev
er that parent company is based. So comes the natural question,. Yes, there will be. If they are bringing 10 units of value, 3 units will help India, but
7 units will help them. They are going to repatriate
that wealth, so to say.. Because jio gives them a conduit
to explore the Indian market. Indian market is a very tough
regulation market, so to say. It is impossible for these companies to find entry into India without
benefiting Indian companies.. I have explained you entire fundamentals. I a
m going to write a very clear
commentary tomorrow on the member community explaining this entire point and
some five, six key steps that I will be taking in terms of
protecting my portfolio. People over the last two years. Now I think that time is coming to an end. I am still bullish over
the next 6-8 months. I am turning out to be
a little bit bearish. So I will explain you more about that. I hope that you enjoyed this commentary. Do share it with your and
I'll see you the next time.
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