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Early Upswing


In my previous blog I explained about the first phase of Economic cycle that is the Initial Recovery which lasted for few months.India as an economy has moved to the second phase of the economic cycle that is the Early Upswing. This phase is characterize by high growth and low inflation which last for one year to several years.



Here are some of the signs of Early Upswing

Rising stock prices:- Stock prices across all the segment starting to rise. Primarily if we see sector wise all cement stocks ,metal stocks,specialty chemicals , 2 wheeler and 4 wheeler stocks ,FMCG space most of the stocks are making fresh highs. 2 things have given boost to the economy one is good rainfall and second is the 7th pay commission. Index is making higher top higher bottom and about to make 52 week high.

Business confidence:- Business confidence is primarily rising which can be easily been seen with amount of deal happening in the economy. Assets whether its power sector,metal,Telecom,cement etc. All have seen shifting of hands from weak hands to strong hands thus leading to consolidation in the sectors.Increase in the ability to take risk has come from rising confidence in the business.

Falling Interest Rates:- RBI has primarily signed Inflation is low and with good monsoon they will reduce rates this will act as booster to the Industries as this will help businesses to build long term projects. In the current high interest rate environment its quite difficult for business man to build a long term project on the contrary there is excess capacity which is already unutilised there is little room for new projects to come on board.

Rising corporate profits:- Most of the companies in the recent quarter of Jan to March-2016 reported  rise in profitability with improvement in margins. Profit primarily came from fall in commodity prices. This Quarter we are seeing rising in the corporate profits with increase in margins and increase in volume growth.

It is popular fact in stock market liquidity drives fundamentals. Rising global liquidity, money across the world is chasing growth. With operating leverage kicking in this phase of the cycle we will market giving exponential valuation to some companies. This is market where people should be fully invested and be ready to ride the curve.
  

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