Economic Survey 2024 has three critical cues for the discerning investor
The traditional signal for a market bubble, as the popular adage goes, is when your cab driver or barber discusses stocks. The top-down variation of this indicator must be when finance ministry mandarins talk about asset allocation and profit booking. The Economic Survey 2024, tabled in Parliament by finance minister Nirmala Sitharaman on Monday, highlighted various drivers of the Indian economy and suggested policy measures to lift growth and safeguard economic resilience.
The report, authored by chief economic adviser V Anantha Nageswaran and his team, also noted the prevailing trends in the domestic capital markets. While most macroeconomic reports, especially those prepared by government officials, tend to rival art films in boredom and monotony, this edition had three crucial cues for the discerning investor. First, overvaluation.
Noting that the Indian capital markets have been one of the best-performing among emerging markets in FY24, the Economic Survey pointed out that India’s market capitalisation to GDP ratio has swelled from 77% in FY19 to 124% in FY24, far higher than that of other emerging market economies such as China and Brazil. This, however, makes it essential to strike a note of caution. "The market capitalisation to GDP ratio is not necessarily a sign of economic advancement or sophistication.
Financial assets are claims on real goods and services. If equity market claims on the real economy are excessively high, it is a harbinger of market instability rather than market resilience," the report said. The market cap-to-GDP ratio is more popularly known as the Buffett Indicator in financial circles.
Read more on livemint.com
