Coffee Can Newsletter – October, 2018

Over the past three years (FY15-18), the Indian economy and the stock market has benefited from strong macro tailwinds due to a combination of low interest rates, crude oil prices, inflation, stable INR, and improving fiscal deficit and current account deficit. All these macro factors are likely to reverse in the next three years, as highlighted in the exhibit below. The RBI has already forecast a rise in inflation which could result in a fall in financial savings and in turn relatively bleak financial markets.