Anxieties on Adani Group are on but the uncertainty on Budget has reversed into a boon for markets

However, it has been a jolt to everyone realising that the government’s only agenda is growth and wants to expand the infrastructure development of the nation to a full throttle.

And the most beautiful part is the modesty of the plan by touching all the characters from a common person to corporates bringing stability and growth.

The notion is to deliver benefits and aspirations from free food, direct & indirect tax benefits, rural and urban development and supporting manufacturing skills. No increase in LTCG is a blessing.

The bottom line is that all these are being explored under a nominal 10.5% growth in GDP in FY24. It does explain the efficiency of the working team.

The financial statement has got slimmer and productive. Subsidy cost is coming down but sufficient enough to reach across the needy.

Jan Dhan yogana & micro financing is healing the rural market, improvement in tax generation as a percentage of GDP is adding financial stability and level of borrowing is moderating not crowding-out the private sector.As per us, the budget is a 10 on 10, but it is not having a beneficiary effect on the market. This is because the market sentiment was already on a doldrum.

It had started in December 2022, predicting that the India market will be a dud in 2023 as earnings growth is slowing down not supporting the supreme valuation held by India in the last 3yrs.

Downgrade in earnings was verified in January as Q3FY24 results came subdued. Now the FY23 and FY24 India EPS growth is forecasted to be around 10 to 12%, which is in contrast to the above average P/E multiple market used to attract.

Muted expectations on the budget had dragged the market in January. That uncertainty has been overtaken with a thump up.

However, the new saga of Adani group is escalating the ambiguity adding questions on the India growth story. The nation’s largest listed group, which accounted for 7% of India’s total market capitalisation has corrected to 3.7%.

The total group market value has corrected by 50% from 24th January. This is having a cascading effect on the market. The FIIs selling has increased post the episode.

What we are bearing today is a rapid loss in the listed value destroying shareholders wealth but only a notional loss to the real entity.

To predict what will be the effect on the sustainability of the real business is difficult to assess today. This is because if the group is able to maintain the accessibility of funds and drive the exponential growth of the projects the existence cannot be challenged and vice versa.

A slowdown in funding is visible at least in the short-term as understood from the drop in FPO. The real effect can be assessed only in the next 6 to 9months, depending on the support from domestic and foreign financial institutions.

The best way to address the issue is to appoint the world’s best consultancy and audit firms to independently architect a financial diligence report. If successful with such a sort of program this saga can come to an end.

(The author is Head of Research at

)

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)