Government Policy / Stgflation - The government can fast-track infrastructure projects, accelerate rollout of goods and services tax (GST) and cut the subsidy burden. Mid-term polls are a key risk.
Fiscal Deficit If the government delivers the budgeted deficit, the long bond yield will fall with positive implications for equities. Higher oil
prices could spoil the mix.
Current Account Deficit Gold demand linked to inflation expectations could swing the deficit positively. Oil is weaker in rupee terms, although funding stress is a key risk
Interest Rates / Inflation RBI) is constrained by stubborn inflation; hence, monetary conditions will remain tight. Risks: Fiscal consolidation will help ease rates. Oil could play spoilsport.
Disappointing Earnings Margins are at trough levels. Narrow money indicators point to a collapse in revenue growth. Expectations are low. Asset turn and hence ROE are likely to rise. Macro conditions could worsen due to high twin deficits.
