DEEP_DIVE 5 min
0:00 india's real gdp grew 7.8% this quarter that number means the domestic economic engine is running hotter than it has in a year last week in episode 19 you and i talked about the tug of war between foreign caution and local conviction well this week that story got a lot more complicated because the market heard that gdp number0:23 and went down here's the scoreboard the nifty fifty ended the week down marking three straight sessions of losses it settled around 23,873 the sensex shed over 400 points on friday alone and while the big indices were weak the smaller ones were getting hit harder the nifty mid cap index fell about 1.3% so you have a flight to0:47 safety or at least a flight away from risk bank nifty is a story of its own completely stuck it's been trading in the exact same narrow range for twenty one straight sessions that's a month of going nowhere the immediate cause for the pessimism is clear geopolitical tensions in the middle east are back pushing crude oil prices to1:09 a six week high every time a barrel of brent gets more expensive it acts like a tax on the indian economy and investors get nervous so that's the simple story strong economy but global fears are winning but the simple story isn't the real story so what does it all add up to you have an economy with an1:30 8.2% gva growth rate that's the underlying value being created and a stock market that's acting like it's afraid of its own shadow the disconnect is massive and the key to understanding it lies in a single number 50,000 crore rupees that's how much money foreign portfolio investors or fpis have pumped into indian equities in the last two months1:53 over $6,000,000,000 and for all that money the sensex and nifty are up less than 1% so where did the money go this is the part nobody is screaming from the rooftops it didn't go into the open market bidding up your favorite stocks it went into backrooms it went into discounted block deals and new share sales think of2:16 it like this instead of joining the party on the main dance floor and driving up the energy for everyone the big money used a vip entrance to get a discount in a private room the money is in the building yes but it isn't participating in a way that lifts the entire market it's targeted it's opportunistic and it2:36 tells you that foreign investors want a piece of the india story but they want it on their terms they aren't chasing momentum they're hunting for discounts and where have we seen this pattern before this is classic post crisis behavior think about the us markets in the early twenty tens the american economy was showing signs of life corporate3:00 earnings were recovering but the market was constantly being held hostage by headlines from overseas the european sovereign debt crisis fears of a greek default domestic strength was real but global fear was the narrative every rally was capped by a worry that had nothing to do with fundamentals in cleveland or houston now the analogy isn't perfect india's growth3:25 today is driven by a powerful domestic manufacturing and investment story which is a very different engine but the structure of the problem is identical a strong domestic reality is being discounted by a nervous global mood the market isn't irrational it's just pricing in two different realities at once it sees the 7.8% gdp growth it sees the 11.9%3:50 jump in investment it hears hyundai ceo saying this is a fantastic signal for the auto industry but it also sees the rising price of oil on a screen and feels the chill of geopolitical risk the technical charts confirm it the nifty is bouncing between support around 23,700 and resistance at 24,050 the bank nifty is in a state4:13 of suspended animation it's consolidation it's the market drawing a deep breath this week sets up a crucial test of that conviction we talked about last time the question on the wall street is no longer about whether the indian economy is strong that debate is over 7.8% settled it the new question is whether that domestic strength is powerful4:34 enough to finally decisively break free from the world's anxieties this isn't a story of weakness it's the story of a market coiling like a string waiting to see if the engine at home is stronger than the storm gathering abroad
