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Positive Investor Sentiment And Business Growth Key To Economic Revival And Sustainability

Investor sentiment in the country and the ability of the corporate sector to take calculated investment risks will ultimately prove to be determinant factors in steering the economy on a revival trajectory.

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The outbreak of the first covid-19 wave in early 2020 battered global economies, disrupted the functional competencies of global value chains and upended the lives and livelihoods of populations across diverse economic and social strata. With a view to provide immediate relief to covid-19 affected sectors and simulate growth, the government unveiled massive economic stimulus measures. The first stimulus package worth Rs 1.19 lakh crore included the roll-out of production-linked incentive (PLI) schemes worth Rs 1.46 lakh crore over five years. In the second such measure announced in the wake of the second covid-19 wave, the government expanded the existing Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 1.5 lakh crore. A new scheme worth Rs 7,500 crore was also rolled out for guaranteeing loans upto Rs 1.25 lakh to small borrowers through micro-finance institutions. Though the government has initiated the right policy interventions and reform measures to infuse confidence in the economy, it will have no leading role to play in developing the economy and ensuring its revival and sustainability.

The stimulus measures by the government have bolstered consumption for marginalized populations at the bottom of the social and economic pyramid. Investor sentiment in the country and the ability of the corporate sector to take calculated investment risks will ultimately prove to be determinant factors in steering the economy on a revival trajectory. Ministry of Corporate Affairs (MCA) data procured from the Prime Database has pointed to the fact that 147,247 new companies were incorporated in financial year 2020-21 in the midst of the pandemic outbreak. This signals a rise of 43% as compared to financial year 2019-20. A bullish outlook also pervaded the capital market of the country in the first quarter of 2021. As per EY India’s Initial Public Offering (IPO) report, the IPO market in India was robust with the launch of 22 IPOs with a value of USD 2.5 billion in the January-March quarter of 2021. This was also a period when a large number of corporate entities had accelerated their investment and asset acquisition momentum as they believed that covid-19 induced headwinds had subsided.

The outbreak of the second covid-19 wave rattled business confidence and muted investor and industry sentiment. In such turbulent times, government support in the form of fiscal stimulus packages only helped in boosting consumption and providing economic sustenance to low-income populations. Even government support could not uplift consumer mood as the second wave of the pandemic reached rural areas which had shown a marked resilience to the first covid-19 wave. There was a fall in demand and consumption in the villages of the country.

A major segment of the economy is opening up and industrial and trade activity is returning back to normalcy with the containment of the second covid-19 wave. If this normalcy is maintained and there are no major future shocks. Investor and industry sentiment is likely to remain upbeat. The government offering sops at a time when the industry is in a position to take investment calls will not make much of a difference.

The IPOs and valuations of companies are traversing a bullish path. This puts pressure on companies to start investing or acquiring. There is always high pressure on corporates to take bold investment decisions.

The Modi government came to power with the promise of ‘more governance and less government’. It continues to play the role of a facilitator in boosting investor mood and positioning the country as a safe investment haven for domestic and global capital.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Mahesh Singhi

Mahesh Singhi, founder of Singhi Advisors has steered Singhi Advisors from ground zero to one of the leading “home grown” M&A Advisory firms, servicing over 1000 clients across varied geographies & diverse sectors, transecting across 20 countries. With the core focus on domestic & cross border M&A's, Singhi is well positioned to help its clients reach the next level of growth by pursuing Mergers, Acquisitions, Private Equity, Joint Ventures and Strategic Advisory etc.

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