Read India’s Tea Leaves in Bonds, Not Stocks
Gas prices and the higher yield curve are better indicators of rising discontent than shares floating on government-injected liquidity.
The price of discontent, one liter at a time.
Photographer: Dibyangshu Sarkar/AFP/Getty
Consumers are feeling cheated at the gas station. Investors are returning empty-handed from government bond auctions. The Indian state is struggling to make its fiscal math work without shortchanging the first group or disappointing the second.
Each of these discontents could curtail a still-unfinished recovery from the massive Covid-19 disruption. But you wouldn’t see any of those concerns reflected in the stock market, which is floating on $85 billion of liquidity pumped into the banking system in less than two years. At the height of the optimism surrounding the 2014 election that brought Narendra Modi to power, the benchmark Nifty 50 index peaked at a price-to-earnings ratio of 23. The multiple is currently at 36 and climbing higher.