The government began 2018 with a lot of credibilities but Prime Minister Modi has lost a bit of momentum on the way. We saw the key commodity for India, the crude oil, trade all over the place during the year, hitting a high of 86.  A crude price above 70 is bad for India as it translates into fiscal inflation, interest rates worries and the currency is affected. The Rupee moved from 65 to 74 on the dollar, later dropping to under 70.  Inflation is below 3%, real rates at 4%, reflecting a chance for rate cuts increasing.
Large-cap stocks held their ground during the year while mid-caps fell as much as 30-40%. 2018 was, therefore, a year that went full cycle. The market does not look expensive compared to expected growth

During the first part of the 4th quarter, foreign investors sold about $5bn worth of stocks, and the steady inflow from domestic investors of $1 billion a month took a breather. This trend improved in the last part as we started to see some domestic buying, share buy-backs and net inflow into the market.

From a macro perspective, inflation and growth will be positive for investors. If the price of crude will remain trade ranging in the 50-65/bbl area, it should not send any dramatic shock waves to the stock market. For the upcoming May election, it may prompt politicians to spend more. The current account is fine and should be managed under 2%, mainly financed by foreign investments and inflow.  Long term credit growth has been around 1,5 times nominal GDP (around 12%) to 18%. Credit growth has now moved up to around 15% from 10% and with GDP growth of around 7,2% GDP in 2018, inflation is reasonable, credit growth at about 15%, pointing to sustain high GDP growth rate so exciting outlook from the rise in credit growth.

Expect valuations to generally hold at current levels as inflation is reasonable and inflation should hold below 5%.  Earnings growth more key than ever for this year, translating to stock picking.