Great businesses and macro economy

Indian stock market is down on latest inflation report. In fact it has been on downward trajectory for quite some time. All the people who used to go ga-ga over the great indian story are either quite or they have changed their opinion. What has changed – the IIP numbers which are coming are not very exciting, the inflation is on stairway up, corporate numbers or okaish, Oil is 140+ mark. So basically the macro conditions are not looking too rosy. I have no idea whether this is just a blip or this is going to continue for quite some time. It it few months, 1-2 years, or more than 5 years. Theres is certainly lot of uncertainty in the financial environment. And uncertainty is the word that most investors hate.

Macro conditions do affect even the great businesses. Mainly, the cost of raw material increases and hence the profit margin squeezes. Some businesses can have pricing power but there is a limit for that. Also in these situations consumers become cautious and spends lesser. The impact can even go to companies like infotech where direct impact of inflation is much lower. The only companies possibly benefitting from such scenario are the ones generating basic commodities.

But history suggests that such macro economic conditions are generally cyclical. So great businesses may not do too good in tough times but they start rocking once the conditions improve.

So what are the businesses that can rock even in such macroeconomic tough situations for long time.

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