Few Words on Market – 081117
The Japan’s economy has been officially declared in recession, this is the news which has just arrived as I write these lines. The news comes soon after the completion of G20 meet. Many things have been discussed at the meeting as per the reports but there is no fast food for combating this crisis the world is facing. Many suggestions have been made, countries like India have also advised the reconstitution of IMF’s policies so as to focus on developing nations as well. The meeting though broadly satisfactory could not evolve any immediate solution which could be injected into the system. There would have been few solutions discussed like devaluing the currencies and inflating the asset prices, the whitepaper of action plans have to be released yet, but the moves would still take many months to show results.
The G20 has failed to cheer the stock market as no concrete measures have been taken except the statements which we hear every now and then. The Govt. at present along with various financial moves should also act in a way which builds up the sentiments of the people in the country. The RBI has cut various rates in last 60 days but in reality not much money has been borrowed, the actual lending rates are still high or banks are very stringent in evaluating loan applications. The PM has already hinted at softer lending regime and it is appropriate time now to cut lending rates atleast by 200 basis points which could revive the sentiments in a large way.
The elections are underway in six states and they are considered as the semi finals to the general elections which may arrive anytime between Feb’09 and Apr’09. The results would be declared on 8/Dec/08 and expect great amount of political activity in alliance formations as the regional parties would tend to incline towards the winners in semi finals. The fight is directly between BJP and the Congress. The so called third front is still faceless and that is good news for the markets as the party which recently left the UPA is still dwindling.
The fiscal deficit on India is alarming. This will only lead to lower ratings of the sovereign nation. The tax collections in the year end are now estimated to miss the targets with wide margin and that has already alarmed the Govt. The job cuts being heard would pressure the tax collections and also expect many employees including the CEO’s to miss their bonusses this year.
The India story is still intact, yes we have to agree that there is definite slowdown and we may not see 8% and above growth rates. The most pessimistic expectation of many is still between 6.5% and 7% which in itself would out beat most of the countries in the world. The China might loose its sheen to India sooner than expectations. As a exporter of cheap goods to developed nations China can’t continue competing with exporter of Services like India.
SEBI and associations like TIA are doing good job in spreading awareness among investing public. More stress now has to be given on bringing in new and first time investors to markets which would pave a way to more savings flowing in.It is better we rely on local money rather than foreign money in future.
The interest rate scenario has clearly peaked out. Investors should act wise now and use the opportunity to invest their debt portfolio into bank FD’s and instruments related to bank FD’s for safe and high returns. Tying up long term savings in these instruments would outperform other short term debt instruments as the interest rates may anytime decline.
Do not expect any big rally from Sensex atleast till a new Govt. is installed at the centre. Expect the Sensex to trade in wide range say between 8000 – 12000 and Nifty between 2500 – 3300. Nifty if selling persists we can test even 2040 – 1800 though way below actual fundamentals.
Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.