Vivek Karwa, CPFA., CFPCM
130917: The food inflation has hit 18.18% figure, and we wonder it may move up higher, thanks to the flawed government policies, by the time you read this article. Even the thought of onions is bringing tears in the eyes of people. This is the second round of spiral in the prices, few weeks after onions had made headlines across. In stock market’s language the prices have started moving up again after a period of consolidation.
Aam Aadmi continues to suffer due to high inflation, five years of government have passed but those promised 100 days, within which the prices would come under control, are still to come! It looks like the policy makers are not under state of paralysis but are under coma now. Even a decision to ban exports of onions has still not been announced. The biggest problem in our country is that of hoarding and profiteering. Even an ordinary person can understand that no food security bill can solve this problem, but the economists seeking votes would not agree to this. It is high time to regulate the supply and put in place the storage and distribution systems.
RBI has finally got the new governor, again an economist. The markets had got tired waiting for rate cuts and hence cheered the coming of new governor, we would rather say market cheered not the coming of new governor but the going out of Mr.Subbarao. We may assign many reasons to markets moving up but finally they move based on levels. We infact have been mentioning on various occasions that 17300 remains a good support for the markets and sensex did exactly that. Sensex hit a low of 17448 and has now bounced back almost 2500 points.
Government has taken few steps of reforms, may be under pressure of IMF and even due to the threats of S&P downgrading India. These are too little too late and hence markets now expect a stronger setup at Delhi post elections. Just three to four months and we will be in election mode, there should be a pre-election rally and though markets should remain in a range, we may target 20500 – 21000 on Sensex in medium term and 22000 – 22500 on higher side if the mood of the nation and projections predict a stable coalition at the centre. The levels of 22000 – 22500 may not last long if the public delivers a fractured verdict pushing us back to square one.
Hence investors should now realize that levels below 18000 start throwing up good valuations and until and otherwise great measures are taken up by the government (which seems unlikely now) we may not move above 21000 easily. Hence markets would remain in a range and investors, though not advised to trade regularly may still lap up the opportunities as and when they arrive. And if your advisor is prudent he would help you in making that extra buck by investing in good companies.
The RBI may not have big window to cut rates and hence the charm of new governor may die down soon. Yes few basis points may come to cheer the markets. Rupee still remains a concern and may not appreciate much until and otherwise some financial prudence is shown by the government. But going by the trend it does not seem that the fiscal deficit will come down any time soon and hence we may have to live with a Rupee range of 55-60 for some time to come.
Investors thus, will have many windows of opportunities to make money but need to tread cautiously and we would advise not to venture into markets without proper assistance and guidance. We at VRIDHI can help you take maximum benefits of the market movements. Don’t indulge in sectors like the real estate, aviation for some more time.
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.
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