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India

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I have not been a big fan of decoupling theory, it is difficult to believe that in this globalized world one or two countries remain unaffected by what is happening across the glob. More so when the economies of the countries are reasonably open and exports are not only big revenue creators but also biggest job creators.

I was amazed with the results of most of the Indian companies. Most of them irrespective of which sector they are from have not only been able to generate healthy profits, most of them have given better results then what markets were anticipating. Even the industry growth data published in the news papers yesterday seem to suggest that the growth is back on track.

I am no way suggesting that we have gone back to the pre-correction levels of economic activity but we surly are not deg-rowing not even stagnate, in fact we look to be in a healthy shape and growing at a reasonable pace.

After looking at this encouraging data I believe that what happens to developed markets will impact India, and one might have to readjust his portfolio a bit depending on the effect of this turmoil on different currencies and few specific industries. But India will grow and outperform most of the markets on the back of a very strong internal demand.

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Markets have surprized all of us again

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When all expert in the market agree and predict the same thing, Something has to change

At the bottom of the markets all expert agreed that the markets across the globe are doomed and it will take at least three to four years before economy and eventually markets start recovering. But as usual, something changed. This time it was all the money infused by government in the system that changed the entire equation. Markets started bouncing and look at them now most of the emerging markets are flirting with their previous peaks.

Most of the people were not sure what will be the impact of all this liquidity and the jury is still out on whether this will lead to inflation or not, but markets have their own understanding and they decided to shrug off all the scepticism and marched ahead. With markets few experts have also shifted sides and are predicting an improvement in the economy. Lets wait till all experts agree on the market growth, that should be a good time to redeem.

Invest in Gold?

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Invest in Gold?

well if you are an Indian, it may not make a lot of sense to invest in gold. I am not saying that the gold prices will not rise. I bet they will.

Dollar is under pressure and I am sure US Will experience high inflation in near future. That is good omen for investors in gold, but at the same time Indian Rupee will appreciate. so the same reason why gold will appreciate globally Indian investors may not be able to enjoy the appreciation.

here is the explanation.

Say for example if you need 100 Dollar to buy 10 units of gold. If Dollar depreciate than for the same 10 units of gold seller will ask for more dollar because it has depreciated in price.

Now lets see what will happens in India. suppose today you need 100 Rupees to buy 10 units of gold, and Rupee starts appreciating, than for the same 10 units of gold a buyer will be willing to offer less Rupee as the currency has appreciate.

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There are three things which looks more clearer now post budget

Fiscal deficit:

A balooning fiscal deficit was expected but the magnitude proposed is a bit more then expected. Market and most of the analysts were expecting a deficit of about 6.2%, whereas the acual number is 6.8%.

Interest rates:

I have mentioned this in past that the trend of decreasing interest rates is reversing. Going forward I believe the interest rates may go up from here on sooner then latter. Total expected fiascal deficit of the governemnt in about 6.8% of the GDP and this will definatly put pressure on liquidity.

Inflation

The threat of inflation will also come back to haunt india as all the money distributed by the government will lead to consumption and will fule inflation. Governemt has also increased fule prices, CPI is already high. In my openion we are not too far away before high inflation come back to haunt us.

Budget and Market Crash

Budget and market crash

Markets went down because of burden of their own expectations, there was so much expected from the budget and the government, that it was almost impossible for the government to do all that and more to ensure that the markets go up from the point that they were.

All and all it looks like a decent budget and a few long awaited measures like scrapping of FBT has been taken. Also a renewed commitment to GST implementation guideline of April 10 is good news.

Needless to say market was expecting much more and has crashed. Market was expecting a clear road map to disinvestment, with a target. Road map on how government will reduce fiscal deficit, FDI in Insurance & retail. Tax rebate, fiscal stimulus, rebate on tax paid on home loan, reduction in taxes etc., which has not happened and markets have crashed.

What has happened though is a lot more expenditure then what India can afford to make.

On the other hand I am sure market had reached to a point from where it needed a huge push to move any higher. Now since that push is missing markets are disappointed.

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