The data released yesterday reveals that the industrial growth
in India rebounded majorly in July, growing 2.6% (versus consensus – 0.8%).
This should usually provide some more legs to the ongoing market rally.
However, given that the market has already rallied hard in past one week and
the next week is expected to be heavy in terms of news flow, the immediate
reaction might be little muted. We would not like to reject the data as
unreliable, given that it had been consistent in its inconsistency.
We still feel there is nothing to suggest in the broader context
that in near future liquidity pressure will ease, rates will fall dramatically,
inflation pressure will ease substantially, currency will strengthen or
investment will pick up in any notable way. This essentially means that in near
term the Indian equity market will continue to gyrate in tandem with the FII
mood swings.
Insofar as the action drama that inaugurated on 4 September 2013
with regime change at RBI is concerned, we feel it should close in next few weeks, as the final
countdown to 2014 elections starts with a round of state assembly elections. In
our view, most of the actions henceforth may inflict pain in short term rather
than providing relief.
We would like to repeat a story told couple of times earlier
also. “Once the king rodent called a general assembly of all rats to discuss
the feline threat. Everybody was too concerned and bothered about the menace.
After a long deliberation, it was unanimously agreed to appoint a strategic
consultant to advise on the matter. The consultant so appointed studied the
problem in great detail and came out with this voluminous report, that
primarily highlighted that cats are far more powerful, wise and smart animal
than mice. Therefore it is extremely difficult for the mice to put up a
credible defense against the menacing felines. The only way to counter the
threat, the report egregiously suggested, is that all rats should become cats.”
Similar appears to be the case of Indian economy. While everyone
is clamoring for government action to spur the growth – nobody is exactly
suggesting how to do that. Is it possible to have sustainable growth with high
inflation; mindless deforestation and mining; businesses which are not willing
to pay for labor, capital, land, natural resources; vast majority of people who
do not like to pay taxes; a national conscience heavily biased against any kind
of compliance; capital scarcity when risk appetite is waning amongst global
investors; and transitioning polity where the emerging federal order is far
from established and the extant feudal structure has crumbled.
In our view, India is in transition – socially, politically and
hence economically. Expecting sustainable high growth in this phase could only
lead to disappointment and despair. The best outcome in next 2 years would be
if we could avoid any major civil unrest and major deterioration in balance
sheets at all levels – household, corporate, banks, and government.
In case the rating agencies, global research firms and
corporates have a better solution than “rat should become cat”, we would like to
hear that.
Thought for the day
“Consistency is the last refuge of the unimaginative.”
- Oscar Wilde (Irish, 1854-1900)
- Oscar Wilde (Irish, 1854-1900)
Word of the day
Hegira (n)
A journey to a more desirable or congenial place.
(Source: Dictionary.com)
Shri Nārada Uvāca
Shahid Sidiqui, Kamal Farooqui, Azam Khan – Is Samajwadi Party losing traditional Muslim support base?
Some stray birds are tweeting that a tacit SP-BJP understanding could be brewing to keep Mayawati out of contention.
No comments:
Post a Comment