Yesterday Sensex crossed 20k mark for the sixth time in past six
years. Five out of these six crossovers have occurred in past three years. On
each of the previous occasions it has corrected at least 10% from the top. The
mute questions are:
(a)
Whether this time it will be any different?
(b)
Will Sensex make a sustainable up move from here
thus improving the investors’ sentiments and making conditions favorable for
capital raising? or
(c)
The past trend will sustain and Sensex will move
lower in the days to come?
In our view, the conditions are different this time but the
outcome may be the same. Global economy, including Europe, is much more stable as
compared to previous occasions and therefore liquidity conditions may likely
tighten going forward; whereas on all previous occasion EU was in serious
trouble and liquidity was easing.
Back home, on all previous occasions inflation and fiscal
deficit were the primary concerns. This time concerns have multiplied. We now
have much more to bother about besides inflation and fiscal constraints, e.g.,
CAD, INR, asset quality, falling investment and consumption, rising corporate
debt and earnings downgrades.
The good part is that global investors are pessimistic on India
for the first time in past six years and domestic participation is minimal.
Thought for the day
“People are trapped in history and history is trapped in them.”
James A. Baldwin (American, 1924-1987).
Word of the day
Gynarchy (n)
Government by women.
(Source: Dictionary.com)
Shri Nārada Uvāca
Reaction of markets to recent news relating to appointment of central bankers is evidence of an ominous trend developing.
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