Thought for
the day
“What a good thing Adam had. When he said a good thing he
knew nobody had said it before.”
-Mark Twain(American, 1835-1910)
Word of the
day
Cusp (n)
A point or pointed end.
A point that marks the beginning of a change.
(Source: Dictionary.com)
Shri Nārada Uvāca
Is Raghuram Rajan already frustrated with politics?
Get back to the business, as usual
Nifty has given up all the gains made in the wake of recent
state assembly election results. The ‘gap’ (6260-6415) created at the opening
on Monday, the 9th December, has been completely filled yesterday.
Incidentally, the opening level of Monday (6415) is also the highest ever level
for Nifty. Technically, Nifty should correct a little more to fill up the ‘exit
poll’ gap (6160-6262) of 5th December also.
A close below 6150 would however negate the entire up move,
pushing Nifty back in neutral territory (5850-6300 with occasional violation on
either side). In our view this is more likely scenario for January-April 2014
period.
The end of the last working Parliament session for 15th
Lok Sabha next week, will abort all hopes of policy reforms that need
legislative approval. With no major policy initiative expected till July 2014
(when first session of 16th Lok Sabha will be held) the market would
mostly take guidance from global monetary and liquidity conditions (QE, FII flows,
USD, Bond yields) and to some extent from RBI’s policy response to the
political vacuum.
There are no positive political events are likely to occur till
next elections. On the other hand, the rising decibel of rhetoric could
actually prompt investors to slowdown or completely wait on sidelines.
In next few weeks we shall see the QE debate erupting all over
again. However, in our view, there is not much economic evidence to warrant an
imminent tapering. We fully agree with what Rich Yamarone, Chief Economist,
Bloomberg and author of Bloomberg Orange Book, recently noted:
“Economically speaking, existing conditions
are cloudy with a chance of a storm. According to the latest entries in the Bloomberg Orange Book, we should expect
to see more of the same – that is, sub-par economic activity with a propensity
toward a downturn.
The
economic data are poor given that the economy is 54 months into the expansion –
the post-WWII average length of expansion is 60.5 months. The looming fiscal
and monetary issues certainly aren't likely to be stimulative. In fact, both
are set to be more restrictive. Meanwhile, households remain plagued by
inadequate real incomes and lacking employment prospects. Businesses are
saddled with heavy government regulation and uncertain economic prospects –
both domestically and globally.”
The currency and bond markets in India are not sharing any of
the recent optimism expressed by large global brokerages. Recent iterations of
RBI governor also highlight that (a) inflation continues to be a serious
challenge and (b) though economic growth seems to be bottoming out, more
evidence would be needed to confirm any reversal in trend.
Though 1st January is merely an indiscreet point in ad infinitum, conventionally it is
celebrated as a chance to begin ab initio.
Accordingly, we are expected to spell out our views for the 365 days period
beginning 1st January every year. We shall abide by the convention
and outline our views about the likely market directions in 2014 and an
appropriate investment strategy.
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