Thought for
the day
“Old age and treachery will always beat youth and
exuberance.”
-David Mamet(American, 1947- )
Word of the
day
Hardihood
(n)
Boldness or daring; courage.
Boldness or daring; courage.
(Source: Dictionary.com)
Shri Nārada Uvāca
Should Congress take solace from the fact that its 3/5 for
BJP and not 4-0 as many pools projected!
Will Congress become a “Party of smaller states” – HP, UK,
Mizoram, Haryana, Arunachal, Manipur and Meghalaya – post 2014-15 elections.
Assam, AP, and Karnataka are the only larger states where
Congress is in power on its own. It shares power in J&K, Maharashtra,
Jharkhand and Kerala.
What to expect from the new government post
2014 election
The general mood in Indian financial
markets had been rather optimistic since announcement of Mr Narendra Modi as
PMship candidate of principle opposition party BJP. The results of recently
concluded state assembly elections have provided further impetus to the
optimism. The response of equity market yesterday reflected the optimism of
financial investors.
In our view, the optimism is well
guarded, mostly optical and should not be mistaken for any imminent improvement
in the macroeconomic or corporate fundamentals.
It is pertinent to note that:
(a)
The volumes and market breadth in equity markets
are not at all commensurate with the gains in benchmark indices. The
participation rate (average number of investors/traders trading and average
number of scrips traded on daily basis) has not seen any notable improvement.
(b)
Bond yields have actually risen since September.
(c)
RBI efforts (swap window for banks and OMCs,
curb on gold import) and fall in domestic demand have restored stability in
INR. However, the consensus believes that from hereon INR should see orderly
depreciation over next many years as India attempts to correct many of its
structural imbalances. Recent political developments therefore have little or
no implications for the currency.
(d)
Despite expected bumper Rabi crop, food
inflation is not expected to ease below 8% in 2014. The core inflation at ~4%
may continue to remain benign as the global growth fails to pick up
substantially.
(e)
As the global liquidity expectations tighten and
bond yields rise, the lending rates in India may continue to remain elevated
for at least 12-15months.
(f)
In absence of any substantial improvement in tax
collections, the fiscal balance will continue to remain tight, especially if
Food Security expenses cover for the savings in fuel subsidies.
(g)
The business confidence will likely see
substantial improvement. However, investment cycle would improve substantially
only if the process of balance sheet correction is accelerated. This is
certainly not good omen for most banks. The exuberance seen in banking stocks
may therefore be unfounded.
The best thing that could potentially
occur in 2014 is improvement in execution of existing plans, programs and
projects. The implication in terms of industry performance would be better
visibility of order flow for capital goods from 2015, improvement in working
capital cycle. Improvement in capacity utilization level would depend on the
correction in inventory level, pick up in consumption demand and higher
government plan expenditure.
Tomorrow we shall discuss how it may
translate in terms of equity price performance.
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