Thought for the day
“All modern American literature comes from one book by Mark Twain called Huckleberry Finn.”
— Ernest Hemingway (American, 1899-1961)
Word for the day
Bedash (v)
To dash or spatter (something) all over;
To demolish or ruin; obliterate.
To demolish or ruin; obliterate.
(Source: Dictionary.com)
Teaser for the day
When the US started quantitative easing, I said right away it will not end before we have QE-99. Usually, when government introduces a programme, they don't end it, and my sense is though they have implemented some tapering, the moment US stock markets drop 10 per cent-20 per cent, they will actually increase active bond purchases. (Marc Faber)
Market betting on
continuity, not reforms
“Tere Vaade par jiye hum
toh ye jaan jhooth jana;
Ke khusi se mar naa jaaate gar aitbar hota.” (Mirza Ghalib)
Ke khusi se mar naa jaaate gar aitbar hota.” (Mirza Ghalib)
(Make no mistake that I believe in your promises. If I did
the thrill would have killed me.)
BJP finally released its much awaited manifesto on Monday.
The best thing about the 50 plus page document is that it
strongly supports the continuity and does not promise any radical shift in
policy paradigm. Amidst an overdose of generics laced with usual rhetoric and
confidence of a winner, the document focuses strongly on sustainability,
indigenization, true federalism, decentralization, and e-governance.
The comforting part is that traditional BJP issues like 370, Ram
Mandir, Cow slaughter, and common civil code etc. have been dissipated to last
half page and seem to have been incorporated to address the old school internal
BJP constituency only. Avoidance of other contemporary controversial issues
like Section 377 (IPC) and decriminalization of politics, Jan Lokpal, Autonomy
to CBI etc. is also conspicuous. In this sense the Congressization of BJP
appears almost complete.
The worst part (or is it good?) is that the manifesto does not
propose any major economic reform. It just talks about administrative
simplification of processes and better use of IT on delivery of various public
services. In my view, markets should take cognizance of this.
This brings us to very hotly debated issue amongst my readers –
whether the recent upsurge in equity market is in response to the “continuity”
and strengthening of recent corrective monetary and fiscal measures; or is it a
hope driven rally – hope of radical shift in policy paradigm under the new
regime.
I have been openly siding with the school which believes that
market is not at all ready for any radical reforms. It is seeking continuity of
extant policy regime with a “friendly” implementation apparatus.
The reasons are obvious. Any radical shift in policy paradigm
will essentially involve move away from “crony capitalism” and/or “crony
socialism”. This would certainly (a) hurt the economic viability of many
businesses surviving and thriving on administrative patronage; (b) challenge
the sustainability of many businesses that exist only because of the systemic
inefficiencies; (c) increase overall cost of doing business and therefore
impacting the profitability adversely; and (d) lead to higher and deeper
competition from global players.
And if it is continuity we are hoping for, politics (and
Narendra Modi) will cease to be a major consideration for the markets 6months
down the line. The market will increasingly look to global cues for determining
its direction. In my view, these cues will most likely be positive. I therefore
would continue to avoid domestic reform story and focus on global bubble theme
for next 12-18months. And I promise to come back home much before cows do. (See
here
and here)
Readers can send their views, comments, criticism to the
author at vijaygaba.investrekk@gmail.com
Follow @VIJAYGABA
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