Thought for the day
“In every author let us distinguish the man from his works.”
—Voltaire (French, 1694-1778)
Word for the day
Wayfarer (n)
A traveler, especially on foot.
(Source: Dictionary.com)
Teaser for the day
For God sake, please do not believe “India is doomed
without Modi”.
There will be life beyond 16th May,
no matter what
After completion of poling on more than three fourth of the total
Lok Sabha seats, the situation is as cloudy as it was couple of months back.
BJP and its PM candidate appear to have failed in winning over
sizable minority votes, especially in the eastern parts of the country.
Consequently, it appears that it might need support of more parties (inside or
outside) to form a working government. A majority government purely on the
basis of pre-poll alliance looks slightly difficult today; though not ruled
out.
The Modi Euphoria in market is taking a breather, and correctly
so. In my view, it was an undue credit to Mr. Modi. I feel the market rally in
past few months is mostly a consequence of (a) global emerging market wave that
lifted most risk assets globally including peripheral Europe bonds and not in
demand commodities; and (b) some tough decisions taken by RBI and the incumbent
government that make the fiscal and current account picture look pleasant. Hope
of a stable government (sic. Modi led majority NDA government) has only alerted
the fence sitters and checked the selling pressure from domestic investors.
Many market participants are trying to invoke the memories of
crazy market move seen post election results in May 2009. I believe a similar
result this time is unlikely for two reasons:
(a) In 2009 Indian
market had underperformed the global emerging markets in four months preceding
the elections and most investors were underweight India due to political
uncertainty. The entire underperformance was erased in just one trading
session. But in 2014 Indian markets are performing in line with the global
emerging markets and there is not much underperformance to recoup and global
investors are mostly overweight India; and
(b) In 2009 Indian
government in coordination with global governments provided massive fiscal and
monetary stimuli to support the economy adding almost 2% to GDP growth, whereas
in 2014 we are witnessing a reverse trend – withdrawal of stimulus and fiscal
tightening.
In my view therefore the best case post 16th May is
not as good as 2009. However, an outcome contrary to the expectation could lead
to a material correction in near term as some fringe players stage a retreat
and punters try to make some quick bucks.
I would reiterate that my strategy is completely independent of
the poll outcome. I will be happy if we a majority government that can take
some risk. However, I will not be disappointed if we get a working government
that enjoys support of at least one of the key national party.
I strongly believe that our economy is at a stage where it cannot
afford to stay dormant. Action has to start. And it will. The point is who we
believe will be the driver. I firmly believe that it will be the Indian
entrepreneurs with the help provided by better global demand environment. Many
disagree. They feel it will be the new government. You decide for yourself.
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