Thought for the day
”In all history there is no war which was not hatched by the
governments, the governments alone, independent of the interests of the people,
to whom war is always pernicious even when successful."
-
Leo Tolstoy (Russian, 1828-1910)
Word for the day
Bel-esprit (n)
A person of great wit or intellect.
(Source:
Dictionary.com)
Teaser for the day
I am a young political aspirant.
Please give me two good reasons why
should I join the Congress Party.
Change in market context
The domestic political events and global market movement last
week highlight a change in short term market context.
The reverses suffered by the Congress Party in recent Haryana
and Maharashtra assembly elections have further strengthened the ruling BJP.
The government is now in an even better position to pursue its socio-economic
agenda of inclusive growth. The results are also a serious setback for the
practices of "crony capitalism" and "crony socialism",
traditionally followed by ruling political parties and political coalitions.
The short term negative could be deeper acrimony at personal
level leading to internecine political non-cooperation prejudicial to common
good.
The reduced propensity of "crony capitalism" could
also cause pain to a lot of enterprises traditionally dependent on political
patronage. Financial markets and investors will not remain untouched by this
pain. DLF might be only be a small indicator of this trend.
Much awaited reforms in administrative pricing mechanism of
diesel and gas prices, material administrative reform in employment regulations
have certainly strengthened the optimism over agenda of the new government.
Globally, the markets got impregnated with the hope of a new
round of monetary stimulus.
US monetary authorities are visibly perturbed at the prospect of
EU slipping into deep recession and Euro taking a massive plunge. Many are already
talking about a reversal of "tapering" and beginning of a fresh round
of QE.
ECB is under pressure to enlarge the scope of its monetary
stimulus and increase the extent of monetary support.
The bond market rally has surprised many economists and investors.
The underlying theme seems to be total disbelief in fiscal stability that is
claimed to have been achieved post 2009 collapse.
The "crash" in commodities, from energy to metals to
food, has exacerbated the imbalance in the global economy. The producers are
facing a serious fiscal and economic challenge at a time when most large
consumers are witnessing slowdown in consumption.
These event confirm my long standing belief,
viz., For next five years at least, the upside triggers in Indian equities would mostly be domestic, e.g., improvement
in macro fundamentals, improved political environment post 2014 election,
inflation peaking out next year on high base effect, peaking of rates,
improvement in external trade, and pick up in investment cycle.
Whereas The downside risk to the market would mostly be due to
external factors. Historically, large FII flows in a short period of time have
caused huge volatility in Indian equity markets. A reversal of USD carry trade,
if and when US Fed decides to moderate liquidity conditions in US, will
certainly cause this event.
I do not believe that these events require any immediate change
in investment strategy. Nevertheless, this does warrants a review..........to
continue
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