Thought for the day
”Whoever fights monsters should see to it that in the process he
does not become a monster. And if you gaze long enough into an abyss, the abyss
will gaze back into you."
-
Friedrich Nietzsche (German, 1844-1900)
Word for the day
Odontoid (adj)
Of or resembling a tooth.
(Source:
Dictionary.com)
Teaser for the day
If your right eye causes you to
stumble, gouge it out and throw it away. It is better for you to lose one part
of your body than for your whole body to be thrown into hell. And if your right
hand causes you to stumble, cut it off and throw it away. It is better for you
to lose one part of your body than for your whole body to go into hell. (Mathew
5:29-30, New testament)
Half empty or half full - II
...continuing from yesterday
The domestic environment appears reasonably stable at present.
Macro indicators are showing signs of bottoming out. Especially, fiscal deficit
and inflation numbers, two major worries of global investors, appear steady and
under control. BoP situation, though not comfortable, does not sound
precarious. Currency and rates are also stable and are expected to show some
positive momentum in months to come.
The business and investor confidence has definitely improved in
past few months, especially since May'14 election results. Consequently flows
to the risk assets, especially equities, have improved materially.
The government appears moving on many problem areas. Hope is
that many investment bottlenecks might get removed in next 12months. There is
material evidence to suggest that the financial stress may ease in next
12months due to legislative and administrative efforts clearing hurdles in
recommencing the work on stuck projects.
There are good chances that the investment and credit demand may
bottom out soon and begin to look up. Though currently it is struggling at
cycle low levels.
This feel good about domestic economy juxtaposed to fear of
Europe running out of option, Japan failing to take off and China's hard
landing present the dilemma I suggested yesterday.
Despite all the sentimental positivity, the fact remains that on
day to day basis Indian markets are susceptible to high volatility caused by
sudden infusion/withdrawal of funds by global investors.
So far this year FIIs have pumped about US$35bn in Indian
financial markets. Around 60% of this money has come in Indian debt and 40% in
equities. Going by past experience (2009) selling even to the extent of US$10bn
in a span of 2months could cause havoc in equity, debt and currency markets.
Such situation is not totally unfathomable.
Given that most emerging markets are fundamentally much less
resilient at this point in time, as compared to 2008-09, subsequent EM
outperformance as a class may not occur this time.
India, this morning looks poised to do relatively better in case
of a global slowdown and consequent risk off, notwithstanding the volatile
correction in the market in the early phase.
However, this hope is predicated on the optimism that the new
government will be able to put the economy back on track in next few months,
before the global contagion, if any, reaches the Indian shores.
I am personally inclined to believe that in next 6-9 months we
shall see necessary corrections to make economy resilient enough to weather any
external shock with minimal damage. The fall in market will therefore, in my
view, be an opportunity to buy.
I see the glass definitely half full!
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