Thought for the day
"The idol of today pushes the hero of yesterday out of our
recollection; and will, in turn, be supplanted by his successor of
tomorrow."
-
Washington Irving (American, 1783-1859)
Word for the day
Sternuation (n)
The act of sneezing.
(Source: Dictionary.com)
Teaser for the day
How many in India would have watched the controversial BBC
documentary if the issues was not raked by media at all?
Head, tail or the edge
"Could Congress get 300 seats in 2019 Lok Sabha
elections?" I asked the people who called me to wish a Happy Holi. All of
them had a belly laugh believing it to be some sort of Holi joke.
By the evening I was convinced that if at all it occurs, it
would be perfect example of a Black Swan event in Indian politics. At this
point in time people are not even willing to give it odds they would usually
give to a tossed coin falling on its edge!
Getting over the Holi mood, I tried to fathom a Black Swan event
for the Indian financial markets, which might violate the ban on Bull
slaughter recently imposed by the Maharashtra government.
I could appreciate the strong Headwinds and Tailwinds, most
analysts and market commentators are talking about. Stretching my imagination a
bit far, I could fathom these headwinds and tailwinds culminating together form
a twister. But the coin falling on its edge! I guess it still remains
unfathomable; and naturally so. If fathomable, these swans would not be black.
The investment strategy therefore needs to focus on the strong
headwinds and tailwinds. The discussion about the probability of the coin
falling on its edge may wait for next Holi.
Headwinds
The strongest headwind for the Indian economy and therefore
Indian financial markets is coming from the rural economy. My survey across
nine states indicates that the unusual rains in February and March have caused
extensive damage to standing Rabi crops. This coming on the back of a poor
Kharif crop in many states, is likely to have serious impact on the rural
income, consumption and debt servicing ability. The damage is extensive in case
of fruits, vegetable, oilseeds, wheat and pulses. This should reflect on March
and April consumer price inflation also.
I my assessment, demand for farm inputs and farm equipments may
be adversely impacted. The delinquencies in farm credit may rise. The demand
for durables - auto, housing, electronics - from rural areas will definitely be
impacted.
The election for Bihar legislative assembly due in October this
year presents another major headwind (headache) for the government. Many
parties, especially the non-Congress opposition parties, are taking this
election as a fight for survival. In my assessment their aggressive stance
shall obliterate any chance of cooperation with the arch rival BJP. In fact the
hostilities may likely rise materially in run-up to the election, impacting the
execution of the development agenda.
The reversal of USD carry trade ahead of the policy rate hike by
US Federal Reserve later this year could also adversely impact the flows in
emerging markets, including India....to continue
No comments:
Post a Comment