Do it yourself

In past there is virtually no trend as to how market reacts to a rate cut or hike. However, the only time the rate cut happened after a 5% or more market rally in the preceding month was in January 2009. The market fell 3% in the month following the rate cut. Date Repo cut 1Day Return 1M before 1M After 30-Apr-01 -0.25 3% -4% 6% 7-Jun-01 -0.25 0% -3% -4% 28-Mar-02 -0.5 0% -3% -3% 12-Nov-02 -0.5 0% -2% 12% 7-Mar-03 -0.4 -1% -2% 0% 19-Mar-03 -0.1 1% -7% -4% 31-Mar-04 -1 1% -5% 1% 20-Oct-08 -1 2% -29% -14% 3-Nov-08 -0.5 6% -17% -15% 8-Dec-08 -1 2% -15% 5% 5-Jan-09 -1 0% 5% -3% 5-Mar-09 -0.5 -3% -12% 26% 21-Apr-09 -0.25 -1% 17% 29% 17-Apr-12 -0.5 1% -1% -8% 29-Jan-13 -0.25 -1% 3% -6% ...

The sharp equity rally in developed markets, though not completely surprising has surpassed the expectations of many. Indian markets have also shown resilience, despite serious political and economic concerns. The following top 10 global trends in particular have implications for Indian markets in next few months: 1.        The central bankers’ “Put” is proving to be more effective than most thought previously. It passed the Cyprus test with commendable grades. As things stand today, we are likely to see more “easing” than “tightening” in next 12months. 2.        Contrary to some forecast, the deluge of liquidity caused by unprecedented monetary easing in past five years has failed to create inflation in the global commodity. To the contrary, the decade old bull market in commodities, including energy, seems have ended. Most industrial metals have already slipped into bear market with sharp price corrections in p...

1.      Follow the leader The number of India skeptics has grown sharply in past one year. Numerous reports have been written to establish that the last pillar of support, viz., consumption, is likely falling rather sharply and the economy will fail to break the vicious cycle. The optimists were in minority and lacked conviction. Very few of them actually walked their bullish talk. Unilever Plc has enlightened the path for everyone. We believe that the FMCG giant with over 100yrs’ experience of working across the globe certainly knows more than the analysts who cannot tell difference between a shampoo and hair conditioner. We shall go by Unilever’s assessment of India’s consumption story and stay overweight for next decade at the least. 2.      Do not follow the leader The Supreme Court today indirectly hinted that the country’s leadership may be exercising undue influence on the national investigating agency CBI. It had been ...

Scooty (e.g. Activa) and mobile phone have empowered women more than any policy initiative or legislation. People were least sure as to how reform in power sector, insurance, banking, financial markets, FDI in retail trade, Direct Tax Code, sugar decontrol, highways development, disinvestment etc. would impact their lives.  Most traders in all states except Goa were quite wary of the GST. During our road trip to six states including the poll bound states of Karnataka and Delhi, we tried to assess the views of the common people about economic reforms – relevance, need, direction, perceived benefits etc. We discussed with numerous people to find out (a) what has happened in past decade or so that has made difference to their lives (for good or worse); and (b) what would they want the government to do immediately to improve their lives. Without leading them to any specific direction, we kept the discussions primarily centered around their day to day life and...

Corruption does matter positively to us, as it helps in circumvent the law and get our way. Not the way crusader like Anna Hazare would like it to matter. No one minds corruption if his child gets admission in a good school/college through backdoor; if he gets his passport without waiting in queue; if he can construct an additional room in his house without permission; if he could encroach upon the pavement in front of his house/shop; if he can dig a deeper borewell in his house or put a powerful motor in his water supply line when his neighbors’ taps go dry. Most office goers in Delhi were happy with the flyovers constructed during the CWG. They have long forgotten and forgiven Kalmadi and other people responsible for putting the nation to shame. Once the home minister of a state visited the Jail on the Independence Day. After finishing his speech, he asked the inmates about their problems and what he could do for them. Most complained about mosquitoes and quality of fo...

Besides Delhi and Karnataka, we covered the states of Goa, Maharashtra, Punjab and Haryana in the first phase of our nationwide survey. Goa The best part of the journey so far has been the trip to Goa. We mostly focused on rural Goa, away from white sand beaches and luxury resorts. After an extensive 3day trip covering over 1000kms, we discovered that the popular debate on sustainable development model might be completely misplaced. While we often hear about the Gujarat vs. Bihar model of development, in our view Goa indeed presents a good example of sustainable inclusive development. We found people generally happy; infrastructure excellent; education system exemplary; police surprisingly courteous, friendly, honest and firm on the compliance; communities in harmony; and growth inclusive. Insofar as the political mood is concerned, for a change, most people were found satisfied with the establishment. BJP should be advised to showcase Goa more prominently in the national ...

BJP appears losing in Karnataka, but there is no Congress wave. BSY appears headed towards political oblivion ala Kalyan Singh in UP. Delhi will be a close contest between BJP and Congress. BSP could surprise with 3-5 seats in 70member assembly. Drinking water is main problem in both states. Rise in unemployment and crime due to mining ban and draught are real concern in Karnataka. CWG scam/shame appears mostly forgotten/ forgiven. Women security, inflation and corruption are not real concerns for the people in Delhi despite media blitzkrieg. In past four weeks our team travelled extensively in the poll bound states of Karnataka and Delhi. While these two states have a little in common, the indifference of common people towards political establishment was too stark. The corruption, contrary to popular perception, was not a real concern though in Delhi it was major topic of discussion. The key points noted during these interactions and general observations were as follows: ...

In February this year we had conducted a small impromptu survey to assess the political mood of people across the country, with special regard to “Modi vs. Rahul” debate. ( see here ) Encouraged by the response of the readers, we have decided to conduct a comprehensive ground level survey covering 16-18 states to assess the political and economic mood of the people. The survey began early this month and shall be completed in two months in three phases. Our team will be travelling through various states across the country to assess the mood of the people, their top concerns and expectations from the political establishment. The basic idea is to form an assessment regarding likely political formation post 2014 elections and the likely impact on the economy. This exercise is completely different from popular opinion polls, inasmuch as our team shall not be carrying any pre-structured survey questionnaires with pre-defined respondent sample in mind. We shall be informally ...

As we all know before the turn of the last Century, Aluminum was thought to be more precious than Gold. Most powerful kings were served food in aluminum utensils while the lesser knights had to do with gold flatware. The sudden change in the value of aluminum took place when much cheaper means of refining the ore became available. Suddenly, it was disposable - as in aluminum foil or cola cans. In no time it transformed from most expensive thing in the world to garbage. In past couple of weeks we have received numerous queries from many readers about the strategy for gold; some of these being panic struck. The underlying theme was the fear that the gold might have taken a wrong turn on the path that follows aluminum journey to south. We asked the following three questions to some of those who were most jittery. (a)    Did you INVEST in gold? If yes, what prompted you to do so? (b)    Have any of the assumptions that prompted you to invest in gold chan...

The young demography is famously the biggest strength of Indian economy at this point in time. However, the rise in incidence of social unrest and violence; spread of Naxalism; rising unemployment and serious deterioration in the skill level of the educated youth suggest that if not managed properly this may as well prove to be the nemesis of the fabled India story. There could be no argument on the fact that Indian growth in past two decade or so has miserably failed in creation of adequate productive jobs for the burgeoning workforce of the country. MNREGA has helped to some extent, but it is bound by fiscal constraints, leakages and lower productivity. Disguised and underemployment also continue to impact the productivity and earnings potential. In our view, in spite of fully recognizing the potential of the youth and the problems faced by them, successive governments have mostly failed in implementing an integrated youth policy that would focus on harnessing this treme...