Expert Zone

Straight from the Specialists

If Europe gets into a debt crisis

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(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

Just over a week back, Europe appeared to be headed for another debt crisis, rattling global markets. Interest on Greece’s sovereign bonds shot up 9 percent. Others followed, including weaker countries like Spain, Portugal, Italy and, shockingly, France. Only Germany offered some protection to investors, albeit with a sharp decline in interest rate.

It appears difficult for countries in the European Union to manage their economies with a common currency.  With no economic instrument for currency adjustment and difficulties in fiscal maneuvering, the most likely outcome is sovereign default for countries with high debt-to-GDP ratio.

The European Central Bank (ECB) has adopted quantitative easing (QE) and announced it had bought 1.7 billion euro of bonds in the first week of the QE. The ECB also has negative interest rate on bank deposits. While this may stave off the debt crisis temporarily, the underlying problem may still force sovereign defaults.

Markets Weekahead – India story looks better; global headwinds could weigh

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The truncated Diwali week saw the Nifty closing at 8,014, recovering from a “breakdown” scare and ending about 3 percent higher to welcome the new Hindu calendar year – Samvat 2071.

The markets were aided by the performance of the BJP in assembly elections and a slew of reforms, which laid to rest the growing sense of inaction on the policy front. These included the long-awaited diesel deregulation, gas pricing and labour reforms, and a roadmap on coal sector reforms.

Targeting inflation at 4 percent

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Finance Minister Arun Jaitley seems to have finally taken the responsibility of targeting inflation as it is a sensitive political issue and could not be left to the discretion of the Reserve Bank of India (RBI). With CPI as the anchor, the target will be 4 percent measured annually (+/-2 percent).

Inflation has been a bone of contention for nearly three years now. The RBI has kept the repo rate a wee bit above inflation rate on the supposition that inflation will go down and growth will follow. But the finance ministry wanted the interest rate to be low enough to stimulate growth, which has almost halved in the past two years. The RBI had the upper hand in deciding interest policy because it enjoys autonomy and need not go by the insinuations of the finance ministry.

India Markets Weekahead: Await a sharper correction to nibble in

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The truncated week which opened after a five-day vacation was in a sombre mood except on Thursday, when markets bounced back due to a dovish Fed commentary. Friday again saw a correction, with the Nifty closing the week at 7860, down 1.07 percent.

People walk past the Bombay Stock Exchange (BSE) building in Mumbai May 13, 2014. REUTERS/Danish Siddiqui/FilesThe prospect of world economic slowdown perturbed international markets, and the Dow saw its worst week since May 2012, which in turn affected Indian markets. FIIs continued to pull out, increasingly worrying traders who are already baffled by the volatility.

First Drive: Mercedes-Benz GLA

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The trend of luxury crossovers was started by BMW with the X1. Audi followed suit with its Q3 and Mercedes-Benz is now entering the game with the GLA.

On sheer looks, Mercedes-Benz seems to have got it right with the GLA. It’s a great effort of making the A-Class hatchback look like a crossover. Though they may not have managed to pull off a crossover per se, the GLA definitely looks well proportioned and flaunts pronounced curves. It even looks slightly muscular from some angles. It’s a bit odd, as the GLA – to the keen eye – will look more proportionate and attractive in comparison to the A-Class. The A-Class now comes across as the GLA that the Hulk sat on.

The Islamic State in Iraq, Syria and its fallout on India

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The Islamic State has invigorated jihadi establishments in South and Southeast Asia. It has shaken up the al Qaeda, so far occupying the spiritual pedestal of Islamist Jihad, spurring it to announce the formation of a branch in the Indian subcontinent. Apparently, the Indian subcontinent won’t remain unscathed with the contesting constituents of Islamist jihad locked in a battle of dominance.

Conventional assaults like in Iraq and Syria are, of course, inconceivable. However, something like the 2008 attack in Mumbai could definitely be attempted. A few basic requirements need to be met before any of these players think of enhancing their scale of operations in India. Boots available for deployment is one of them.

India Markets Weekahead: Time to lighten commitments as extended honeymoon almost over

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The past week was one of the most eventful post the general elections, and the action continued till Saturday with a landmark speech by Prime Minister Narendra Modi at the U.N. General Assembly and Tamil Nadu Chief Minister Jayalalithaa Jayaram being sentenced to four years in jail in a corruption case. Markets were volatile and the Nifty closed the week at 7,968, down 2 percent despite a recovery on Friday.

The week started on a positive note but weaker European manufacturing data and concerns about growth in China led the markets to crack.  The Supreme Court’s decision to charge a penalty as well as deallocate almost all coal blocks awarded since 1993 led to another bout of selling in power, metal and banking stocks.

The benefits of falling oil prices for India

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(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

The fall in global oil prices couldn’t have come at a more opportune time for India. In August, oil imports dropped 15 percent year-on-year, driven primarily by a fall of $10 per barrel in prices. Brent has fallen below $100 over the past month, and could slip further. Increasing supplies from the United States and slowing demand are contributing to the weakness in prices.

Little chance of an RBI rate cut

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(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

At the Reserve Bank of India (RBI) monetary policy review in August, India’s policy parameters looked encouraging but the central bank was not eager to make any significant change to monetary policy – and none at all to the interest rate. Since then, perspectives have changed. And yet, it is unlikely that the RBI will make any cut, though desirable, to the interest rate.

China’s WMD cooperation with Pakistan looms over Xi-Modi talks

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(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

The visit of Chinese President Xi Jinping to India and his meeting with Indian Prime Minister  Narendra Modi this week has elicited considerable positive interest in both countries. It has the potential to recast the uneasy Asian strategic framework, and by extension the relations of emerging global powers that are currently clouded by acrimony and mutual mistrust.

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