Expert Zone

Straight from the Specialists

If change does come in 2014

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

The market is pregnant with expectations of a change after the general elections which must be held by next May. You would have to travel far and wide before you come across anyone in India’s financial market who is not hoping – even praying – for change.

The mood on the current policy direction is so gloomy that any alternative is looking like manna from heaven.

I am obviously not competent – I doubt anybody really is – to predict the outcome of the elections. In a vast and varied country like India, forecasting national trends with any degree of reliability is hard. But it is safe to say that a strong momentum for change is being built by BJP’s prime ministerial candidate Narendra Modi.

While a victory for the BJP is far from certain, it is still pertinent to reflect on what a Modi-led central government could mean for the markets and the economy.

Taking stock of the insurance sector

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

With half the financial year gone by, it’s time to take stock of the insurance sector. Let me start with life insurance.

It was a tough year as new norms for a majority of insurance products – which were to be effective Oct. 1, 2013 but later postponed to Jan. 1, 2014 – were hanging like a sword over the business.

Which inflation should the RBI target?

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The Reserve Bank of India (RBI) is entrusted with the responsibility of maintaining price and financial stability, and it has used interest rate and money supply to pursue this objective with unwavering determination. Yet, inflation has survived with matching persistence.

The index that the RBI uses to target inflation is the wholesale price index (WPI), which is the combined price of a commodity basket comprising 676 items. A few prices in this basket can be too volatile or outside the scope of the RBI’s monetary policy, leading to poor results.

India Markets Weekahead: Results of state elections a key driver

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

Markets had been on a roller-coaster ride but closed weak for the third week in the row with the Nifty in the 5950-6000 range providing support.

A hint from the U.S. Federal Reserve on tapering its bond-buying programme was enough to spook the markets. Though this is expected in the first quarter of the new year, it remains to be seen whether chairman-elect Janet Yellen’s dovish stance would postpone it further.

Mall developers take to revenue-sharing to woo retailers

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

Over the last five to seven years, the retail segment in India has evolved towards a more organized pricing structure. After the real estate boom of 2005-06, when property prices increased to as much as 40 percent of a retailer’s operating costs, developers seemed more willing to share the business risk. They moved from a per-square-foot rental model to versions of the minimum guarantee and/or the revenue share model. Most investment-grade properties in major cities now follow this model, unlike shopping centres in smaller cities.

In the original model, rentals varied depending on the store and location. But with increased brand awareness and rising vacancies, developers saw the need for a customized tenancy mix, adopting efficient mall management techniques while protecting retailer interests to maximize their own earnings.

Not a smooth ride for the markets

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

There was subdued excitement over the Sensex hitting a record high in a special trading session on Diwali. It had taken the market quite some time to cross its previous peak in 2008. This was also the case for most other markets, although they had recovered a little earlier.

The Indian market was slow to catch up because, apart from the international conditions, there were domestic problems that affected the health of the economy.

Leveraging the digital revolution

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

We live in an age where emerging technologies are narrowing the divide between humans and machines. As features of mobile phones become more customized and complex, they cease to be just devices of communication. Mobile phones now store more personal information than ever before. They are increasingly being perceived as personalized devices that enhance our lives.

We are also living in times when remote robotic surgeries and online classrooms are transforming healthcare and education in ways never imagined before. We are truly living in a digital age.

India Markets Weekahead: Invest with an eye on the exit door

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

Markets touched new highs this week but the usual euphoria was missing as it wasn’t a broad-based rally. Finance Minister P. Chidambaram said the worst may be over for India as the current account deficit is getting under control while a bumper harvest could help rein in food inflation and boost the rural economy. Hopes of a revival and the mirage of green shoots coupled with international liquidity due to delayed U.S. Federal Reserve tapering has fuelled this rally, which is expected to spread to other sectors that are comparatively under-valued.

But the ground-level situation is in stark contrast to the optimism in the indexes. October auto sales were flat to negative for a number of automobile majors despite huge discounts. The festive season hasn’t spurred sales in white goods either, as food inflation reduced the disposable income of the middle class.

India-Pakistan border flare-up a zero-sum game

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

At places along the Line of Control (LoC), barely a wire separates the Indian soldier and his Pakistani counterpart. The genesis of the recent flare-up was the killing of five Indian soldiers on the Indian side of the LoC. The media blitz in Delhi found more fodder with a spike in infiltration attempts and exchange of fire beyond the LoC at posts across the international border.

Need to rebalance RBI’s interest structure

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

In its mid-quarterly monetary policy review last month, the Reserve Bank of India (RBI) made some hasty changes in the interest structure. The repo rate was raised possibly because of the rise in inflation and the marginal standing facility (MSF) rate was cut after the rupee recovered against the dollar. The interest structure is still lopsided with short rates exceeding long rates. This anomaly needs to be corrected.

It is believed that the economy is susceptible to a rundown when short rates exceed long rates. A further slowdown, in any case, needs to be prevented and is quite feasible since the compelling conditions that necessitated an interest hike have been contained. There is now enough room for the RBI to restore balance.

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