Expert Zone

Straight from the Specialists

India Market Weekahead – Volatility to continue in the run-up to general elections

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

Investors pressed the panic button on Friday with the Nifty diving 4 percent, its biggest single-day fall in two years, to end at 5508.

Measures taken by the Reserve Bank of India (RBI) on the eve of the Independence Day holiday to prop up the rupee were among the triggers for the fall. The rupee didn’t do all that well either, falling to an all-time low of 62.03 to the dollar early on Friday.

Recent policy actions have backfired, with markets fearing that the announcement of ad hoc measures could further undermine the confidence of foreign investors.

Macro numbers during the week also showed a declining trend. Industrial production contracted 2.2 percent in June. The trade deficit in July remained high at $12.27 billion with inflation powering along at 9.6 percent. With the rollout of populist measures such as the food security bill, I wonder how the finance minister will achieve his deficit targets.

Recruiting goes from back office to boardroom

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

During my McKinsey days, we often talked about how all our assets (the consultants) walked out the door each night. If you rationalize this focus on talent and knowledge assets as something unique to consulting firms, you would be wrong.

While companies are investing in knowledge management and have better defined processes, talent should be the number one priority for each company.

India Markets Weekahead – An opportunity for investors

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

Indian markets were down for a third consecutive week with the Nifty closing 2 percent lower at 5565 on weak economic signals and disappointing corporate results.

The rupee held on at 60.67 to the dollar.

The appointment of Raghuram Rajan as the next governor of the Reserve Bank of India (RBI) brought the market some cheer. Rajan, a former chief economist at the IMF, is seen as a pro-growth policymaker.

A bumper crop may energize Indian industry

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

Industrial growth in India in 2012 was less than a percent and data from April and May this year doesn’t show a lot of promise. The reluctance of industry to grow has been the reason for GDP growth dropping to a disappointing 5 percent, raising doubts about whether the India story has come to an end. That may be an extreme view considering that even the best performers, such as China, are having problems.

But there is a glimmer of hope. Monsoon rains have been above average this year and a bumper crop is expected. Agriculture contributes to around 20 percent of India’s GDP and even an 8 percent increase in agricultural production will at best improve GDP growth by a percent. But agriculture does have an impact on industry and both together can make a perceptible difference.

Hyundai makes a grand move with the Grand i10

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

In 1947, when India won freedom from British rule, an enterprising young man in South Korea was realizing a dream that was to become a global phenomenon. Chung Ju-yung, founder of the Hyundai group, set up a construction company at 32 and two decades later, the Hyundai Motor Company was born.

Indian telecoms at the crossroads again

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

In the 18 years I have been working with Indian telecoms operators, I can recall several points where I felt the industry was at a crossroads in its evolution.

Sooner the better for RBI to unwind grip on liquidity

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

The Reserve Bank of India (RBI) wasn’t expected to do anything new at its policy review on Tuesday and it did exactly that. But the markets still reacted adversely. The stock market moved in consort with the rupee with the Sensex falling 245 points.

It is generally true that markets overreact, more so in India, partly because market sentiment is affected far too quickly. What evoked these sentiments was the undue concern expressed by RBI Governor Duvvuri Subbarao about external uncertainties, more so about quantitative easing by the U.S. Federal Reserve and food inflation in India.

The paradox of India’s real estate business

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

Over the last two years, India has been battling various economic issues such as rising fiscal deficit, a falling rupee and increasing food inflation. No, nothing new there. And what does this have to do with real estate? Quite a lot.

A country’s economic performance has direct repercussions on how its real estate market behaves. This is especially true for the residential property segment. More prosperity means higher financial confidence among home buyers, and this leads to a greater demand for homes. The opposite is, of course, equally true.

New ways to distribute insurance policies

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

On a rainy day in Mumbai, I was chatting with the taxi driver. It was a prolonged journey, made worse by a never-ending traffic jam. We talked about insurance and I asked him about his insurance cover. I heard the familiar story of a man being cheated into buying an expensive plan; he escaped only after losing a lot of money.

When we think of insurance, it’s typically life, motor and health insurance that come to mind. These are relatively expensive and an already reluctant Indian consumer stays away unless forced into it. This ‘push’ component has become the default sales mode. Motor insurance is mandatory by law and should have ready acceptance. But a large number of vehicles on Indian roads are still not insured.

How the RBI’s recent measures affect you

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

Banking is the backbone for growth in large economies such as India. Banks provide short-term finance to trade, industry and agriculture while also ensuring excess money is channelized into productive assets via deposits and financial intermediation.

Banks have to work under the stipulated policies of the central bank with respect to deposit mobilisation and lending for which they need to maintain minimum cash balances and government securities.

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