Expert Zone

Straight from the Specialists

Overseas cues to drive the market but limited upside

Photo

A positive week for the markets saw volatility in a narrow band with Nifty gaining about 115 points to close at 5216, a gain of about 2.25 pct. The midcaps and small caps outperformed the frontline stocks indicating retail interest.

FIIs continued with their buying spree lapping up about US$ 535 million worth of stocks. The new finance minister  Palaniappan Chidambaram was given a thumbs up but expectations of any radical move are low especially after the disappointment from Prime Minister Manmohan Singh in the last fortnight.

The Reserve Bank of India left the CRR and repo rates unchanged but reduced the SLR by 100 bps. The India Meteorological Department (IMD) hinted at a “drought-like” situation as drought can be defined only after the season ends. It is expected that rainfall across the country in August and September will be below normal. This too was taken in the stride by the markets as this situation was building up for a while.

As the industrial sector was coming to terms with the Manesar violence, which questioned India’s image of offering a business friendly environment, we had the worst power failure in post-independent India with the northern grid collapsing. It wasn’t limited to Monday and we saw a repeat on Tuesday, exposing the shoddy state of India’s infrastructure. Our industrial sector seems to be having a bad concoction of a non-performing government, labour uprising in the industrial environment and a failing infrastructure but we still grin and bear it.

Why the RBI preferred an SLR cut

Photo

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

The first quarter review of monetary policy did not create any ripples. The stock market remained flat and investors and consumers showed little interest. That was because RBI Governor Duvvuri Subbarao had made enough noise earlier that the time was not right and conditions were not suitable for a rate cut.

Not so easy for India to come out of the dark

Photo

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

Many words have been used to describe the power outages that put half of India in the dark this week: embarrassing, catastrophic, the worst the world has seen. While all of these may be true, the blackout also embodied the dire situation the country could be headed to without the necessary reforms to modernise its economic infrastructure. To be sure, it is not a lack of vision that would lead India to similar potential disasters in the future, but a lack of political will.

Selling insurance through kirana stores

Photo

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

India is considered to be a large untapped market for insurance products. There seems to be enough scope for improvement on the insurance density and insurance penetration counts for the country. While this is true, the challenge lies in reaching out to the large population in the rural areas where the traditional financial distribution channels just don’t make economic sense.

Hopes fade as investors await concrete action

Photo

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

It was an action-packed week for the markets but not for the reasons we had anticipated. Manmohan Singh’s government, which was expected to announce a string of policy action steps starting with a diesel price hike, failed to make any announcements which would have cheered markets.

Consequences of an export squeeze

Photo

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

In June, exports shrank more than five percent to $25 billion largely due to recessionary conditions in major importing countries such as the U.S. and the EU. Although exports are not as critical to us as they are to Singapore or China, they do count for a lot.

Opting for lean and mean armies

Photo

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

The British army is being cut to size, or perhaps, being stripped to its bones. The British defence secretary has announced a 20 percent cut, reducing its strength to 82,000 combatants by the end of the decade.

Get set for an action-packed week

Photo

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

Markets continued to display weakness during the week except for a spirited, though limited, rally on July 18 after the UPA convinced belligerent ally Mamata Banerjee to fall in line for the presidential elections. The Nifty lost 0.4 pct to close the week at 5205 on political worries after the NCP, another government ally, expressed dissatisfaction with its functioning.

The growth versus inflation dilemma

Photo

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

The RBI is concerned about inflation; the finance ministry has growth as its priority. That, as RBI Governor D. Subbarao mentioned, makes the two almost look like adversaries.

Decoding political risk no mean feat

Photo

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

Politics is playing a dominant role in financial markets today — and generally speaking, investors do not like it. Political risk is an additional layer of uncertainty that has to be factored in while making investment decisions. Because political risk is intimately linked with the uncertainties of human behaviour, the impact of political risk can at times seem to be almost random. After over two decades as a professional economist, I can assert that forecasting economies is tough. Trying to forecast what politicians are going to do is even worse.

  • Editors & Key Contributors