Expert Zone
Straight from the Specialists
India Markets Weekahead: Ride the election rally but skim the profits
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The market began the week on a high note after an extended weekend but could not sustain the rally due to profit booking. The Nifty was at a high of 6570 on Tuesday but the rest of the trading days remained lackluster and it ended the week with a marginal loss – at 6495 after the extended trading session on Saturday.
Although the week was marked with heightened political activity as candidates for the general election were announced, the U.S Federal Reserve had a sobering effect on the markets. The Fed decision to continue with further tapering of $10 billion and focus on interest rates, which should start rising sooner than expected, saw corrections in most markets as the dollar strengthened.
The sanctions imposed on Russia by the United States and the European Union over its annexation of Crimea did not cause any upheaval. But one needs to see whether the sanctions will be escalated further and monitor its fallout on the world economy, especially in Europe.
In India, FIIs continued to be buyers in the pre-election rally and pumped in about $739 million last week. The rupee, which turned weak on news of the Fed decision, was quick to bounce back to 60.89 against the dollar, close to a six-month high.
How much inflation is good for growth
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The RBI has left it to the government to decide the inflation target since it considers it politically sensitive. The central bank will accordingly modulate its monetary policy to ensure that the government’s target is not exceeded.
Targeting inflation alone cannot be the sole objective of monetary policy, though it is an important criterion for regulating the repo rate. Even developed countries have concerns about inflation – when it is too low or too high.
Health insurance sector poised for more growth
(Any opinions expressed here are those of the author and not of Thomson Reuters)
With the arrival of Ci
gna TTK, there are now five standalone health insurers offering products and services in India. Religare Health is also a recent entrant that started operations only last year.
At a time when we are seeing several exits in the life insurance sector, this is an indicator of the growth potential in India’s health insurance sector.
India’s democratic pageant
(This piece comes from Project Syndicate. The opinions expressed are the author’s own)
Last week, India’s independent Election Commission announced the dates for the next general election. The world’s largest single exercise of the democratic franchise will take place over a staggering 37 days in nine “phases,” some a week apart, from April 7 to May 12. Some 814 million eligible voters will elect, for the 16th time, a new parliament and government, casting their ballots at more than 930,000 polling stations — after choosing from an estimated 15,000 candidates belonging to more than 500 political parties.
Is the current euphoria in equity markets justified?
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The third-quarter results season corroborates my view that 2014 will be a year of fragile recovery for the Indian economy. Fragile, I reiterate.
The market, however, has run up to an all-time high, with the Nifty breaching the psychological barrier of 6,500. Is the euphoria justified?
How election years affect the stock market
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The ongoing stock market rally has been primarily supported by foreign investors. The rupee also rose to a near three-month high against the dollar on Friday.
It is rather unusual for the Indian market to jump in pre-election months, particularly after 1996 when coalitions became the new political strategy to make up for shortfalls in parliamentary majority. In most election years, the market had actually fallen just before the elections – in 2004, by more than 10 percent.
India Markets Weekahead: Markets move into pre-election rally
(Any opinions expressed here are those of the author and not of Thomson Reuters)
A spectacular rally in the last few days has put the market in a pre-election mode, buoyant with hopes of a stable and reform-oriented government. Led by institutional buying and the resultant short squeeze, the markets rallied more than 3 percent in the last two trading sessions – closing the week at 6526, a record high for Nifty. The markets seemed to have moved into a new territory with metals, realty, banking, capital goods, infrastructure and energy sectors participating in the rally.
Generally, the data points for a pre-election rally are the developments on political activities and opinion polls. The economic data takes a backseat in this “rally of hope” and markets take a keen interest in electoral analysis.
India Markets Weekahead: Markets back on track for pre-election rally
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The week started on a sombre note but with institutional activity picking up, the Nifty closed with gains of 1.97 percent at 6276 despite a mid-week trading holiday. Political activity also gained momentum with 11 parties coming together to form a Third Front to oppose both national parties.
The Election Commission may announce election dates in the coming week — the code of conduct coming in will halt any policy decisions.
Is gold a good investment once again?
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The increase in gold prices in the last two months has rekindled interest in the yellow metal as a vehicle for investment. It was after the 2008 global financial crisis that gold became the most preferred asset, with prices doubling in four years.
Why was gold preferred? It was not so much as a hedge against inflation but as an insurance against uncertainty. When the economy is faltering and the future looks bleak, gold becomes a preferred asset.
India’s disrupted democracy
(This piece comes from Project Syndicate. The opinions expressed are the author’s own)
India’s 15th Lok Sabha (the lower house of Parliament) passed into history ignominiously this month, following the least productive five years of any Indian parliament in six decades of functioning democracy. With entire sessions lost to opposition disruptions, and with frequent adjournments depriving legislators of time for deliberation, the MPs elected in May 2009 passed fewer bills and spent fewer hours in debate than any of their predecessors.
