Expert Zone
Straight from the Specialists
Why the Fed is not worried by emerging market moves
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Several emerging market central banks have been forced to react to market events already this year. Interest rate increases in India, Turkey and South Africa followed bond or currency market volatility. Argentina has endured dramatic moves in its currency, and Brazil has been forced to tighten policy.
The moves in these markets, unlike those of 1997-1998, do not suggest a systemic threat to all emerging markets. Investors have distinguished markets where errors in fiscal policy, monetary policy or political risk created a fundamental mispricing. Such errors are generally most visible in a current account deficit or a government budget deficit, or both.
The prospect of rising global bond yields has offered investors alternative investment opportunities to these troubled countries, with fewer risks. Countries that have followed a more orthodox policy approach, and have generous foreign exchange reserves and current account surpluses or equilibrium have been less threatened.
Slow pick-up in India’s GDP growth
(Any opinions expressed here are those of the author and not of Thomson Reuters)
GDP estimates by the Central Statistics Office for the 2013-14 fiscal year show an improvement over the previous year. But the extent of improvement is too small for comfort. Possibly, in the final revision, that small margin may disappear or even turn negative.
This year, India’s GDP is expected to be up 4.9 percent from 4.5 percent the previous year. This additional growth has come mainly from agriculture, due to a favourable monsoon. Agricultural growth was three times the previous year. Production of non-food grains (like vegetables and fruits), and animal products (like meat and eggs), did not increase adequately in spite of the inflated demand and will continue to be the main source of inflation.
India Markets Weekahead: Time to size up portfolio
(Any opinions expressed here are those of the author and not of Thomson Reuters)
After a scare earlier in the week, the markets showed resilience at lower levels and bounced back, showing the confidence of participants. Though Nifty closed 26 points lower for the week at 6063, sentiment was much better than the previous week.
Interest rates likely to remain high
(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Thomson Reuters)
The Reserve Bank of India (RBI) raised its benchmark repo rate by 25 basis points to 8 percent at its policy review meet in January. The reverse repo rate rose to 7 percent while the bank rate and marginal standing facility rate climbed to 9 percent. This is the third hike in repo rate since RBI Governor Raghuram Rajan assumed office in early September.
As liquidity dries, time for fundamentals
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The focus is back where it should be for equity investors – fundamentals.
In the past few years, markets around the world have swayed to the wave of liquidity unleashed by central banks in a bid to get their economies back on track. The U.S. Federal Reserve, for one, was buying as much as $85 billion of bonds a month since September 2012. But that tap is beginning to taper with the Fed reducing purchases by $10 billion in January and another $10 billion in February.
We feel that this, together with a host of factors at home, sets the stage for a more sanguine approach to equities. I indicated in my note last month that we expect 2014 to be a year of fragile recovery for the Indian economy. The scenario will be similar for Indian equities.
Reflections from Davos
(Any opinions expressed here are those of the author and not of Thomson Reuters)
It’s been an exciting week at Davos. The annual meeting of the World Economic Forum this year was refreshingly different from previous editions. There is a general sense of optimism.
Although the effects of the recent crisis linger on, businesses and business leaders are acknowledging that we are seeing signs of recovery. In Davos, I had conversations with business leaders, heads of industry bodies, as also members of the academic and media fraternity. Each of these conversations resonated optimism.
Why the RBI raised interest rates
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The Reserve Bank of India (RBI) raised interest rates at its review on Jan 28. The justification usually given for doing so is inflation.
But at its previous review, when inflation had soared, the RBI was passive and left rates unchanged. Now, with wholesale price inflation (WPI) slowing to 6.16 percent, the RBI was quick to raise the repo rate by 25 bps back to its highest level since the 2008 crisis. Why?
Time for a relook at FDI in insurance intermediaries
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Insurance companies in India have an FDI limit of 26 percent, which may be revised upwards in the coming months. The industry requires funds to grow and the revision can be an enabler, but the process may take some time as it requires legislative approval and there seems to be some opposition to the move.
Since the industry is still in its nascent stage, the insurance regulator also places the same FDI cap on insurance intermediaries such as brokers and web aggregators, severely limiting their ability to raise funds to grow their business.
India’s decade of decay
(This piece comes from Project Syndicate. The opinions expressed are the author’s own)
Indian Prime Minister Manmohan Singh, who has been in office since 2004, recently held what was only the second press conference of his current five-year term, which is rapidly approaching an inglorious end. Betraying his yearning for approval, Singh told the assembled journalists that he hoped that history would judge his tenure more kindly than his political adversaries do.
India Markets Weekahead: It’s time again for an election year ‘rally of hope’
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Despite a volatile Friday, it was a good week for the markets and saw the Nifty close about 90 points higher at 6,261, with sentiment supported by better-than-expected quarterly results and benign inflation data.
The few earnings that disappointed investors seemed to affect specific stocks without having a bearing on either the sector or the markets.
