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India Markets Weekahead: Await a sharper correction to nibble in

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

The truncated week which opened after a five-day vacation was in a sombre mood except on Thursday, when markets bounced back due to a dovish Fed commentary. Friday again saw a correction, with the Nifty closing the week at 7860, down 1.07 percent.

People walk past the Bombay Stock Exchange (BSE) building in Mumbai May 13, 2014. REUTERS/Danish Siddiqui/FilesThe prospect of world economic slowdown perturbed international markets, and the Dow saw its worst week since May 2012, which in turn affected Indian markets. FIIs continued to pull out, increasingly worrying traders who are already baffled by the volatility.

The results season started off on a positive note with Infosys declaring better-than-expected profits and a bonus of 1:1. Although the stock rose 7 percent, it wasn’t enough to support sentiment in the rest of the market including the IT pack.

The automobile sales data for September continued to show an uptick while the HSBC PMI data for September was mixed, with services rising to 51.6 but manufacturing declining to 51.

Budget strikes the right chord on reviving investment

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

Finance Minister Arun Jaitley (C) poses as he leaves his office to present the federal budget for the 2014/15 fiscal year, in New Delhi July 10, 2014. REUTERS/StringerPatient, consistent baseline play rather than aggressive serve and volley — that about sums up the Narendra Modi-led government’s maiden budget.

Modi’s first budget can be a great start

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

There are few opportune moments for a nation to enact bold economic reforms. For India, this week is one of them as Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) government unveil their first budget since sweeping to power in a landslide victory last May.

India needs the sort of shock therapy it administered in response to the 1991 crisis when foreign exchange reserves had dropped to just $1 billion. While current circumstances may be less urgent, they are no less critical. Economic growth has dropped to the 4-5 percent range, half the peak level of a decade ago. Inflation has risen between 9 and 11 percent over the past five years, crippling consumer purchasing power.

India Markets Weekahead: Driven by hope in an election-led rally

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

The New Year was ushered in with a steep and sudden correction in the broader indexes, with the Nifty closing 1.63 percent lower at 6,211. However, the mid-cap and small-cap indexes outperformed.

Though the holiday mood was evident, it was a politically charged week. The newly installed Aam Aadmi Party (AAP) government in Delhi won a confidence motion with the support of the Congress. They subsequently announced power subsidies after granting water sops last week. Prime Minister Manmohan Singh addressed a rare press conference, the third in 10 years, announcing his intent of handing over the baton to a new prime minister.

Time to brace yourself for a hard landing

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

In his speech to parliament last week, Prime Minister Manmohan Singh said: “The depreciation of the rupee and rise in dollar prices of petroleum products will no doubt lead to some further upward pressure on prices. The Reserve Bank of India will therefore continue to focus on bringing down inflation.”

By saying this, the economist in Singh seems to have won against the politician. This has also been a vindication of sorts for outgoing RBI Governor Duvvuri Subbarao.

No quick fixes to India’s growth problems

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

Over the past year, the government has silenced its critics with several pro-reform policy initiatives including the relaxation of FDI norms, freeing FII debt investment limits and a calibrated deregulation of petroleum prices. These reforms were cheered by the markets by way of increased FII inflows.

India’s widening twin deficits – fiscal and trade – appeared to have been reined in. But in the first few months of the fiscal year 2013-14, everything seems to have come undone for India – be it the potential end of the U.S. Federal Reserve’s quantitative easing policy or the dollar’s appreciation against emerging market currencies.

When will the rupee stabilize?

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

The rupee hit a series of record lows in August, rattling the stock market and forcing policymakers to step in. But the fall was necessary to correct India’s past mistakes and improve the dynamics of the economy. Stock markets were jolted because the rupee’s slide was sudden. But then that is how markets behave.

International markets, be it for currencies or commodities, are sensitive and therefore volatile due to underlying speculation that is difficult to control. Eventually, however, a stable point is reached at which point they settle down.

Why India slowed

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This piece comes from Project Syndicate. The opinions expressed are the author’s own

For a country as poor as India, growth should be what Americans call a “no-brainer.” It is largely a matter of providing public goods: decent governance, security of life and property, and basic infrastructure like roads, bridges, ports, and power plants, as well as access to education and basic health care.

Bear market a golden opportunity to shore up coffers

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

The recent run of the gold bears in financial markets has been positive for India’s current account balance. If this continues along with the persistent softness of oil prices, as many expect at least for the short term, it just might give the government the opportunity it needs to implement certain measures that have so far run against popular sentiment.

The plunge in the gold price since the start of the year, triggered by speculation and hints that the U.S. Federal Reserve may trim its bond-buying program sooner than markets had assumed, has helped the rupee hold up well against the dollar. This is good for India’s fiscal house, where the trade and current account deficits are more or less permanent fixtures.

Pitfalls of the food security bill

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

The food security bill will be introduced in the current budget session of parliament, more because of its populist appeal than any economic urgency. Even when the bill was discussed by the Cabinet, Finance Minister P. Chidambaram and Agriculture Minister Sharad Pawar reportedly had reservations. They had valid reasons.

Subsidized food distribution is nothing new. Already 400 million people avail of it from over 500,000 fair price shops. What the bill intends is to widen the scope of the present scheme and cover two-thirds of the population with five kg of grain per beneficiary at nominal rates.

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