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Straight from the Specialists

A shortcut to industrial recovery

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

A worker sprays water over piles of coal at Mundra Port Coal Terminal in the western Indian state of GujaratThe rate of growth in infrastructure industries falling to 2.6 percent in FY2013-14 came as a shock. That’s because these industries had been consistently growing at relatively high rates in the previous three years, in spite of the drop in production in other industries.

Infrastructure industries include coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity. Production of natural gas has been shrinking since FY2011-12. Even so, the infrastructure group maintained steady growth between 5 percent and 6 percent. The sharp drop last year was caused by lower growth in the steel and cement industries.

That apparently is an indication that construction activity is on the decline and steel-consuming industries such as capital goods and automobiles had cut production. Construction had been a stimulant for industrial growth because it generates demand for a variety of goods and services.

Construction activity was expanding at about 11 percent until 2011 but slowed drastically to less than 2 percent in the last two years. Demand for housing was affected by inflated EMIs from the rise in interest rates.

India’s next foreign policy

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

A guest holds the flags of the United States and India and a program in the East Room at the White House in Washington, November 24, 2009.     REUTERS/Jim Young/FilesNext month, India will complete its marathon election. A new government is expected to assume power at the end of May, and, if the polls prove correct, the Bharatiya Janata Party (BJP), which has named Narendra Modi as its prime ministerial candidate, will lead that government.

In defence of the defensives: Why IT, pharma stocks are not pariahs

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

Expectation that the ongoing general election will throw up a stable government has spurred a return to risk in domestic equities. The consequent rally has meant those favoured defensives of the sluggish times – information technology and pharma stocks – received a shearing.

The CNX IT index shed 7.8 percent and CNX Pharma 10.1 percent in March – even as the benchmark Nifty surged 6.8 percent.

India’s democratic pageant

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(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.

India Markets Weekahead: Markets back on track for pre-election rally

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(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?

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(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

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(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.

Interest rates likely to remain high

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(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.

India Markets Weekahead: It’s time again for an election year ‘rally of hope’

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(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.

How much will U.S. recovery help India?

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

After a prolonged slowdown, the U.S. economy is finally showing signs of recovery though much of it comes from investment in inventories and may not be sustained at the present high rate.

The United States is the largest economy with a share of more than 22 percent in the world GDP. Naturally, even small changes in its behaviour have a perceptible impact worldwide. To India, the United States counts for a lot, although possibly less than it does for China.

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