As the economy and markets struggle, India needs tough actions
Slowing growth, a falling rupee, sliding stock markets, a rising current account deficit, drying foreign inflows and policy paralysis at the centre. Things certainly don’t look rosy for India.
With the rupee down 22 percent in the last 10 months and a 6 percent drop in stock markets so far in May (as of Friday’s close), is it time for the government to seriously rethink its strategy ahead of the 2014 general elections?
From Mark Mobius, who said the Indian government has been making many big policy mistakes, to Lakshmi Mittal, who told The Times of India on Friday that decision-making is too slow and India needs to move the way the rest of the world does — there is no dearth of criticism.
As the global economic environment continues to be weak, what is the government doing to address these issues? Right now, India badly needs reforms, foreign inflows, and most importantly, clarity and stability.
It took Finance Minister Pranab Mukherjee nearly two months to clarify his controversial set of General Anti-Avoidance Rule (GAAR) proposals, and also defer it by a year, after an investor backlash.
One wonders what took the government so long to issue clarifications, which could have helped revive much-needed inflows and improve sentiment. And even when it did, it failed to pacify investors.
As a Scotiabank executive summed it up – India changes rules too quickly. They don’t realise it hurts them in debt capital markets and hurts flows on a long-term basis.
How to rate the budget?
When the finance minister presents the budget, the stock market moves one way or the other.
And like every year this will dominate the news.
Over there and everywhere.
Is that fair? Or convincing?
Some of the analysis will follow a pattern.
If the stock market goes up, the budget may be described as successful because it didn’t “rock the boat”.
If it moves sideways, it may be said the market had already absorbed the good news — the growth figures for instance.
To rate a budget based on stock market response is totally incorrect. In my opinion stock market is only an indication of how much money people are willing to play with! Now we have phrases like “inclusive” etc, why? When there is no more need for such phrases, that may be a time when stock market can be studied: At that time most of the people may be investing in it. Not now.
When a common man is not having enough moeny for his day to day living, taking stock market as a reference only shows how much of ignorance prevails within the higher class and ruling class of people.
Days of darkness during Diwali?
Diwali, the festival of lights, is here but do we see a pall of gloom with the BSE Sensex crashing more than 50 percent since January 2008?
Things have come to such a pass that some people have simply stopped looking at their portfolios. They think it’s too late now to cut losses.
“I have now lost faith in long-term investment, I wish I had booked profits in January when my portfolio had doubled,” says my friend Vikrant, who works for a leading business newspaper in New Delhi.
The tumble over the past 8-9 months had forced Vikrant to postpone plans to buy a new car, and when he finally bought one, he preferred a loan from his father rather than a bank loan at 14 per cent.
When I joined college, many had warned me to stay away from the stock market calling it a dangerous place, thanks to the scams by Harshad Mehta and Ketan Parekh.
I agreed then, although more out of respect, and I was more than willing to dump such talk along with my boring History textbooks.
But the events of 2008, with the credit contagion spreading to stock markets across the globe, have made me sit up and take notice.
India saw huge increase in the number of magazine, dailies, websites and television channels both in english and regional languages in the past two years i.e. 2006 and 7. The hype created by these people led to false promises by sellers of financial products who togehter with media convinced small minority of retail investors that funds and stocks are one way bet… lessons learned… time to forget and forgive… move on… Hope Indians view dalal street like their neighbourhood kirana shop or mandi where one goes only to buy what one needs as per a list prepared beforehand at prices that one expects…
Play safe, stay away from stocks
The world of equities seems to have opted for a bargain-basement sale. The BSE Sensex which scaled the dizzy heights of 21,000 points in January 2008 is today testing 10,000 and nobody is sure if the bottom has been found.
“Nowhere in the world are we close to a bottom. Put your money in a safe bank at 9 pct and forget about the stock market for the next two years,” Shankar Sharma, Joint Managing Director of First Global, told Reuters.
If that’s the case, one wonders if the response pattern will change to the Reuters Money question – Where do you see the Sensex by Diwali??
High-profile equities investor Rakesh Jhunjhunwala who had advised Indian investors to keep away from the stock markets as early as November 2007 declined comment on the current situation.
The Indian stock markets have been on a downward spiral for the past 8 months and more and bellwether stocks like Reliance Industries, ICICI, Infosys have taken a serious hammering at the bourses. Some equities analysts do see this as a good opportunity to buy and build a good portfolio for the future.
British economist John Maynard Keynes who said “in the long run, we’re all dead” be damned.
But, there again, some of the “experts” were advising investors to buy at every level of the tumble – 18,000, 16,000, 14,000, 12,000 and now near 10,000.
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Crisis of confidence? You must be joking!
Joke 1 Joe Blogger had a cheque returned last week. They said it was due to “Insufficient Funds.” Now, Joe’s not sure if they meant his account or the bank’s?
Joke 2 There are two sides to a bank’s balance sheet – the left side and the right side. On the left side, there is nothing right, and on the right side, there is nothing left!
My cell phone has been bombarded with forwarded jokes like the ones above ever since the global financial crisis started. At least some people have their sense of humour intact despite the troubled times. Some might even thank God for such small mercies.
The BSE Sensex which has been hurtling down in a merciless downward spiral for the past 8 months has seen a Monday morning surge. The index is up more than 7 pct on assurances from finance minister P Chidambaram that the government was working on more measures to improve liquidity.
But will liquidity revive the markets and restore confidence?
For its part, India’s top private sector lender ICICI has unleashed an unprecedented information drive (on TV, by email and SMS) to assure depositors that all is well with the bank.
Over the past months, the world which went flat so that business could go where it’s done best might have actually shrunk. Pundits and punters talking about the Great Depression of the 1930s as if it was a Friday movie release that was not well-received.
the stock market is getting shady these days, with indexes going down and even big trading institutions losing hundreds of millions, so I wouldn’t buy my portfolio right now, neither would I sell anything I’ve got. Are we at the bottom? It’s impossible to know, usually nobody know the future, especially with stocks, but currently it’s even more less predictable. Better invest in gold.
Me panic? I’m not panicking! Who is panicking?
Would someone please remind folks that it’s Friday and we all deserve a relaxing weekend? I for one will be doing my usual Saturday morning Yoga. But it’s nasty out there – the contagion has spread, and panic is now the correct adjective.
The overnight Dow crash hit Asia hard – the Sensex is down at least 9 percent and looks like it’s headed for a holiday south of 10,000, the rupee has hit an all time low and in Japan the Nikkei tumbled another 10 percent. Looks like that decision to let Lehman go bust set off the mother of all chain reactions…and Indian markets may be headed back to 2006 levels.
Here’s our resident technical analyst Phil Smith:
…As the chart shows the SENSEX has broken through some very strong and very important support points in the past couple of weeks. These are clearly showed on the chart with the support at 11,900 to 12,500 being broken effortlessly. The next major support levels for this market now stand at around 9,700 as marked and coincides with the old support levels reached back in 2006 when the market staged its dramatic correction then. Currently all the technical indicators are bearish as they have been since the middle of September
Once again, all eyes are on Washington, where on Saturday President Bush (remember him?) will meet finance ministers from the world’s wealthiest countries. The IMF will be there too with emergency funds available.
But is this the time for traditional remedies? A coordinated rate cut by central banks on Monday feels like ancient history. So what’s next? The U.S. government is talking about taking large stakes in banks to ensure liquidity (meaning free marketeer President Bush may preside over the largest nationalisation of banks in history!)
And that’s what it may take, because every other kind of faith seems to have been tossed aside – banks are simply refusing to lend. Here in India, Chidambaram is still calling for calm – insisting the fundamentals are strong.
For me, am not panic because the money i have invested in shares is around one lakh and moreover its already under 80% loss, so not a big amount remaining to loose. Iam currently working in Europe and here the situation is worsening day by day ; In USA the situation is damn worse doesnt know what will be the future; Good news is that G7 is ready to support & save the banks if they are under crisis; Since our indian banks doesnt involved in sub prime mortgage business, the impact is less.Anyway, as Mr.Chidambaram said, we have wait and watch instead of getting panicked.I didnt see real estate market prices goin down in india and this ensures that our economy is sound enough to sustain during the crisis.Finally STAY COOL ,continue what you are doing now in a precise manner
