Good catch. I expect this gap to narrow down going forward. This divergence has been going on for quite a while and with the emerging market theme getting from bad to worse and with no concrete respite seen from the currency, it would be no surprise to see the gap plateauing out, as early as 2014.
the dollex is at lows, so from the point of view of the FII the nifty is at 2011 lows already. It will be interesting to see what FII would do from this point onwards. Below the last support there are no major supports till March 09 lows for Dollex.
the dollex is at lows, so from the point of view of the FII the nifty is at 2011 lows already. It will be interesting to see what FII would do from this point onwards. Below the last support there are no major supports till March 09 lows for Dollex.
I came across an article by the incoming Gov. of the RBI where he has argued for increasing interest rates to improve the US economy. Of course Krugmann & his ilk are arguing for more monetary stimulus. So I do not expect him to decrease interest rates. On the contrary he will be forced to increase interest rates to prevent the rupee from collapsing. This will chew up growth in the short term & push the govt. to the wall. Only then will some sanity return to their policy stance.
Ridhim Desai gave a very good interview today on CNBC & his points reinforced what I have been feeling all along.
My views are as follows:-
1. Over the past 6 years the govt. has been merillly spending money on programs (NREGA & Fuel subsidies) that did not create assets or long term capabilities. This was masked when the economy was doing well but the bills are now coming due in the form of high deficits.
2. Policy actions over the years have lead to a steady erosion of manufacturing activity which has been substituted by imports.
A classic case - the sticks used to make aggarbattis are now imported from China(at 25% higher cost) because the rules now framed do not allow for easy transportation of the indian bamboo sticks. So add Rs. 100 Cr to the CAD.!!
3. Real interest rates are negative & this is affecting the poor & lower middle class. So domestic savings have been diverted to gold as a hedge against inflation & depreciation of the rupee. Naturally the CAD gets clobbered.
4. An artificial price boom has been created in the real estate sector & has also tied up a lot of income (as EMIs) of the middle class.
5. Capex cycle has stopped & so no new incremental economic activity is taking place. Only Services & Agriculture were growing & possibly with the rupee fall & good monsoons we will see these 2 sectors continue to do comparitively well.
6. The remedies for all the problems are within our grasp. But it will require a resetting of thinking on the part of the govt. But this present dispensation only believes in splurging money on fancy schemes with poor record of actual effectiveness & efficiency.
Coming to Japan - their demographics were different. The have an aging population & interest rates effectively kept at Zero. Inflation was virtually non existent. So people preferred to amass savings & postpone consumption as they had to save for their retirement. Also the structural issues of their bank bubble & Real Estate Bubble were never properly tackled. But Abbe is going down an un-chartered path with his policy of massive stimulus. Could be risky as their overall debt is pretty much excess as it is.
Compared to the western economies our debt position is much better @ around 60-80% of GDP. Not to mention the largest holding of physical gold in the world, mainly in private hands. The main issue is that we have tied ourselves into knots due to policy mis-steps. Also our actual consumption levels are so pathetic that it is essential for us to have high growth to keep social tensions under control. The govt. has started taking some corrective steps, but these will take some time to filter down to the economy. So hopefully the next govt. will get the benefit of these steps & build on the momentum.
I am looking at improvement in the Economy only from mid 2014. Till then it may make sense to park your money in FDs & debt. Do not sell good stocks in panic. I have seen many dramatic reversals of sentiment & at taht time it becomes virtually impossible to catch the stocks on the rebound.
p.s. : If anybody wants the Rangarajan article pls. pm me ur email & I will send it across. it is a PDF & I Could not attach it here.
Ridhim Desai gave a very good interview today on CNBC & his points reinforced what I have been feeling all along.
My views are as follows:-
1. Over the past 6 years the govt. has been merillly spending money on programs (NREGA & Fuel subsidies) that did not create assets or long term capabilities. This was masked when the economy was doing well but the bills are now coming due in the form of high deficits.
2. Policy actions over the years have lead to a steady erosion of manufacturing activity which has been substituted by imports.
A classic case - the sticks used to make aggarbattis are now imported from China(at 25% higher cost) because the rules now framed do not allow for easy transportation of the indian bamboo sticks. So add Rs. 100 Cr to the CAD.!!
3. Real interest rates are negative & this is affecting the poor & lower middle class. So domestic savings have been diverted to gold as a hedge against inflation & depreciation of the rupee. Naturally the CAD gets clobbered.
4. An artificial price boom has been created in the real estate sector & has also tied up a lot of income (as EMIs) of the middle class.
5. Capex cycle has stopped & so no new incremental economic activity is taking place. Only Services & Agriculture were growing & possibly with the rupee fall & good monsoons we will see these 2 sectors continue to do comparitively well.
6. The remedies for all the problems are within our grasp. But it will require a resetting of thinking on the part of the govt. But this present dispensation only believes in splurging money on fancy schemes with poor record of actual effectiveness & efficiency.
Coming to Japan - their demographics were different. The have an aging population & interest rates effectively kept at Zero. Inflation was virtually non existent. So people preferred to amass savings & postpone consumption as they had to save for their retirement. Also the structural issues of their bank bubble & Real Estate Bubble were never properly tackled. But Abbe is going down an un-chartered path with his policy of massive stimulus. Could be risky as their overall debt is pretty much excess as it is.
Compared to the western economies our debt position is much better @ around 60-80% of GDP. Not to mention the largest holding of physical gold in the world, mainly in private hands. The main issue is that we have tied ourselves into knots due to policy mis-steps. Also our actual consumption levels are so pathetic that it is essential for us to have high growth to keep social tensions under control. The govt. has started taking some corrective steps, but these will take some time to filter down to the economy. So hopefully the next govt. will get the benefit of these steps & build on the momentum.
I am looking at improvement in the Economy only from mid 2014. Till then it may make sense to park your money in FDs & debt. Do not sell good stocks in panic. I have seen many dramatic reversals of sentiment & at taht time it becomes virtually impossible to catch the stocks on the rebound.
p.s. : If anybody wants the Rangarajan article pls. pm me ur email & I will send it across. it is a PDF & I Could not attach it here.
Last edited:
Thanx for the insights.
1) Regarding the Japan episode we know about the demographics and the realestate bubble. But what I am actually looking at is the following
- whether the Nikkei registered growth in EPS over these 2 decades of bear market, if yes , what kind of growth
-I think it was Jim Rogers (correct me if I am wrong ) who took out the investments from Japan when the index PE touched 35. So it would be interesting to know how the PE behaved during the bear market.
-Japan had many MNCs, which i guess were not dependent on their domestic economy, did these stocks also went down in same manner.
- What has been the scene for the domestic mutual fund industry and the broking industry in this bear market
2) In case of India, it might become a case of stagflation (no growth with increased inflation) which might also keep the stock markets in bad shape and erode the wealth of the public. As you yourself pointed out that real estate prices are artificial, so there is a chance of the bubble bursting which can lead to serious effects on the banking sector. Though it is an extreme scenario, still the possibility exists.
Wish someone could throw light on some of these points
1) Regarding the Japan episode we know about the demographics and the realestate bubble. But what I am actually looking at is the following
- whether the Nikkei registered growth in EPS over these 2 decades of bear market, if yes , what kind of growth
-I think it was Jim Rogers (correct me if I am wrong ) who took out the investments from Japan when the index PE touched 35. So it would be interesting to know how the PE behaved during the bear market.
-Japan had many MNCs, which i guess were not dependent on their domestic economy, did these stocks also went down in same manner.
- What has been the scene for the domestic mutual fund industry and the broking industry in this bear market
2) In case of India, it might become a case of stagflation (no growth with increased inflation) which might also keep the stock markets in bad shape and erode the wealth of the public. As you yourself pointed out that real estate prices are artificial, so there is a chance of the bubble bursting which can lead to serious effects on the banking sector. Though it is an extreme scenario, still the possibility exists.
Wish someone could throw light on some of these points
So one needs to be the MD of an international bank for his/her words to be taken seriously? Wow! Even if this person keeps changing his/her views like changing his socks( hope he/she does it though). Nothing has changed in the last couple of months, for that matter in the last couple of years. Why this change in the stance then? If one has a genuine view on the market like I have, irrespective of the circumstances the view should remain intact. These people are opportunistic in nature playing with free/public money and do nothing short of gambling in the stock market and try to influence the market movement in the direction of the market positions held by them. I give a damn, to what these guys say...
"Jun 01, 2013, 03.50 PM IST
India in for 15% rise by Dec; like financials: Ridham Desai"
@poortrader, the situation prevalent in Japan( lost decade ) and the one seen in India today, are completely a 'tale of 2 cities'. Will find time to post my views in the days ahead.
"Jun 01, 2013, 03.50 PM IST
India in for 15% rise by Dec; like financials: Ridham Desai"
@poortrader, the situation prevalent in Japan( lost decade ) and the one seen in India today, are completely a 'tale of 2 cities'. Will find time to post my views in the days ahead.
Hello Sridhar,
Your article was insightful. It puts in words what a lot of people feel.
In it, I found myself fixated on one projection: "I am looking at improvement in the Economy only from mid 2014.". That is within an year. It appears optimistic.
The situation is very bad from the inside. This month we saw a massive exodus by the "Retail Client" category. However, the Index is still at decent levels only because FII have held on.
The two categories, FII and Retail, look at different parameters to take major decisions. FIIs, I suppose, are driven by availability of cash and are opportunist, whereas Retail guys (HNIs, Props etc) have their own money to manage and are mostly India-centric.
Retails have cast their vote, the sign is on the wall. The economy is doing badly. So it is not the hope of growth that it keeping the FII, it is availability of cash.
If FED increases interest rates which will channel liquidity into US Bonds, then sharp correction will definitely ensue in India because of poor policy making. If this correction catches momentum then things will turn for the worse.
And how likely is that to happen?
In my opinion, very! FED wants to increase rates but is waiting for an opportune time. It showed its intention in the last meet and the world markets crashed hence it had to rescind. US has zero interest rates right now and the only way to go is up.
Your article was insightful. It puts in words what a lot of people feel.
In it, I found myself fixated on one projection: "I am looking at improvement in the Economy only from mid 2014.". That is within an year. It appears optimistic.
The situation is very bad from the inside. This month we saw a massive exodus by the "Retail Client" category. However, the Index is still at decent levels only because FII have held on.
The two categories, FII and Retail, look at different parameters to take major decisions. FIIs, I suppose, are driven by availability of cash and are opportunist, whereas Retail guys (HNIs, Props etc) have their own money to manage and are mostly India-centric.
Retails have cast their vote, the sign is on the wall. The economy is doing badly. So it is not the hope of growth that it keeping the FII, it is availability of cash.
If FED increases interest rates which will channel liquidity into US Bonds, then sharp correction will definitely ensue in India because of poor policy making. If this correction catches momentum then things will turn for the worse.
And how likely is that to happen?
In my opinion, very! FED wants to increase rates but is waiting for an opportune time. It showed its intention in the last meet and the world markets crashed hence it had to rescind. US has zero interest rates right now and the only way to go is up.
Similar threads
-
Nifty option strategy chart in Dhan Optiontrader
- Started by MetatraderUser
- Replies: 3
-
-
-
-
NSE Changes Nifty Bank Expiry Day to Friday for Future and Options Contracts
- Started by DreamDeal
- Replies: 11