New Government Old Politics

I am writing this after a long time. In the meanwhile as the powers that be changed and exchanged their jobs, me too changed the job (you can find out about it on my profile). The last month has proved it again that as more things change, they remain the same. The Loksabha saw the first skirmish of what was to come in the next five years. DMK and UPA do not seem to see eye to eye on the disinvestment issue. That caused the stock markets to lose 500 point on the sensex and gain 450 points in a matter of two days. Now, was this a predetermined trading strategy is any body's guess.

The Nifty has relentlessly gone up from 2550 pre-elections to 4500 post elections and has made a lot of investors richer. What should one make of this near doubling of the nifty? May I remind you of the October lows (i.e. 2008 October). In the last eight months majority of the front line stocks have posted phenomenal returns, Reliance, SBI, RCOM, Reliance Capital, Reliance Infra, Reliance Industrial Infra, Suzlon, the list goes on...

Has the economic outlook changed so drastically that the despair of the markets has gone and the economic boom is right round the corner? Has the global financial crisis blown over? Does a change in the leadership in Government (in this case no change) make such a difference that people will throng to the stock markets and buy whatever comes their way at whatever the price? We have heard that markets are irrational but are they so irrational that they DOUBLE IN EIGHT MONTHS?

Given these circumstances, we can reach to two conclusions.
1. The markets were artificially brought down and a panic situation was artificially created so that gullible people sold out at lower prices. The economic situation had not worsened at all and everybody was crying WOLF.
2. The economic situation has really worsened and there seems to be hope that things will turn around. This hope has made the markets rebound and get ready for scaling new heights. The worst is over and out and things will be great once again. Our PM also corroborates this statement that India has the capacity to grow at 9% p.a. despite the slowing growth world over.

I would like to leave these question open for discussion...

Please feel free to leave your comments at the end of the blog.

TWO CIRCUITS AND A SCAM

The Indian stock markets hit two circuits and were closed for the day. It was an unprecedented thing that happened.

A decisive win for the UPA has brought back the bulls in the market with a long list of wishes.

1. Easing of FDI norms for Insurance sector.
2. Reform in the banking sector (especially on the labour laws side)
3. Disinvestment from public sector undertakings to make up for the deficit brought about from last year's doles.
4. Dismantling of the Administered Pricing mechanism for petroleum products.
5. Easing of interest rates and making credit available to the industry.
6. Boosting exports by implementing a new export promotion policy.
7. Spending more money on health, infrastructure and education.
8. FDI in the aviation sector.

I HAVE ONLY ONE COMMENT TO MAKE FOR ALL THIS WISH LIST. THIS LIST WILL REMAIN A LIST AND YOU WILL PROBABLY BE ABLE TO SEE ONLY 40% OF THIS LIST COMING TRUE IN THE NEXT FIVE YEARS.

AS FAR AS THE MARKETS ARE CONCERNED THE REGULATORS ARE NOT IN SYNCH WITH THE MARKETS AND THEY NEED TO REFORM THE MARKET FIRST. A TRADING OF 300 ODD CRORES CAN STOP THE MARKETS FROM TRADING AND CAUSE A UPPER CIRCUIT. THIS IS THE BIGGEST SCAM OF ALL TIMES AND NEEDS TO BE PROBED.

Additional reading http://www.moneycontrol.com/india/news/market-outlook/nothing-to-be-proud-of-vk-sharma/398047/1

If the market can be easily manipulated with 300 crores then it is a very shallow market. We first need stock market reforms and we need a regulator not an opinion maker in the regulators seat.

All the best.

Foot in the mouth disease affects me

The UPA has won. It just needs either SP or BSP to lend a hand to the HAND. Dr. Singh will be KING again and keep the seat warm for the heir apparent. Now the question shifts to who will handle which portfolio? PC will have to reboot through the Rajya Sabha. Laluji has a strength of TWO so he has no hopes of making it to the cabinet.

What about the markets? Nifty will be on a new Government honeymoon from Monday and will surely scale up to 3950. It faces a technical resistance there (may be the market may not like the new cabinet or the new FM). If this resistance is breached then we can safely assume (FII Gods and world markets willing) to go up to 4250 in this pre-budget rally. By the way, we are in for a fresh budget from the new Government, the February charade was just a vote-on-account. A vote-on-account is just a permission from the outgoing parliament to splurge for three more months.

With fiscal deficit going out of the hands of the government and no new investment forthcoming the new government will have an up hill task of keeping the economy on the growth track. Our banks may not need a stress test but they sure will need some prodding and some loosening of norms for doing their regular job of credit disbursement. Of course they will have to be assured by the new government that the loans they give will not be waived off again and even if they are waived off, they will be compensated fast.

Now you will also see some more woe stories coming from foreign and not so foreign investors about the state of the economy not being conducive for fresh investment. Things like the limits on foreign investment in retail, insurance and MEDIA will be tossed around. These will be bandied around as reasons for the stock markets not performing well.

The MEDIA moguls need a pat on the back with loosening investment norms for all the PR that they have handled splendidly for the first family of India.

This will be the term when Dr. Singh will have to actually demonstrate that the nuke deal will actually fructify into a win-win formula for our country.

If you happen to read my earlier blogs you will notice a sea change in the style of writing. You will find this more blunt and more prophetic (to say the least). That is because, now that I have bungled once on the predictions of the elections results, I have developed a common disease prevalent in the political arena of our country "The Foot in the Mouth disease". Now it doesn't matter if my predictions are right or wrong I was wrong once anyway!