Yet another day of rally. Yet again the SENSEX crosses 15000. But not convincing enough - Atleast for me.
With DMK and TMC announcing their reservations and objections on the issue of disinvestments of PSUs, the stage was set for the markets to move south. It did start in that direction but the moment the PM made his speech in Lok Sabha, the bulls took over the market. A Classic example of people buying a story.
Let’s have a closure look at what the PM said. (Source: http://www.loksabha.gov.in/)
“......More recently, particularly in the last one year because of the international slow down our economy has been affected. Our growth rate which was about 9 per cent, annual growth in the previous four years has declined to about 7 per cent. We live in an increasingly inter-dependent world economy and I cannot promise you that we will not be affected by global events but I am convinced since our savings rate is as high as 35 per cent, given the collective will, if all of us work together, we can achieve a growth rate of 8 to 9 per cent even if the world economy does not do well. This shows we will maintain, at least, 7 per cent growth rate. In the short run, we cannot do better but this is not good enough. Therefore, the ambition that our Government has is that notwithstanding developments in the global economy, our country must have the resilience to so manage its affairs that it grows at the annual rate of 8 to 9 per cent. I am convinced it can be done with the cooperation of all sections of this august House. That will be the direction in which we will be moving....”
He has only indicated that it is quite possible for us to raise the growth levels to 8 to 9 percent. There was no indication of any plan or display of any data supporting the PMs wish. Moreover he has not stated the year in which he would like to have the growth rate at 8 to 9 percent.
On the contrary, look at what IMF said in their last update on India, posted on their website.
“ For India, the report forecasts growth to slow markedly in 2009 before starting to rebound toward year end. Although its still relatively low dependence on exports will contain the transmission of the global demand shock, India will be particularly affected by the financial shock, because the strong investment growth in recent years owed much to favorable credit conditions. With external financing having tightened and the domestic credit cycle having turned, investment growth is expected to be severely curtailed, and so is GDP growth.”
With DMK and TMC announcing their reservations and objections on the issue of disinvestments of PSUs, the stage was set for the markets to move south. It did start in that direction but the moment the PM made his speech in Lok Sabha, the bulls took over the market. A Classic example of people buying a story.
Let’s have a closure look at what the PM said. (Source: http://www.loksabha.gov.in/)
“......More recently, particularly in the last one year because of the international slow down our economy has been affected. Our growth rate which was about 9 per cent, annual growth in the previous four years has declined to about 7 per cent. We live in an increasingly inter-dependent world economy and I cannot promise you that we will not be affected by global events but I am convinced since our savings rate is as high as 35 per cent, given the collective will, if all of us work together, we can achieve a growth rate of 8 to 9 per cent even if the world economy does not do well. This shows we will maintain, at least, 7 per cent growth rate. In the short run, we cannot do better but this is not good enough. Therefore, the ambition that our Government has is that notwithstanding developments in the global economy, our country must have the resilience to so manage its affairs that it grows at the annual rate of 8 to 9 per cent. I am convinced it can be done with the cooperation of all sections of this august House. That will be the direction in which we will be moving....”
He has only indicated that it is quite possible for us to raise the growth levels to 8 to 9 percent. There was no indication of any plan or display of any data supporting the PMs wish. Moreover he has not stated the year in which he would like to have the growth rate at 8 to 9 percent.
On the contrary, look at what IMF said in their last update on India, posted on their website.
“ For India, the report forecasts growth to slow markedly in 2009 before starting to rebound toward year end. Although its still relatively low dependence on exports will contain the transmission of the global demand shock, India will be particularly affected by the financial shock, because the strong investment growth in recent years owed much to favorable credit conditions. With external financing having tightened and the domestic credit cycle having turned, investment growth is expected to be severely curtailed, and so is GDP growth.”
I wonder whether the market is taken over by speculators and quite possibly few operators. I don’t think there can be a big difference in the projections of IMF and the reality (actual) . I also do not see anything concrete on the floor, in the form of data, to make me believe that the growth can be accelerated from the current levels so quickly.It is a common sense - that it is easier to take a U-Turn in a bicycle and quite difficult to take quick U-Turn in a big ship. The reversal of Indian Fortunes have few external factors and contributors as well. Quite a few ifs and buts are involved like Bangalore Vs Buffalo policy of US.
I will be extremely happy if India grows at a rate of 8 to 9 percent in 2009-2010. But until I see economic data and leading indicators pointing in this direction, I would not fall for such news. This is just another excuse for the Bulls to take the markets higher and show their strength.
Hopefully people will start looking at the blockages that are likely to be placed by TMC, DMK and possibly few more allies on the disinvestment issue and reduce that bit of extra fat from the market cap, built on the PSU expectations.
Hopefully people will start looking at the blockages that are likely to be placed by TMC, DMK and possibly few more allies on the disinvestment issue and reduce that bit of extra fat from the market cap, built on the PSU expectations.
Disclaimer: All information and views posted by me in the blog are solely my views and opinions and do not necessarily reflect the truth or the real situation. The material and information contained on this post is provided for pleasure reading only. You are requested to consult your Financial Advisers before making any Investment related decisions. I do not recommend or suggest any investment decisions for any of the readers of this blog. I therefore do not accept liability for any loss one might incur, by taking decisions based on my posts.
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