The current consensus
on India is very deprssing, and it is difficult to
find a real bull among major market participants.
Almost everyone is underweight India in a regional
or even broader emerging markets context and we
have already seen outflows of more then $7
Trading volumes have collapsed, investor visits
reduced and the hype around the India story almost
totally dissipated. Analysts trying to market the
India story keep reporting total disinterest among
the investor base, and raising new money for India
is extremely difficult.
With such a sea change in sentiment it would be
helpful to remember "how we got here in the first
place". While financial markets globally are
in turmoil, India has had some specific issues.
The India story got derailed for three or four
Inflation spiked and forced the RBI to tighten
aggressively, effectively choking growth and
hitting corporate profitability. Growth
expectations had to be revised downward for the
first time in five years.
The unanticipated surge in oil prices blew a huge
hole in both the fiscal and current account;
Wrong valuation with high expectations and there
was excessive hype.
The government in its desire to get re-elected
began to pursue suboptimal policies; viz. The farm
loan waiver, higher than recommended pay hikes,
industry level price controls, inability to cut
Now low rainfall also fails indian economy in big
way. Price may rise more.
First of all, we will have a new government in
place with hopefully a five-year term. As per
previous performances and reform policy we can
expect good future.
New tax policy may reduce the burden of High price
and help people for more money for investment.
Now gove is more or less with free for large
coalition. Given the disappointment on this front
in the last four years, any policy action will be
Next elections are far so more responsible is
government economic decision making.
Inflation will be around 6%. With inflation under
control RBI will be about to commence an easing
cycle and in last few months we have seen the new
policy for the same.
Major concern of new Govt is the putting growth on
track rather just manage inflation. GDP is also
more important for market stabilization.
GDP growth will start accelerating and we should
exit the year at an 8 per cent trajectory again.
Thirdly, independent of where oil prices go, the
year ending March 2009 will mark the peak in
India's macro-economic vulnerability to rising oil
At 9 per cent of GDP, oil imports will naturally
drop to below 6 per cent.
In next 6-12 month, we can expect the visible
growth and stock market catch up.
India is in better off the the other country as
far as slow down is concern and
stock market India
is now almost stable or at least not dropping in