morning thoughts...
As said and expected the
markets stayed in a range but there were spectacular gains in individual stocks
and sectors.
Technically the same trend
is likely to continue with intermediate corrections but that would be an
oppurtunity to create short term longs
The RBI has maintained
status quo on repo rates. Meanwhile, it has cut the statutory liquidity ratio (SLR) by 0.5%. In
keeping repo rates unchanged, RBI has stuck to its role of maintaining currency
stability. As far as India Inc is concerned, around 70% of the total debt of
BSE 500 companies (non banking and non finance) belongs to net importers. Even
as India Inc. expects better times ahead, any slip on currency aspect may lead
to margin erosion. And that in turn may impact the credit profile or result in
rating downgrade for some firms. At the same time, a cut in SLR is likely to
ease up credit flow to private sector, so that it can make the most of growth
measures likely to be taken by the new Government.
Coming back to growth- inflation dilemma, now that Mr. Rajan and Modi are to work with each other, it is time to shed some myths. It is not because of RBI's stance on interest rates that growth has taken a set back, for an economy like India, inflation issue is rooted in supply side gaps. The role of RBI is to maintain the currency stability. In maintaining interest rates, it is not constraining the economic growth, but merely responding to the years of mess in the economy.
The solution to current economic problem lies not in easing interest rates. For a stable recovery, India needs to address supply side loopholes that can also lower inflation. And that is something under Government's control. Some of these measures include removing logistic bottlenecks. Food wastage in India is a case in point. The economy is bearing double costs, first due to food wastage and then on account of food subsidies. Not to mention the food inflation, the prime inflation driver. Similarly, huge subsidies on fuel sold by state run oil companies have restricted private sector participation. Perhaps by introducing rational taxation for fuels, the Government can move on to controlling subsidy expenses. That will create a level playing field for public and private firms in the energy sector, ensuring better supplies and lesser costs for the fuel.
We do believe that urgent supply side reforms are necessary for the RBI to act decisively on interest rates. However, we would like to reiterate that the RBI, given its conservative stance, is unlikely to be in a hurry to cut rates. Which in turn means that investors and corporate looking forward to the lower interest rate cycle will have to be patient. Until and unless the new government can reasonably assure the central bank of its actions to keep prices rise under control, the governor may not relent. And hence it will be too risky to speculate on whether we are on the cusp of reversal in interest rate cycle.
Coming back to growth- inflation dilemma, now that Mr. Rajan and Modi are to work with each other, it is time to shed some myths. It is not because of RBI's stance on interest rates that growth has taken a set back, for an economy like India, inflation issue is rooted in supply side gaps. The role of RBI is to maintain the currency stability. In maintaining interest rates, it is not constraining the economic growth, but merely responding to the years of mess in the economy.
The solution to current economic problem lies not in easing interest rates. For a stable recovery, India needs to address supply side loopholes that can also lower inflation. And that is something under Government's control. Some of these measures include removing logistic bottlenecks. Food wastage in India is a case in point. The economy is bearing double costs, first due to food wastage and then on account of food subsidies. Not to mention the food inflation, the prime inflation driver. Similarly, huge subsidies on fuel sold by state run oil companies have restricted private sector participation. Perhaps by introducing rational taxation for fuels, the Government can move on to controlling subsidy expenses. That will create a level playing field for public and private firms in the energy sector, ensuring better supplies and lesser costs for the fuel.
We do believe that urgent supply side reforms are necessary for the RBI to act decisively on interest rates. However, we would like to reiterate that the RBI, given its conservative stance, is unlikely to be in a hurry to cut rates. Which in turn means that investors and corporate looking forward to the lower interest rate cycle will have to be patient. Until and unless the new government can reasonably assure the central bank of its actions to keep prices rise under control, the governor may not relent. And hence it will be too risky to speculate on whether we are on the cusp of reversal in interest rate cycle.
On the lower side major supports exists at around 7035 levels
on the nifty front which is a big cushion for the markets.
Coming to the commodity markets bullions , base metals and
energy looks positive for short term and the startegy remains to buy on dips
AFTER THE HUGE SUCCESS OF CONVERT 10K INTO 1 LAC-
CONVERT 30K INTO 3 LACS VIA OPTIONS ( LIMITED OFFER AND SEATS
)
LAST DAYS CALLS CREATED WEALTH YET AGAIN-
OUR ADVANCE NIFTY YIELDED 790 POINTS IN NIFTY AND 2500 POINTS
IN BANK NIFTY IN 15 DAYS
Cash call Balrampur chini rose 8%
Jackpot Tata steel rose 30 rs
Fo Bharti airtel rose 11 rs
Double bumper – Jindal steel 320 ca , tata steel 500 ca
doubled
Gold gave 115 rs , silver gave 357 rs , crude gave 55 rs
