global economic crisis

The joke doing the rounds since yesterday is quite cheeky! It goes “Du-bai or not Du-bai that is the question”. Ha! Quite tongue in cheekish but appropriate all the same. When the markets open this week that’s the first question that traders and investors the world over have to answer. In a previous article posted this month titled ‘Signs Of A Correction’ , I remember ending that post with these words and I quote straight from the article “A correction around this time is likely to be a drawn out one. Price wise and time wise unless of course some big event casts its shadow and spooks the market leading to a tremendous fall.”

The events related to Dubai and the news that comes out of there this week has the potential to be that ‘Big event which spooks the market’. It’s something that can shift the Indian market from the current bullish gear to a selling, fear driven frenzy.

Firstly, on behalf of theindiastreet.com I would like to wish all our readers a very happy and fun filled Diwali. We hope that the Festival of Lights and the Goddess of wealth help you to prosper and be a part of the growth that the Indian economy is witnessing.

A year ago at around the same time, I remember posting an article titled ‘A Dull Diwali Sets In’. Looking back at the Diwali of 2008, the constant theme of pessimism, the calamitous overtones of the world economy and the future of the Indian markets had seriously bummed out the millions of Indian investors. Some of the Traders on Dalal Street were not even in a half decent mood to light a firecracker during Diwali.

What a difference a year can make! The fireworks have exploded on the Sensex and the Nifty. The most hearty thing to see that the same people who were so depressed and unhappy last year are a lot more optimistic and smiling. Definitely Samvat 2066 looks a lot happier than Samvat 2065.

When the markets open next,we’ll be a day away from a brand new month of trades and investments. September is usually but not strictly the month when market indices start to head south. A lot of selling activity takes place during this month. This is a historic trend. To see how the market behaves at a time when the news of late has been much better than before, with the recession receding and all that , will be interesting to observe.

Many of the fund managers and market analysts I’ve heard from seem to agree that at the current levels the Sensex and the Nifty will find it hard to maintain. So are we then heading towards a correction?

A three day losing streak was broken today with the Sensex ending a slight inch ahead of the 15,000 mark. The flat closing is indicative of both bullish patterns and bear trends dominating the market. The bear phase we saw for most of last year and much of this year has eased significantly since the middle of March. The American economy too seems to be doing a lot better; I mean that in a market sense not in the overall scheme of things though unemployment figures have thankfully reduced. The Dow Jones has started to reflect money once again coming back into the equity markets.

The Indian case is similar except that the volume of shares being traded and the ease with which money is flowing through the Sensex is much more comfortable because India continues to be seen as a good investment destination.

At the recently concluded G8 summit Prime Minister Manmohan Singh was quite candid. Aggressive even, as compared to his normal docile self. He made no bones about the fact that the global economic crisis was the doing of the western developed economies and countries like India, China and Brazil had been unwittingly dragged into it. These countries are not a part of the G8.They didn’t cause the problem but have been invited to be a part of the solution again and again. There’s a lot more that they can do but the G8 want the G5 (Mexico, China, Brazil, South Africa and India) to help by parting with resources (read money) but don’t want to acknowledge their economic power – at least officially on the world stage.

Pranab Mukherjee’s first full scale fiscal budget after twenty five years has been a classic case of trying to balance expectations just as well as numbers. The pressure on the Finance Minister has been considerable since he presented a very droll interim budget in the previous government. Mr. Mukherjee knows that he can’t please everybody and this budget has shown that he has tried not to but he’s done a reasonable enough job to stick to his stand. Not everyone is happy and not everyone is sad after the budget.

Pranab Mukherjee’s recent appointment as India’s new Finance Minister has received a widespread ‘Thumbs Up’ from corporate to middle class India alike. The new Finance Minister’s priority will also be towards bringing in social reform which was extensively promised in his Congress Party’s election manifesto. The 74 year old clearly has his work cut out for him. He takes over a Finance Ministry that has been dealing without a leader for quite some time. In this article we take a look at the key areas the new Finance Ministry needs to deal with.

India’s inflation problem is over for the next few months.Unfortunately it’s given birth to the problem of Deflation.  A situation in which there is a decline in the level of prices. Many will ask why this is a bad thing? Especially when Indian business watchers have been shouting that the inflation level has been too high. What could possibly be wrong if you get to pay less for a product that cost a lot more in the previous months. You will pay less in the near term thanks to deflation but if the same condition persists over time then many will end up losing their jobs.

For the first time in a really long time, the men and women at Dalal Street have smiled. Along with them the millions of small investors have a reason to be happy. The Sensex is once again a five digit number. The concluding week has been one small ray of light in a very dark and murky economic storm. Hopes have been re-ignited that this is indeed the birth of a new bull market. We’ve seen such sentiments in the past, and they’ve proven to be false.

The birth of a new bull market is sometime away but this short term rally has indicated that the all important market bottom is being or has already been formed.

The GDP figures for the third quarter are in and they are disappointing but as we’ve been saying for some time now, to expect India’s GDP to grow at the same rate as it has done so for the past five years in this economic environment is foolhardy and simply not possible. The estimates for GDP growth in the third quarter of the fiscal year has left the government with a lot of egg on its face. A growth rate of 5.3 in the third quarter is not reason to get angry but the fact that we kept hearing from officials that India would grow at 7% and beyond is irritating.