India is experiencing fluctuating equity and bond market and totally driven by economic data. In the last 4 weeks, Indian equity market experience deep cut and subsequently great comeback. Indian currency fall was dramatic and in the same manner the rebound. In the last 4 weeks, analyst on daily basis offered different views similar to currency fall and rebound. In the mean time reserve bank came out with few measures to control steep Indian currency fall but failed to control that. Finance ministry came out strongly with multiple measures to control gold import to curb CAD. Oil marketing companies where allowed to increase gasoline price by 10% to negate currency impact. Cabinet Committee on Investment cleared stalled mega project in the infrastructure segment to kick start economy. Coal ministry forced Coal India to sign FSA with power generation companies struggling to procure coal and subsequently forced to import coal at higher price. The aim was to make sure the local coal delivery and at the same time improve on CAD. Power ministry allowed PSU to import Gas without duties and deliver it to gas based power plant. The financial market regulators came out with an option for NRI to buy stock through FII route and similar approach was announced for the bond market.
All initiative looks very good and change of RBI government fuelled Indian equity market and market recovered all the losses which happened in last 3 weeks. The bumper news came out with higher export growth and low gold import which impacted CAD to be around $10 Bn instead of analyst expectation of $14 Bn plus. Street cheered low import of Gold and all of us felt that India is able to control the import of gold. If we feel so then its grossly misjudgments.
The positive IIP and inflation number released early this week turned many bears into bulls and started talking economy is bottoming up and in next two quarter, there would be upwards growth surprise. Even Prime Minister economic advisor also predicted to achieve 5.3% GDP growth.
The reality is simple. None of the business houses announced any investment plan instead all are struggling to control their financing cost which they have taken to complete mega project but unfortunately most of the project got delayed due to environment and land acquisition delay. Major steel project was pulled out due to continual delay in the said areas.
High taxes, duties and interest rates are keeping investment climate in negative mode. The employment opportunity is near to zero as all companies are trying to control cost to keep afloat.
There is no control to put the curb on imports which is hurting steel, power sector and thus even India best PSU’s as well as private companies are struggling.
Any policy decision is not going to be reflective by the end of this year and then it would be general election fever which is going to stall the decision making process.
I am surprised that how on my TV channels, the views on economic climate changes within hours.
