Off-date Rate Cut and Stocks...

Today's RBI monetary policy is good for both the short term and long term investors, it is going to roll over to margins and earnings and price expectations from the value perspective, both stocks and bonds are likely to gain, because there has been significant correction in the both... which could increase the speculative demand too, with the consumption demand due to higher real balances with the public... Savings and investment are likely to go upto, too... due to lower prices and higher real wages and profits....


In a month or two the corona virus would be a thing of past... Stimulus would help increase demand and supply and prices and growth... Lower prices are incentive in itself to increase demand and growth....


Lower food inflation and oil prices, could lower inflation and interest rate expectations... RBI has said little about inflation expectations, but cede that inflation and growth numbers are uncertain, but more money supply if passed on the investors and consumers could increase real wages and incomes and demand by the real balance effect as the lockdown fades.... Nominal income would go up too... During 2008 GFC, INDIA recovered faster than other countries on the back of stimulus and lower inflation and interest rates...


Moreover, the policymakers may commit that the stance would be consistent and stable that a roll back in stimulus would only be gradual since the Ricardian Equivalence might work... when people think that the stimulus would be rolled back over the short run, they may not spend...


Companies are trying to sell more shares in the anticipation of more demand they have lowered prices to increase demand of shares of good companies... This is the time to accumulate more stocks... The INDIAN government has tried to control spread of the corona virus by the social distancing... which is the most effective way to curb contagion and is updated with the latest figures from every state... Timely diagnosis and treatment has just cut down the number of casualties... Only 15-20 have died so far... out of a billion it is not that bad... More people die daily in the road accidents...

Virus and Stimuli...

Higher demand, prices and interest rate expectations due to low prices and interest rates could increase spending due to supply chain disruption, however, lower price and interest rate expectations could delay demand and spending and growth...


Statistically not even .001% are affected by corona... China and Singapore have the situation undercontrol we must learn... it has peaked and separating the infected from the population could help lower spread of virus... and treatment... they must be kept under observation, aloof...


The US's central bank is the first to acknowledge that so much potent superpower... The Fed has been intelligent to increase supply and lower prices which would further lower price expectations before it starts increasing again and hold on investment... Lower trade due to low demand would further increase slowdown.... we are in a period of uncertainty and slowdown...


The RBI and government would aggravate the problem, lower borrowing cost would further increase supply and lower price expectation... in this situation increase in productivity would further lower price expectations, business investment is also bad because there is lower price expectation increasing supply would further lower price expectations... From profit point of view we need to increase prices and expectations to increase spending...


The Yes bank episode says that crisis is good, it increases rate cuts expectations, fiscal spending expectations and demand and investment spending expectations due to low demand and prices... to increase the growth rate... The aboves increase real wages and incomes with the real balance effect... Low prices increase investment spending due to speculative demand for money...


Fiscal spending increases income multiplier which increases nominal wages and incomes and lower cost of production reduce consumer prices and increase real wages... The next effect would be higher incomes and spending... Lower borrowing cost would increase real returns on the investment....


Though, this is an unprecedented situation, board exams have never been postponed....it would have an effect like demonetisation, lower demand and prices and growth, also due to low exports/imports -real wages, real interest rate and real exchange rate.... Nonetheless, rate cuts could be a possibility since there is similar expectation, though demonetisation was a wasted oppourtunity in the same terms...


Lower demand and prices need more money supply or money to increase employment and demand which increases price expectations... Lower borrowing cost means more competitive wages and exchange rate, too... but only after full employment.. Lower borrowing cost would make the economy competitive and increase demand when prices are low due to the real balance effect observed in the stocks which increase demand and price expectations...


INDIA still needs to introduce unemployment rate as a forward guidance tool for interest rate decisions... Too much delay in stimulus could delay recovery in the unemployment and prices and growth... Since corona effect is likely to dissipate with time and stimulus could help increase growth before it takes a deep seat... it could be a problem if it is prolonged... recovery could take time...


But, April, May, June are hottest months in INDIA which would it self curb the incidence as the corona virus does not survive long in heat... People must take medicines and food that increase their immunity, could take alcohol in small quantity................


Increase money in the economy to increase production/productivity or increase supply to lower prices and increase real wages, real interest and real exchange rate and demand and price expectations and spending... Lower borrowing cost would have the same effect, increase real wages and real exchange rate and demand and spending and prices and growth expectations...


Delay in stimulus, widely expected would delay spending, especially the investment spending and could prolong slowdown... More money would increase demand and employment and supply and investment and production and growth in the economy... Productivity and employment increasing Fiscal spending is warranted when there is also a need to increase transmission of lower price to the consumers to increase real balances with the public and demand and spending...


More money is needed to increase employment and demand and growth in the economy... There been oversupply in the economy due to low demand and prices... Price correction with stimulus or more money to the public would help increase demand and growth...


A lot of foreign money flowing into China due to big correction and cheap economy could flow into INDIA provided economic policies guard financial stability, stability in inflation and interest rate and expectations... Nonetheless, stability in real wages and real exchange rate is also important for investment and spending decisions... Lower prices increase demand and price expectations and spending...


 It would increase demand and supply both as long as there is unemployment and excess capacity... Money is not directly invested in business, but through the money markets, stocks and bonds, correction in the both could increase value because prices would revert to mean... Markets are wise to maintain a limit on prices, market moves between highs and lows if business is good... The market averages prices to control loss...


The US Fed even after on inflation target is ready to bear high inflation to make up for low inflation due to low demand and growth... INDIA may also have a flexible inflation target, higher inflation target during low demand and growth and low inflation target during high demand and growth to stabilize the economy and inflation and growth expectations...


BJP is very unfortunate to bring the economy out of slowdown started eight years back during UPA... Growth is lackluster... Back to back drought, demonetisation and, now, Corona... have spoiled the growth recovery and employment in the country...


The gov may try to remove ltcgt and impose stcgt on less than 6 months investment to stabilise the stock market... Nudge investors to invest long term...


In the stock market everybody's cost and price may differ unlike the inventory market where cost and prices are rigid and (in the stock market) there is scope to adjust average cost and prices by adjusting money and shares...


This is the time to use Margin Buy, icicidirect provide Margin money to buy stocks either with 20% cash or pledge shares to use Margin... Invest slowly... Invest only when the stock is down more than 20%, buy double shares slowly to keep average cost low... or till average cost is closest to the CMP... Buy with a time horizon of 1 yr... you can borrow at 0% for a yr...


SEBI may withdraw 20% upper circuit to increase demand... We have seen that Yes Bank shares increased more than 50% in a day only.... Some shares do increase 100% in a single day but they are penny shares.... Moreover, it must also include shares in Margin buy, as risk to too much correction is low now... It is less risky to buy with 1 yr time horizon...

Inflation, Transmission (of Rate Cuts), Black Money, Foreign Exchange Reserves, Corona Virus and CAA/NRC/NPR...

Using a deflator of 4% for 18 and 4% for 19 the real GDP growth rate of INDIA is 6.6% in 19 over the last year, inflation has spiked only recently due to seasonal/cyclical factors, due to budget too... People put hold on investment due to lower interest rate expectations, but inflation has cut on the real interest rate and dashed hope for a rates cuts soon... Nonetheless, the corona virus has renewed hopes for rate cut… Higher inflation expectations from low base due to increased demand and price expectations if supply doesn't increase, would also restrict investment in future due to low supply and higher prices and interest rate... Businesses are holding recovery back by not investing and further increasing prices and interest rate and expectations...


If transmissions of reporate cuts do not happen, the RBI may cut real rates considerably lower or to zero, afterall it is the market rates that give positive returns and matter... Lower real repo rates could help transmission to the market rates... Core-inflation excludes volatile food and fuel prices when INDIA has limited capacity to nudge supply to contain prices and demand and interest rates... is close to 4%... Therefore, there are no broader inflation expectations and are largely contained... Oil and food depend upon seasonal and external factors, too, and create uncertainty for growth... But, too much lower interest rate expectations could delay spending as people would hold for bottom or lowest borrowing cost... and when everybody would increase demand and spending it increases prices and expectations....


If Modi could bring all the black money to the banks by offering zero or lower interest rates for 5 yrs or by making digital payment above Rs 2000 compulsory that would be a great service to the Economy... it could help formalisation of the Economy, too... Tax Revenue could increase; it would help increase deposits and lower borrowing rates for business and employment....


Nominal GDP is growing consistently since last few years... Even GDP at constant prices shows consistent improvement over years same site...


The Govt has $ 500 billion in the foreign exchange reserves with the RBI which is lying idle/passive... INDIA's CAD is around $ 70 bllion and the reserve is enough for 6 months imports... The reserve could also help increase investment in skills and productive areas... $ 500 billion is 35 lkn crore rupees... More supply of dollar could lower it and make the rupee strong and oil cheap which could also increase competitiveness of the Economy... The Gov and RBI should try to bring rupee denominated bonds get indexed in foreign indices...


The RBI must make crop insurance and hedge investment necessary for loans... That would make the investments safe....


Export ban on medical products may lower prices (and expectations) of medical equipment in INDIA which would need more investment in the Industry to lower average cost... to contain revenue.... which may also increase prices and expectations in China... Lower price expectations could delay investment in the stock or inventories... Lower borrowing cost could help increase investment and increase supply, further, lower prices (and expectations)... Ban is also not diplomatically ethical... Demand for foreign exchange could go up too.... It’s a bad move...


Expectations of Stimuli due to the coronavirus... Lower cost of doing Business...  may put … Hold on Investment... If Industry lowers consumer prices it would lower the borrowing cost, demand for real wages would be contained down due to higher supply and lower inflation and higher real interest rate and savings/investment and the domestic real exchange rate and exports ie internal devaluation like Germany which is second country with CAS (Surplus)... and higher growth...


The US economy has shown price pressure especially the core-inflation... Lower imports could increase inflation expectations and spending by domestic investors when prices and interest rates are cheap... Lower prices could increase the US competitiveness... and demand and growth... it would also increase savings and investment... other things remaining constant....


Because they (Muslims) have majority in the neighboring terrorist countries, which oppress minorities and are a threat for security, they cannot be provided free entry... Their rights would be better protected in the majority countries, though; they are minority in INDIA and are treated on par with other citizens... INDIA is more liberal than other countries, but not to be confused with weakness...


Let us see which party could end hooliganism and vandalism against a law to identify its own citizens... for their good... opposing Citizenship Law is anti-poor....