Article;
Economy -Report after one-month of Modi government growth looks up inflation cools
Comment;
Boom or bottoms or investment-cycle in a economy moves with
the monetary-policy. When the Reserve bank looses interest rates the cycle
turns into boom or when it tightens interest-rates cycle converges to bottom.
It is still early to expect the economy to bottom-out because we still might have
to go through two events which can force the RBI to increase interest rates.
Number one is the high-food inflation (expected, too, because of possibility of
drought). The RBI again might increase interest rate to control some demand if
the supply-side does not improve. And, number-two is slow switch-off of the QE
in the US
because a capital-flight and weakening of Rupee might again press our RBI
Governor to tighten interest rates and money-supply. The stock-market in INDIA and our
domestic investors are waiting for the market to correct so that stock-prices become
affordable. Experts say that there is an asset-price-bubble in the market
because of unsustainable gap between nominal prices and real-prices and expect
it to correct with inflation, but the real stock prices will also go up). But
for foreign investors things are a little bit different because they might not
spent that money in INDIA ,
where inflation is high, and spend that monies in their home countries where
inflation is low. At this point of time the domestic-investors might expect the
RBI to tighten so that the market corrects itself a little more affordable to
enter the stock-market. We buy socks high low and sell them high…
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