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...