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...
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