People’s expectations about prices reinforce prices and spending, higher price expectations could increase investment and consumption demand and supply on hold, given people are employed and have money which could further reinforce higher prices through higher spending. Similarly, lower price expectations increase supply and hold on demand which could further reinforce lower prices through higher supply, given people have money.
Prices affect demand and supply in the sameway demand and supply affect prices, though we have demand and supply side models, but prices do help manage demand and supply, in the stock market prices and expectations are important determining demand-bid and supply-offer which further reinforce prices and volatility, if demand is higher than supply, price expectation increase and when supply is higher than demand price expectations decrease which further increase volatility.
People know little about Economics and Business... It is profitable both ways when prices fall and when they increase too, though money (supply) is a must, either through external devaluation or internal devaluation... Higher inflation or ext. devaluation increase spending and lower inflation or internal devaluation too... Higher inflation means supply side would improve because higher prices increase supply, wages and profits and lower prices means demand would increase, wages and profits... But money supply is very important... If you have to increase demand you need money, if you have to increase supply you need money, too...
Higher inflation means lower real interest rate good for borrowing.... if nominal interest rate remains stable... lower real wages too, lower domestic exchange rate too... Higher competitiveness...
Relative to other countries INDIA is doing quite fine.... Not even 1% of the population is affected by corona.... death rate is very low, recovery rate is high... We should point at China for GDP reduction... INDIA would recover fast... The worst is behind us...
Disruption and correction in growth and prices are oppourtunities to invest or buy at low prices and supply or sell at high prices... Generally, low growth coincides with low prices and high growth with high prices... There is a positive relationship between prices and economic growth...
In the absence of any significant demand stimulus due to limited fiscal space and inflation expectations even in the face of structural unemployment, the RBI may accelerate the pace bond buying or some form of quantitative easing to recapitalise banks to tackle to problem of NPAs and credit growth could help faster recovery... It would also lower interest payment by the Govt on public debt... It would kick off employment and investment or demand and supply, both when real rates are negative... and labour is abundant and cheap... Rich and aging economies have pumped too much money, to increase demand, though INDIA needs a big supply side stimulus to expand recovery on a faster note... This could help reduce unemployment and the need for a demand stimulus...
Money moves from pricier markets to cheaper markets, especially in FPIs/debt... If Govt spending is productive and inflation stabilising a lot of foreign money would pour in... INDIA is a cheap financial market, a lot of value investing is likely to happen... Lower interest rates are good for the debt and stock market... Foreign investors rarely invest on Fds or fixed income class because that is illiquid and hard to withdraw that could help further lower short run rates...
Foreign capital would pourin, though they would chase corrections, at any significant dip it is a buy oppourtunity... Though INDIA has been slow in increasing money supply to the productive investment, but US is easing on a high note which would chase higher returns in INDIA, both debt and stocks due to higher prices expectations from a low base.... Higher price expectations in INDIA could bolster foreign capital inflows...
The INDIAN stock markets take cue from the US' market and the US' market also takes guidance from the INDIA market... It is like chicken and egg analogy... both, appreciation and correction... The US market would be range bound due to the US' elections and this could also affect the Sensex and BSE... Though, stock markets could see increase after the US elections... In between stock market in INDIA could still help gauge markets' performance in the US... foreign capital could also flowin... INDIA's young population and better immunity could help lower deaths due to cov19... INDIA economy could recover faster than the aging economics... INDIAN economy lockdown has bottomed out and we have observed a fast recovery, though employment has yet to reach precovid levels...
Pledging the company's shares to receive financial life line might be pursued... it could help companies to reduce average cost by increasing scale... Restructuring could further help...
A major reform would be to allow greater FDI in the PSBs... It would help recapitalise them...
Government may float unemployment benefit (according to market demand) and skill development bonds and open economy for the foreign investment... banking in INDIA is a cartel market... Higher foreign exchange and capital inflows would help maintain exchange rate... It would (bonds) would help boost productivity and competitiveness and demand... Foreign exchange is the rawest of the raw material, underscoring local sourcing would help increase domestic demand...
The Govt must launch a nationwide unemployment benefit system for the sake of social security...
APMC was scrapped to avoid the farmers exploitation in mandis because middle man chain could be cut to reduce cost if farmers sell directly to investor and consumers... If all the farmers unite under Famer Union, they could manage demand and supply and get higher returns like OPEC... If cartelisation of banks and oil industry are allowed agriculturists must also be allowed some bargaining power... Food for poor could remain subsidised... Had Congress brought Food Security on time we had not been pushed into slowdown and NPAs due to contractionary policies later and high food inflation... Too much money was pumped into the economy that resulted in higher demand with lower productivity and supply side mismangement...
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