The RBI has loads of dollars, foreign exchange reserve which could be used to capitalise banks... Strong rupee could increase foreign capital inflows and cheaper imports and domestic inflation also due to lower oil prices... Lower prices increase competitiveness and demand in the economy and exports... which could help maintain stable interest rate...
During covid it is important to maintain some
inflation to keep up demand and spending and help increase supply...
Farmers need share in value addition at every stage
from raw materials to intermediate to finished product and in bidding and
auction too, till it reaches the consumer... It would be profitable that Famers
decide prices on the basis of cost...
Why the government decides the prices of grains...?
The Farmers must be provided the capacity to hold and slowly sell on price
rises... Small and marginal Farmers should be benefited by the market system
and be able to sell directly to the urban retailers at very low cost...
The FDI in multi brand retail was allowed only to
increase procurement by the large companies directly with mandated local
sourcing... The transport cost must be low...
Short run is more predictable than the counter view
that long run is more certain therefore the long run premium is higher than the
short run, which is wrong... We could tell what could happen in a month or
three on the basis of data, but difficult to tell what could happen in the next
5 or 10 years...
Stock
Market investors shall give little importance to day to day news and stick to
the longrun story and invest more at corrections... Analysts say that investors
need to follow the stock specific cycle and not the market cycle which could
affect the stock market cycle too, especially the index stocks...
People wrongly believe that they shall buy when they
expect that the market would go up, but contrary to it when they buy the market
increases, though if they hold and wait for lower prices it would increase
supply and lower prices... Investors shall try to gauge the majority rational
expectations... which might turn a reality... Rational expectations are very
important for investment decisions...
Correction means more investment... Lower prices
increase demand and price expectations... Guv Das view is for short term investors,
there could be an imminent correction... From a 2 to 5 year perspective the
outlook is good... The RBI too lower interest rate to increase demand...
The stock market is always suspected for bubble coz
it runs on liquidity by the central bank, higher liquidity means higher stock
price valuations therefore the market has responded sharply V shaped recoup
with the liquidity support ahead of the broader economy and the RBI still in
accommodative mode... Nonetheless, the market cap to gdp ratio is low compared
the revival saw after the 2008 crisis...
Higher inflation due to supplyside disruption has
helped increase margins and earnings of the companies... Higher inflation means
higher margins and earnings... which have also pushed the stock market high...
As long as the central bank maintains an accommodative stance the party at the
Dalal Street might continue...
Lower prices in the stock market increased
investment demand (after the Mar correction) while higher prices in the broader
economy due to supply disruption and lockdown which hit the consumers demand,
too... Higher unemployment has again hit the consumption story... Unless prices
in the broader economy correct a little bit due to lower cost and higher
productivity and supply and higher income, consumption demand may remain low...
Since more people than a million are adding to the
labourforce every month then how can production remain low with more
consumption and investment demand and spending and stable and accommodative
monetary policy... 2021-22 would be more prosperous than 2020-21....
Modiji's attempts to curb corruption have been
failed manytimes like to reduce back money in the economy that has skewed the
inequality through demonetisation, but it turned out to be a bigger scandal by
banks... Without sweeping reforms to cut down on corruption all would go down
the drain which would further increase inequality and abuse of power and
position...
Economists may give hope to the investors to keep
investing in the economy that might help... The stock market investors and even
FPIs are an important source of growth and must be saved; now not only rich,
but many more people invest in the stocks...
Recently, BofA said that credit growth is bottoming out but growth could remain weak… Nonetheless, if the credit growth is bottoming out the growth would follow... If business or investors buy or demand or spend when prices and cost are low and sell or supply when prices are high they would gain and that would also help achieve stable prices and full employment...
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