Tuesday, September 10, 2013

Will RBI's Kipling Quoting Pied Piper Be Enough To Lift Indian Markets?

The best reference in the whole speech given by Mr Rajan was his mention of Dr Rakesh Mohan and his 'lazy banking'.Arguably the best man never to become Governor of RBI,an erudite,thorough gentleman who never made a hoopla of not being raised above the Deputy Governorship and someone who just quietly slipped into the American academia.

If you can trust yourself when all men doubt you, 
But make allowance for their doubting too:Rudyard Kipling

So said the new RBI Chief.A dynamic gameplan that has lifted Indian equities even as I write but will words be enough after the euphoria has worn off?

I feel the whole pessimism was overdone as was the fall in the Rupee vis a vis the $.English being a funny language yet I am a big fan of all the aphorisms."There is a silver lining in every dark cloud".I do believe.Will it tempt Indian manufacturers to up production?To try and compete with China?That is where the great depreciation in the Indian Rupee has brought us and woe betide if such an opportunity is let go.

The China model that favours mass over quality is a failure.Not sustainable.If Indian industry can produce even mediocre quality at quality price then the trade competitiveness will overide the lack of infrastructural support.

That is why I have always been a supporter of Growth measures over the inflation fighting policies that Subbarao was solely thinking about.Creating employment,raising exports is the best option of earning Forex,social stability and bring down the CAD.Ain't those the main headwinds to the Economy?

Its Thailand more than China that has flooded Indian markets,upto such a point that Indian industry has become too lazy to produce and is comfortable being just a 'Middleman'sourcing from Chinese-Thai makers to dump it here.Easy money.No red tape.No licences.The Thai baht is now worth 2 rupees.Even 5  years back the reverse was the case.

Rather than impose capital controls,raise interest rates,devalue currency the measures proposed by the new Chief and the sheer focus on increasing liquidity,freeing NRI rates,taking banking rural,Inflation indexed Savings Certificates have been a very positive intent.

The stock markets might become illogical at the top and bottom but the almost 4.5% rally in the Nifty over the past week shows that the market reacts to logic and senses the will in the Government to try and stem the apathy.

Global factors will keep markets nervous but as a trader(if you are one!) its a sweet spot to be in with quality stocks quoting below book value,getting a 5% beating on bad days being a no-brainer BUYs...!!

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