For those who were expecting some steps by Govt to stem the fall of the rupee, Mr Chidambaram's press conference on Thursday came as a thorough disappointment. Mr Chidambaram in his usual suave manner explained away the rupees's fall as due the current account deficit and that many countries with CAD have suffered currency depriciation. And that as and when the deficit is controlled rupee will recover. Further he also expressed his confidence in controlling the CAD.so as to keep it within target. So any hope of an immediate govt action to recover the rupee is dashed. and we may have to continue with a week rupee for some time. Both the sensex and the nifty, as a result, lost over a percent each.
But there were few positive takeaways. He assured that all planned expenditure will be made and urged departments to go ahead and spend. This will result in some economic activity. He assured of more reforms and suggested that investors should focus on long term rather than get weary on short term volatility. Considering his track record in his present tenure, it appears he means business.
But what about growth ? Does it mean that in the long term growth will pick up. May be it will or may be it will not. In today's world, how long is long term.? Growth is the feedstock of stock markets. Stock prices will not go up unless the company grows it's business. At present one big obstacle in the way of companies to grow is the high interest rate environment. Companies after companies are bleeding. The number of companies whose share price has fallen below par value is increasing. It is unfortunate that the few instances in which RBI has reduced rates, the same has not been passed on by the banks. And our banks continue with fat NIMs (net interest margins). Its a serious dichotomy here. If the target of credit is bleeding can the banks add flab? As long as this imbalance continues we will be alternating between hope and despair. That is volatility. And it kills.
Until my next then,
Happy investing
Basudev
.
But there were few positive takeaways. He assured that all planned expenditure will be made and urged departments to go ahead and spend. This will result in some economic activity. He assured of more reforms and suggested that investors should focus on long term rather than get weary on short term volatility. Considering his track record in his present tenure, it appears he means business.
But what about growth ? Does it mean that in the long term growth will pick up. May be it will or may be it will not. In today's world, how long is long term.? Growth is the feedstock of stock markets. Stock prices will not go up unless the company grows it's business. At present one big obstacle in the way of companies to grow is the high interest rate environment. Companies after companies are bleeding. The number of companies whose share price has fallen below par value is increasing. It is unfortunate that the few instances in which RBI has reduced rates, the same has not been passed on by the banks. And our banks continue with fat NIMs (net interest margins). Its a serious dichotomy here. If the target of credit is bleeding can the banks add flab? As long as this imbalance continues we will be alternating between hope and despair. That is volatility. And it kills.
Until my next then,
Happy investing
Basudev
.
No comments:
Post a Comment