Sunset in USA!

India ranks 2nd amongst the countries with number of billionaires per trillion dollars of gross domestic product (GDP), Russia being 1st.

So can we say that the sun is finally setting in USA!

Are foreign investors more confident on India than domestic investors?

In the first quarter of the current financial year, foreign institutional investors increased their shareholding in nearly all the listed companies of the two Ambani groups, while individual domestic investors cut down their exposure to these companies during the same period.

These companies include Reliance Industries and Reliance Petroleum Ltd from the Mukesh Ambani group as also Reliance Capital, Reliance Communications, Reliance Infra and Reliance Natural Resources Ltd (RNRL) from the Anil Ambani group.

Is NIFTY headed towards 4600?

It looks like before expiry nifty should touch the 4600 levels, following which it should consolidate or slowly drift down to the 4400 levels before another breakout on the upside. It would be nice if nifty consolidates for sometime here and the small and midcap play catch up for a broader participation in the market.

Does emerging market outperformance depend on the falling dollar?

The fall in US dollar is something that goes hand in hand with an improvement in confidence.

Usually what we have been seeing for the last year or so was that whenever there was concern about global outlook then US dollar goes up in value. And when confidence builds regarding the global economy, demand for US dollar goes down and the US dollar falls.

That in turn also helps commodity prices such as the oil price and other commodities which in turn is the positive for emerging markets.

So the renewed upswing in share markets and the renewed downswing in the US dollar and likewise the renewed upswing in commodity prices they all go hand in hand. They are just all indicators, of a return to investor confidence.

India or China? Whats the preferred place for investment with investors.

Between China and India, the big difference is that China’s growth is basically being bought by the government through their tremendous fiscal stimulus. So, China is indeed growing faster than India but it is basically fake growth.
Whereas, in India, because you don’t have the same kind of tremendous surpluses, you haven’t stimulated the economy nearly as much and your growth is genuine.

Montek Singh Ahluwalia defends the budget

Deputy Commissioner of the Planning Commision, defending the Union Budget said that investors should not judge the Budget by what was said in the speech as the high fiscal deficit this year was justified. He said that it is impossible for the government to cut tax and reduce deficit at same time.

It clearly said that we are going for growth, getting back to a high growth path is our top priority, that we are in favour of inclusive growth. It’s the private investment that is going to drive the growth process. It said things like we need to do a lot in social sectors and infrastructure and I think it laid out, in my view, a macro economic framework which makes a difficult balancing act between trying to give stimulus on one hand and maintaining a reasonable fiscal deficit.

Can a good monsoon affect your investments?

The "monsoon effect" does have an impact on demand for fertilisers and tractors, and to a lesser extent, two-wheelers and consumer durables. But sustained trends in monsoon performance appear to be more important than above- or below-normal rains in a single year. Two consecutive years of bountiful or deficient rain, invariably show up in the sales numbers for fertilisers and tractors. Monsoons also appear to have a strong delayed effect on two-wheeler sales, usually with a lag of one year.Even in monsoon-dependent industries such as fertilisers, pesticides or tractors, investors should pay attention to company-specific factors such as target markets, product mix and dependence on domestic markets, for these could reduce the sensitivity of the financials to the `monsoon factor'.

The monsoon affects the lives and livelihoods of Indians in many ways. It involves not only the economy but also the socio-cultural and political aspects. Two important sectors in particular—business and farming—eagerly await a good monsoon. Farmers worry about crop production and the emanating income. Businesses wait for farmers’ income, aiming to sell more manufactured goods to them. A bad monsoon is a setback for both—poor income for farmers and less demand for manufactured goods.

In recent years, India has developed ample economic strength to endure a bad monsoon. Agricultural, industrial and economic productivity is dependent on the monsoon. A slowdown in agricultural output will have a cascading effect on rural disposable incomes and the corporate targeted markets.

Two-wheeler sales of companies like Hero Honda, Bajaj Auto and TVS who have offerings in the rural segment, see optimism if the monsoons are normal. Similarly, surplus inventory and poor sales drag tractor makers if there is a poor monsoon. Companies like HLL and Nirma also have a large rural presence. Forecast about the timely arrival and even distribution of the rains directly promotes assurance of high growth. Thus, stock markets closely watch the monsoon pattern, as it has a direct impact on automobile, power, cement, steel, and infrastructure industries. It can mean a huge fortune, or a big loss to stockholders, notwithstanding the mood swings...among the people associated with good/poor harvests. Drought conditions are likely to reduce hydro-power generation, while the demand for power is likely to go up, aggravating power shortages.

Years with below-normal rainfall have been significant contributors to the economic crisis during those periods. Unemployment increases, especially in rural areas. Agricultural prices will rise, pulling up the inflation rate. One can expect fiscal deficit to increase, tax revenues to fall, and expenditures to rise. Going by past experiences, expenditure on education, health and social welfare would be cut. Finally, the burden of drought relief will fall on the government.

The nature of the relationship between agriculture and consumer demand has also changed. Historically, poor monsoons depressed growth in the agricultural sector only. Now, the rural sector is the economy’s driving force.

The demand for consumer durables and non-durables is coming from rich agricultural regions and the urban centres. Both are getting saturated. The other is the (potential) demand from poor agricultural regions which is highly dependent on the monsoons.