Will this latest Govt. move boost Indian stocks?
In this issue:
» Indian stock markets fared the worst in 2011
» Central bank has revised exports numbers
» Has the RBI become the government's pawn?
» A solution to helping India's poor
» ...and more!---------------------------------------- Did you miss the Webinar? ----------------------------------------
Equitymaster's Webinar on the Future Prospects for the Indian Economy with Mr Ajit Dayal was broadcasted on 30th of December, 2011.
The webinar answered questions that could be troubling any Indian Investor today. Where is the Indian Economy headed in 2012? Is Gold still a good investment? Could the Stock Market touch the 21000 figure in 2012?
If you missed watching the webinar, here is your chance to access the same.
Click Here to watch: Indian Economy - From Darling to Damned (Rebroadcast)
And let's understand what lies ahead for India and how could this impact your investments.
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Thus, in 2011 too, money pulled out by FIIs had influenced the movement of the indices. But the story this time was a bit different. Certainly, the escalation of the crisis in Europe was one of the factors that added to the overall negative sentiment. But to put the blame entirely on that region would not be right. Problems back home in India also led to loss of confidence among investors. High inflation, interest rates, lower profits reported by India Inc., policy paralysis in government were some of the main issues that led to big outflows.
Hence, in order to cushion the volatility in Indian stock markets and also deepen its under-developed markets, India will allow foreign nationals to invest directly in the country's listed companies. Foreigners were previously restricted to investing in India's equity market through mutual funds or other institutional channels. Whether this will result in an immediate flow of foreign money into India remains to be seen though. Ultimately what matters is what steps the government is taking to bring in reforms and ramping up the infrastructure of the country. If the political deadlock continues the way it did in 2011, the chances of more investments in Indian markets, be it domestic or foreign, will be poor at best.
Do you think the government's latest move of allowing foreign investors to invest directly in India give the much needed boost to Indian stock markets? Share with us or post your comments on Facebook page / Google+ page.
01:28 | Chart of the day | |
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Data source: The Economist |
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In view of this, it is indeed worrisome that the RBI has revised its exports figure down by US$ 6 bn in its balance of payments statement for the first quarter of FY12. It should be noted that a similar move was made by the commerce ministry earlier when it had too admitted to overstating certain export numbers by US$ 9 bn. We sincerely think that the data collection agencies better get their math right with respect to such numbers. A lot of future capital allocation decisions by firms and individuals are arrived at after poring through data provided by these agencies. Thus, if these are error prone, the decisions that depend on them may also turn out to be wrong and cause damage to the economy.
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In fact, the liquidity, more often than not helps the government fulfill its politically motivated social obligations rather than meet economic interests. In the event of the government exceeding borrowing limits, the private borrowers are getting crowded out. More so because the government's borrowing rates influence interest rates in the economy as well. We hope that the central bank puts its feet down on this account as well. Only then will the RBI prove itself truly independent.
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04:55 | Today's Investing Mantra |
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11 Responses to "Will this latest Govt. move boost Indian stocks?"
Sarat Palat
Jan 7, 2012We cannot say it is going to have a positive effect. We have to wait and watch. If FII are moving away from Indian market, naturally the foreign individual invester will be hesitant to invest.
The thing we have to concentrate at this point of time is how we could improve ourself. We all know the problems we are facing. If we could overcome these issues naturally the things will brighten up.
kurupgp
Jan 4, 2012This will give an opportunity to the politicians and administrators who hold unaccounted money in foreign banks to invest this amount in stock market and convert this into white.
AJ
Jan 3, 20122011 is the worst year for the parliament democracy and coalition politics is no good for the general public. This is the clear example of UPA-2. Our great opposition parties saw to it that they have stalled the working of the Parliament for any bull shit reason. Finally the Government did not function, policy paralysis and what not. One thing is very clear our politicians do not look beyond 5 years and they care a damn for the country and its citizens. Everything is quickfix solutions without thinking about longterm benefits.
saby chacko
Jan 3, 2012I fully agree with the investment towards rural development and increase in agriculture productivity will have greater effect on our GDP than anything else.
There is one important point missed out is that India perhaps has the worst weather forecast system in the world despite launching so many satellites!! People working in our meteorological departments needs to be trained abroad to decipher out the data provided from satellite images regarding weather and forecast it in an accurate manner for the benefit of farmers, fisherman,highway/road building,etc. I think this is also an urgent priority, as our weatherman are really bad in their forecast.
Habeebur Rahman
Jan 3, 2012It is most unfortunate that we all have too many democratic rights. In addtion to reaosns that noted in the artical, there is an another reasons i.e. total irresponsibility of opposition parties,without understanding the imporance of Indian economy, opposing all steps taken by the Government to improve economy. If any political party wins with clear majority and allowed to run the state for 10 years, then we can meet and beat everyone in economy.
Shabbir Haidermota
Jan 3, 2012Why are we Indians always obsessed with foreigners and why can't we shake off this inferiority complex ? Rather than allowing foreigners to invest directly in Indian stock markets to boost them why can't the Government increase the Section 80C limit from the present Rs.1 lakh to at least Rs.3 lakh and then see what effect it has on providing depth to Indian stock markets through domestic retail long term investments. Considering the poor retail participation by domestic retail investors in Indian stock markets, is this not the most obvious source of giving impetus ? Neither SEBI nor AMFI seem to be clear in even attempting something like this which is a tragedy for the Indian stock markets as well as struggling mutual fund industry.
aasheem
Jan 3, 2012India is with in second to fourth position ( as per TOI survey)in the world , in production of Food Crop, Dairy Products and Hatchery Products.
In spite of that our 35% population is under poverty. The reason being that there is improper or corrupted distribution system, controlled by the corrupted Politicians.
A hooping 40% of our Food Production are wasted during Harvesting, Storing and Distributing and , due to the lack of proper handling system - which has been admitted by Mr Sharad Pawer, Minister, in a recent interview with Mr Phugalia of CNBC Awaz.
The only problem in India is CORRUPTION. Which is being fuelled by MOST of THE POLITICIANS OF ALL POLITICAL PARTIES.
Probably we are heading towards a fate as happened at Libya, Sirya and Egypt.
All politicians are be fooling the Am Janta and Looting their hard earned money paid as Taxes.
Rajesh
Jan 3, 2012I do not think this would have any material impact.
The move is clearly designed to enable powerful people to bring back their money having colour other than white. With polititians and administrators competing for their place in Guiness Book Of Records for topping the list of 'Most Corrupt Individual' in BRIC region, and Government telling the world that it can not even count its export; chances are bleak that any genuine foreign investor would be lured to invest in India. Stock market may see marginal boost though.
sanjay
Feb 26, 2012FIIs pumping money in and out has small investors in trouble most of the time. do u agree? do they just go in and out or make money each time they do this? how can small investors cope with this cycle?
do u just monitor these comments or answer some of them?
regards