|»5 Minute Wrap Up by Equitymaster|
On This Day - 20 AUGUST 2011
Do you still believe in 'Brand India'?
In this issue:
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But, would you still bet on India given the other options you have globally? Well, we think so. And who better to corroborate our analysis on 'Brand India' with than Sir Martin Sorrell. He is the head of WPP, the world's largest advertising and marketing communications conglomerate. He believes that 'Brand India' is far stronger than 'Brand UK' or 'Brand US'. 'Brand UK' has been marred with the recent riots in London. Shops were looted, violence erupted and buildings were set ablaze in the poorer neighbourhoods of the city. The police's inability to handle the violence raises fears ahead of the Olympic Games next year. 'Brand US' is also under tremendous pressure. The vote on the debt ceiling and the subsequent rating downgrade by S&P contributed to a global selloff. The lack of further monetary stimulus to the economy is adding to fears of a slowdown and anaemic growth. Sorrel interestingly quips "You can't just go off steroids without feeling some pain." 'Brand Euro' is also jittery with most economies in a debt crisis not showing any signs of recovery. Their default may even drag down stronger nations like Germany and France.
India remains one of the fastest growing economies in the world. Corruption is a concern; but the same is prevalent in most emerging economies. The Anna Hazare movement is breaking new ground and challenging the way things are done. But, is the over 20% YTD (year to date) fall in the Indian stock market justified? Well, maybe not but it provides a compelling opportunity to pick up good stocks in a growing economy.
We continue to believe in 'Brand India' in light of its strong fundamentals and domestic growth story. Have you lost faith, or do you still believe in its core strengths? Share your views with us or post your views on our Facebook page.
As far future prices are concerned, the general consensus is that it will continue to advance. Are the bets reasonable or is too late to be a part of the gold rally? We believe that gold is going to glitter even more. Our conviction regarding gold prices stems from the lack of confidence in the leaders to handle the European or US debt crisis . Further, we expect the limited supply of the precious metal to keep the prices firm.
A leading business daily has argued that China's growing appetite for metals could make things difficult for India. It should be noted that in recent years, there has been no effort on India's part to increase or even start production of certain types of metals. This was because China used to flood the markets with these metals and that too, at a very low cost. But things have changed now. The dragon nation has started putting restrictions on the exports of a few metals as its own domestic consumption has increased a great deal. And things are only likely to get worse from here. Thus, it is important that India takes the issue of metals security quite seriously now. It should not only try and increase domestic production but also enter into strategic tie ups with resource rich nations. Any further delay in the same could have negative repercussions on the India growth story.
Indian stock markets too faced the brunt of heavy selling with the BSE Sensex closing lower by 4.1% during the week. Weak global cues and fears of slowdown due to rising interest rates overweighed investor sentiments.
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