Oct 9, 2004|
And the story continues
...as another report stating a poor (or less than expected) job growth in the US has been released. This might lead to further concerns over the sustainability of the global economic recovery that is, and has been, powered by the incessant 'consumption desires' of the US consumer.
The job report for the month of September 2004 states that the US non-farm sector has added 96,000 jobs in the month, much lower than expected. This is likely to further fuel investors' fears of slowdown in the global economic growth that has already been marred by the continuous strengthening of crude oil prices, which are comfortably hovering over the US$ 53 per barrel mark.
While this is bad news for the global economy, one could take respite (at least for the time being) from the fact that this low addition to employment might (might) lead to a pause in the Federal Reserve's tightening of interest rates. While commenting anything specific on this front would amount to speculation, what we are trying to say here is that, in a logical way, the Fed might postpone its 'measured' interest rate hikes believing that if it did not do so, and rather raise rates, that might have a harmful effect on the strength that the US economy seems to be gaining at present. This is because, if the highly indebted US consuming class, which is already reeling under the pressure of job cuts and, thus, reduction in purchasing power, reduces borrowing due to increasing interest rates, who will buy all the merchandise that factories of Asia (read China and other Southeast Asian nations) produce for them?
Now, while the Indian economy would not be affected much from the reduction in US consumption because of the fact that our export dependence is a lot much lower than our Asian peers, we need to study carefully the constant rise in global crude prices. At US$ 53 per barrel, these prices are already around 80% higher then the average price of US$ 29 per barrel for the period 2000 till date. And if these were to stay at these (or higher) levels for a long time, the reverberations will definitely be felt on the Indian economy. To put things in perspective, India imports nearly 70% of its oil requirements and as per a report from the International Energy Agency (IEA), Indian uses 2.5 units of crude to generate every unit of GDP. This is much higher than what is used in developed countries and, as such, should be a considerable cause for concern for Indian authorities.
Considering the above two concerns (reducing US consumption and rising crude prices) and also the fact that Indian markets have gained significant ground in recent times (Sensex is up almost 9% in the last one month), we believe that investors need to exercise some caution. While a staggered approach needs to be the mantra, investors should also have a long-term investment perspective. For in the short tem, there are a lot of uncertainties that need to be taken care of.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407