Dec 20, 2008|
'Zero'ing on growth
The authorities seem to be adopting every possible measure available in the book to restore confidence in the global economic system. Take the week gone by for example. The US Fed lowered its interest rates further and in the process, virtually exhausted the limit of its main weapon for enhancing GDP growth. The US government also did its bit when it finally decided to come to the rescue of troubled US auto makers. But when an economy is in the midst of a recession, it does not take long for bad news to emerge from somewhere, making investors once again go into a shell. This is exactly what happened in the US stock markets in the just concluded weak. Markets remained volatile throughout the week and ended mixed. While the Dow edged lower by 0.6%, tech laden Nasdaq advanced 1.5%.
Things looked rather rosy elsewhere especially in the Asian markets as mouthwatering valuations finally enticed investors to abandon the dollar and invest in Asian equities. South Korean markets were the biggest beneficiary of this move, edging higher by as much as 7% during the week. Sensex, the Indian benchmark, also performed well as expectations of still stronger fiscal sops as well as further lowering of interest rates intensified amongst investors.
Since the bailout funds have not been sufficient to revive the US economy and prevent it from succumbing to another spasm of economic depression, the country's central bank has resolved to pump prime the economy. It is willing to do so even at the cost of flushing cheap dollars which could stoke inflation at a later stage. The Federal Reserve has cut its key overnight interest rate to a range of between 0% and 0.25%, and is prepared to sustain the unprecedented low levels for some time to come.
There are, however, concerns that even if this measure fails to deliver the desired impact, the Fed will have very few tools left to resort to for stimulating the economy. Although the central bank has already spoken of measures like purchases of long-term US Treasury notes, given the country's pitiable leverage position, it seems a risky proposition. In explaining the reason behind the rate cut, the Fed has stated that the US economy, which has officially been in a recession for a year, was in danger of getting weaker, and that the risk of inflation had decreased 'appreciably'. Other central banks, notably the Bank of Japan, have taken interest rates down to near the 0% level in the past.
Crude oil declined by a huge 27% during the week to US$ 34 a barrel. Gold prices edged 2% higher to US$ 838 an ounce. Crude oil has now come off 77% from its all time highs, sending huge shivers down the spine of oil exporting countries. Their latest attempt at shoring up the prices has also come a cropper. It should be noted that OPEC, the organization that supplies nearly 40% of world's crude had agreed during the week to lower output by a further 2.2 million barrels per day. However, oil prices have continued to tumble, much to their chagrin and looks like more production cuts could be on the anvil.
Movers and shakers during the week
|Source: Yahoo finance |
|Source: Sebi ||Source: Equitymaster |
||Change from 52-wk High
|Top gainers during the week (BSE-A Group)
||41,307 / 9,125
||1,117 / 69
||263 / 25
||395 / 34
|Top losers during the week (BSE-A Group)
||544 / 154
||844 / 149
||410 / 106
||77 / 23
||3,257 / 1,202
Economic policymaking across the globe is a really tough job. And the realisation has hit us strongly now than ever. Only a few months back, almost all of them were battling the demon of inflation. Now, all of a sudden they find themselves in the midst of the worst deflationary spiral in recent years. Hence, what has followed is truckload of incentives, both fiscal as well as monetary. While this may help shrug off the deflationary phase, it could well give rise to even higher inflationary pressure few years down the line. An investor's job looks way easier. All he has to do is invest in a company that is able to increase its prices in times of inflation and have steady demand for its products during times of deflation. If bought at a reasonable valuation, he could jolly well afford to omit the two dreadful words from his lexicon.
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 22, 2017
It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.
Aug 22, 2017
Post demonetisation, a cut in bank savings deposits rates was in the offing.
Aug 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
Aug 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
More Views on News
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.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
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 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407