Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Of lower inflation and higher FDI - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 24, 2008

    Of lower inflation and higher FDI

    The reality of lower economic growth for India this year seems to have finally dawned upon the policymakers. The country's midyear economic review was tabled in parliament last evening. "We should be prepared for growth in 2008-09 as a whole to be around 7%." This is how the people concerned chose to put it across as the issue of GDP growth came up.

    The tone was however not subdued throughout. Knowing quite well that prices of commodities have been in a free fall for quite some time now, and are likely to remain in the medium term, the policymakers expressed confidence that inflation should reach "normal levels" by March 2009. The increase in FDI (foreign direct investment) and the prospect of strong remittances were also some of the other positives that one can take away from the review.

    Talking of FDI, another development took place in the parliament yesterday that could well help swell the total FDI tally. It was the introduction of the Insurance Amendment Bill, a legislation that strives to increase the maximum permissible foreign investment in insurance companies to 49% from the current level of 26%.

    Industry players welcomed the move as it would result in more equity flowing into the sector, which at present is massively under-penetrated and in some real need of fund inflows. Another bill, the LIC Bill was also introduced in the parliament yesterday. This bill seeks to put a cap on the government guarantees on LIC's (Life Insurance Corporation) obligations. This in effect means that not all your LIC insurance policies will be guaranteed by the government and is now likely to be a function of the solvency of LIC. The move is likely to deal a big blow to the competitive position of LIC as it will create more of a level playing field between the public sector behemoth and private insurers.

    Mixed economic indicators
    Now we know why investment titans like Warren Buffett and Peter Lynch never made investment decisions after taking into consideration macroeconomic indicators. Because if they did so, they probably would have held cash all their lives. Sample this. Yesterday, two leading macroeconomic indicators came out in the US. Both pointing towards opposite directions. Since we are already hearing a lot of news of gloom and doom, let us consider the positive one first.

    It was the Michigan Index of Consumer Sentiment and it showed a marked improvement from the lows of November, a 28-year low to be precise. An improvement in consumer sentiment means good news for consumer spending and since it accounts for a bulk of US GDP, it translates into good news for the country's economic growth. The rise in index was believed to be a result of sharp fall in crude oil prices, which would now enable the US consumer to divert the savings from the same to other items of consumption.

    But before one starts reading too much into the same, it's time for the bad news. And it comes from that very predictable quarter - the US housing market. As per reports, sales of existing homes in the US fell nearly 9% as continued job losses and stricter lending standards crimped demand. What more, the median home prices fell a little more than 13%, its worst ever decline since 1968 when the data was published first time ever. So, there you are. Two indicators pointing in two opposite directions!

    We guess analyzing companies and trying to arrive at its intrinsic value looks like a much better proposition, isn't it? Sooner or later, the price will meet value. And you will save a lot of stress in the process.



    Equitymaster requests your view! Post a comment on "Of lower inflation and higher FDI". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    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.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)