The Indian economy since quite some time now has been in a precarious state. Be it the fiscal deficit, current account deficit, high inflation or slowing growth, the country is facing challenges on multiple fronts. These times are vaguely reminiscent of 1991 when Indian economy was on the verge of a collapse. The country had to pledge its gold with the International Monetary fund (IMF) for an emergency loan. It took drastic reforms for the economy to come out of the woods at that time. These included adopting the then alien concept of liberalization.
If the last two decades are anything to go by, the decision has served us well. However, the impact seems to be fading off. The growth rates after having a decent run have hit the lowest levels in a decade. The real estate market is witnessing inflation. So much so that Indian commercial real estate prices are among the most expensive in the world leading to unviable business and economic conditions. The tax avoidance is become blatant. Currency markets have nosedived. The economy clearly is in a mess and highly vulnerable on account of both domestic and global issues.
At the core of domestic issues lie huge dependence on volatile monsoons, high consumer inflation and political instability. Let us see how. Monsoon failure is likely to stoke food price inflation. At the same time, political instability will hardly let right policies be framed and implemented. On the global front, US government's spending cuts are posing a threat for the rupee. The weakness in the Euro zone, rising oil prices and high dependence on FIIs to plug current account deficit are making things worse. The margin of safety is almost non existent with the high current account deficit we are running and thinning foreign reserves.
Basically, the economy is flashing red signals. While the Finance Minister has acknowledged the problem in the Union Budget, it is time to take some hard economic decisions to steer the economy back in the right direction. These will include cutting undisciplined spending, reducing subsidies and taking bold reform measures, not just in words but in action.
For information on how to pick stocks that have the potential to deliver big returns, download our special report now!
Read the latest Market Commentary
What else is happening in the markets today? Dig in...
Indian share markets end deep in the red with the Sensex down by 1,939 points and the Nifty ending down by 568 points.
ONGC share price is trading down by 7% and its current market price is Rs 118. The BSE OIL & GAS is down by 4.0%. The top gainers in the BSE OIL & GAS Index is CASTROL INDIA (up 1.3%). The top losers are ONGC (down 7.1%) and GAIL (down 6.3%).
ULTRATECH CEMENT share price is trading down by 5% and its current market price is Rs 6,487. The BSE 500 is down by 3.4%. The top gainers in the BSE 500 Index are SOUTH IND.BANK (up 10.4%) and JAGRAN PRAKASHAN (up 10.0%). The top losers are ULTRATECH CEMENT (down 5.0%) and BAJAJ FINSERV (down 6.3%).
JAGRAN PRAKASHAN share price is trading up by 10% and its current market price is Rs 60. The BSE 500 is down by 3.2%. The top gainers in the BSE 500 Index are JAGRAN PRAKASHAN (up 10.1%) and RCF (up 11.0%). The top losers are MAHINDRA CIE AUTO. and AJANTA PHARMA (down 0.1%).
UPL share price is trading down by 5% and its current market price is Rs 589. The BSE 500 is down by 3.2%. The top gainers in the BSE 500 Index are RCF (up 11.0%) and SOUTH IND.BANK (up 10.4%). The top losers are UPL (down 5.4%) and BAJAJ FINSERV (down 6.2%).
ICICI LOMBARD GENERAL INSURANCE share price is trading down by 5% and its current market price is Rs 1,479. The BSE 500 is down by 3.2%. The top gainers in the BSE 500 Index are RCF (up 11.0%) and SOUTH IND.BANK (up 10.4%). The top losers are ICICI LOMBARD GENERAL INSURANCE (down 5.2%) and BAJAJ FINSERV (down 6.2%).
View More Indian Share Market NewsLast time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.
In this video, I'll cover your queries on intraday trading and also share my view on how to decide stop losses and target prices.
A look at what India's top equity mutual funds bought and sold in January 2021.
Do you enjoy reading Tesla and Bitcoin stories? Here's a not so famous small-cap stock to profit from the rise of EVs.
More
Equitymaster requests your view! Post a comment on "What makes India's economy vulnerable?". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!