Global uncertainty is an opportunity

Tue, 6 Jul Pre-Open

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The notion that India was decoupled from the developed world was buried in the dust when Indian markets crashed and the economic engine slowed down. True, that the country has recovered much faster than the less fortunate rich world. But the global financial crisis has certainly highlighted one important fact. This is that when it comes to the financial markets at least, India is increasingly linked to what is happening in the global world.

And in the global world, things are not looking too rosy. Take the US for instance. Stimulus measures and printing dollars have not really worked in terms of tiding over recession. Infact, these are bound to haunt the US in the longer term. This is in the form of inflation and a weaker currency. More importantly, unemployment in the US has persistently refused to abate. In Europe, the debt crisis has only worsened. Once again, the European policymakers' response to pump in more money to bail out the defaulters is only likely to cause problems in the longer term.

There are changes perceptible in the Chinese economy too. In an attempt to ensure that its growth continues at a furious pace, various measures by the government has only led prices of Chinese stocks and real estate to reach unjustifiable levels. Commodity prices have also reached highs. What is more, the Chinese are not likely to consume commodities at the pace like they did before.

Little wonder then that Indian stockmarkets are feeling some of the heat. Although the Indian markets have rallied splendidly since March 2009, continued uncertainty in the global markets has slowed the markets down. Having said that, the Indian economy is in some sense less dependent on what happens globally than the financial markets are. This is largely due to robust domestic consumption and less dependence on exports unlike China. It cannot be denied that India's growth story in the longer term remains intact. Thus, any dips in the stockmarkets globally and thereby in India should be looked upon as opportunities to buy into good quality stocks that will benefit immensely from the buoyancy in the Indian economy.