panch-tattva talk…macro environment and nifty V

Friends,

 

Inflation was high at 9% in 2000 and came down to just about 2% in 2002. Since then it peaked at 8% in 2004 only to come down to 4% by mid 2005. It has since then gone up and down and it rose to 8% lastly and would be still higher after the retail oil price revision . I invite you to find the corelation in inflation and the Nifty ie the stock prices. Every body applying mind to find an answer will find that there is no such corelation. Infact when after low level was touched in 2005 it went up as also the indices. Since after very low level in 2002 , the inflation has been up only and indices (particulraly Nifty ) are up many times over. In simple terms there is no need to packing for the inflation numbers are high. Look for other damaging things for the markets to come down not inflation. Indian corporates are already using ever lower borrowed money for its working and if the inflation would make the interest rate revised (by RBI) , it will only make the capital employed have better returns than otherwise.

 

Why than the media and the experts are playing up the inflation factor and trying to scare people about investment in equity. I think it is with some design to help some groups to aquire equities cheaply. Nifty closed yesterday at 4517 without a big dent while the repo rate was raised by the RBI 25 bps to 8%. If any thing , please prepare for sudden jumps. I am , however , aware that in short term or on particular days indices may be pushed down . It will be only for very breif periods , of which I am rather certain.

panch-tattva talk…answers to high oil

Friends,

Oil is keeping at high level but is no more unnerving . At leaset Indian markets and the US markets have stood firm in a range while Heng Seng and Shanghai which have to seek coparatively lower level over time for the matters discussed since about the last we months, have shed weight.

The open economy in US is responding by curtailed travelling and higher use of smaller cars. The US economy is worth USD 14 trillion (GDP) almost three – four times of India’s and China’s combined. If there is initiative there , the result will be no less comforting . USA is also cooperating with Japan to ensure  conditions to bring oil price down.

Indian govt at long last has seen the need to have  all-out counter measures. It did raise retail prices and has now raised excise duty on bigger cars/SUVs with engine capacity of over 1500 CC by Rs 15K to Rs 20K. This will garner about Rs 400 Crs. This is a small step in right direction.Over time the oil related under-recoveries should be done away with. Mr Subir Raha in an article went to the extent saying the high subsidy level is generating Rs 900 Crs of black market gains for some who may be the power brokers. I think the proportions are much more otherwise why an unreasonable practice would be continued under the economist PM. He will find it hard to answer for what his govt is doing later when no more heading the govt. As an ordinery citizen who can not calculate that the oil subsidy of Rs 2 lac crs is enough to see the whole population of India coming under BPL (Below Poverty Line) catagory have a direct help of approx Rs 40000/- per family. Would it not mean an end to an era of compulsive su-human living for the poorest members of our society. Is not this the plank that the parties use for getting votes. Does this not mean that their heart not lie where their mouth is. Does even a drop of subsidised oil goes to help these poor people in any way. If any effort of the govt is to be targeted for helping the poor , it should have these BPL families, first and foremost, in mind. The rest may take their own care. It will save a lot of misdirected effort of the govt and the citizens. India has been poor because it has been subjected to meaningless less effort at imposing wrong and high taxed and trying to collect the same on govt’s part and equally , by the public in saving and evading such taxes. Further, the litigation on account of these very taxes takes the time of most intelligent of the people , from both sides . Who gains this way ;some individuals and who suffers this way ; the whole society and the Nation.

I am only trying to build an openion in favour of open policies and of direct help to poor rather than a round about mannerism fraught with many slippages.

HariOm
KrsnaKhandelwal