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Indian Markets Concerns / Risk and Mitigation

October 22, 2008

This is the second post in the series of three on why one can dare to BUY the Indian market now. If you have not already read the first part, its here – Historical Returns in India after Bear market.

As an Indian investor what are the prime concerns weighing on the Indian market ?
1.Uncertain global macro-economic scenario, especially the United States.
2.Forthcoming Parliament Elections in India has postponed major policy decisions and spending.
3.High fiscal deficit arising out of the agri-debt waiver, implementation of the 6th pay commission, oil bonds, fertilizer bonds, etc.
4.High Inflation + Interest Rates + High Oil Prices
5.Economic Slowdown

Mitigation of the above risks:
Despite gloomy international scenario, India has seen a positive month in terms of the fundamental growth story by way of the the NSG waiver which has put the country into a different league and this move other than providing power solutions of the country has also improved the way the country will be looked at.

Inflation numbers seem to have taken a breather but still remains unacceptable in the political context and containing it is an electoral mandate which the Government will.

The commodity complex including oil having corrected and reduction of CRR and Repo Rate is a booster to the Indian industry. The unexpected surge in oil prices this year and its further consequences should rationalise by the mid of next year and then is when the order book implementation will uplift IIP.

The GDP growth forecast though lowered is still higher than most other economies and going forward with inflation easing, new government in place and expected easing of interest rates this slowdown is expected to reverse.

Comments

One Response to “Indian Markets Concerns / Risk and Mitigation”

  1. Anonymous on October 24th, 2008 1:16 PM

    Some More Facts:
    Exports as % of GDP for FY07-08:
    India 17.4% (Exports to US is 4.1% of GDP)
    China 36.1%
    Korea 40.0%
    Taiwan 35.2%

    Net FDI and Portfolio Investment (FIIs) was 4% of GDP*. Thus dependence on foreign capital is minimal.

    FY10 should see significant improvement in Current Account, Fiscal deficit, Interest rates & Inflation (may come down below 5%).

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