DESPONDENCY RULES AND MARKET RUES

By Ruma Dubey

The moods have never been so low; not even during the Lehman crash of 2008. At that time, there was hope but today, all hope seems to have died. There is only a sense of acute despondency and the feeling of walking on a treadmill – you walk miles but get nowhere!

In this current state of mind, there are many who are brave hearted enough to invest or trade. As mentioned earlier, this is not the time to catch a falling knife. The momentum of the falling knife is only getting faster and best to wait it out. Take a look at some of the news, all as of today and that in itself will give you an indication of what to do in this insane environment.

• The bellwether stock of capital goods, PSU BHEL reported a pathetic Q1 performance, a reflection of acute slowdown in the sector.
• NPAs of banks are on the rise
• Service sector growth too has slowed down
• The Rupee , despite all measures of RBI continues to hit new lows against the dollar and that has become a very BIG worry today
• The killing of five soldiers at Loc has made the political situation even more tense; both Houses of Parliament were adjourned today post this development.
• The issue of Durga Nagpal and the entire purpose and power of IAS officers has today come under a cloud when political parties, using their fiefdom can decide the fate of such learned and some honest bureaucrats.
• There is fear of interest cycle reversal and all apprehensive eyes are on the rupee; if it crosses the Rs.62 threshold, there is news that RBI might hikes rates.
• Q1 numbers of India Inc are terrible to say the least.
• Fuel prices are expected to go up further.

Today the confidence of people is at its rock bottom.  If earlier we were feeling that there is a lame duck Govt in place, today, that lame duck seems to have lost all other limbs too.  It’s like stitches coming off from all sides of a trash bag, the stench is only getting stronger.

What hopes can one have from the Parliament and Bills? Even if FDI in pension and insurance, as this juncture gets passed, which seems unlikely, the markets may not care much. A few days ago, the Govt further liberalized FDI in many sectors but that went unnoticed like the whimper of a dog.  Multi brand retail sector FDI sops were announced but do you see a serpentine queue of MNC retailers wanting to set shop here? Yes, we have the population and a teeming middle class. The potential is very much there but like us, even these FIIs today have no faith in the Govt. Frankly, despite any measures which the govt might announce, the truth is that no one will bite the bait till elections are over. In this current political conundrum, no one wants to take any chances.

Thus it is best to wait and watch. But one cannot help but shudder to think that we might have to face this atmosphere of uncertainty till mid of next year.  At this moment, cash is king; sit on it and do not rush to make impulsive buys – fools rush in where angels fear to tread. Let some semblance of sanity return.