DON'T BRING OUT THE CHAMPAGNE - JUST NOT YET
By Ruma Dubey
It is said that Indians are stoic, do not express their emotions openly, are not overtly sentimental. Well, who says that! Look at the stock markets today… the markets are in the green and more importantly, the moods are upbeat. And this is the same market which two days ago had crashed 650 points! The same war fears remain and the same Current Account Deficit (CAD) remains. Yet, today there is a sense of optimism. All this because of one man – the new RBI Governor, Raghuram Rajan. His inspiring inaugural speech got the bulls back while that of Manmohan Singh has got the markets further into a bear grip. If this is not letting emotions ride the markets, what else could be? The stock market, the pure icon of capitalism is moved purely by sentiments – economics, fundamentals and all other things come much later. That is the underlying truth – markets are driven only by sentiments.
What drives the sentiments? Now that is the big question. Today, we are very happy because after a long time, like a parched man sighting an oasis, we have seen a leader of some caliber. Suave, well spoken and young, he is like a messiah today. Apart from his academic achievements, the way he spoke, with so much clarity and hope, with a vision for the future and all this with authority, truly warmed the heart. For all of us, to hear any public figure speak so well is a rarity and Rajan just provided us with that succor, the feeling that we finally have at least one “Mr.Right” at the helm.
His predecessor, Dr.Subbarao has done well, especially given the excruciating circumstances. He took India through the turbulent Lehman collapse and years of policy paralysis. The last few months of his tenure were pretty grim and his fixation on inflation hurt the economy. Subbarao’s ability to hold his steed, without bowing down to the Finance Ministry is admirable. In comparison, Rajan now knows, thanks to Subbarao, that hiking rates is not going to work to curb inflation. Rajan is pretty close to the finance ministry and shares a good rapport so to that extent, maybe the RBI and the Govt will work in tandem.
Rajan has been greeted with a soaring stock market and the rupee fall has also been arrested, for now, for today. Yet, one has to know that our macro concerns remain. It feels good to know, in a contrived kind of way, to know that the Parliament and the politicians are finally working, getting Bills passed. Even if it is with an eye only on the elections, it is good to know that at least some good is coming off this.
The war clouds over Syria remain thick and dark and we still have to wait and see the effect of the QE easing, if and when it gets announced on 18th Sept. And yes, Rajan’s first credit policy on 20th Sept will be awaited with a lot of eagerness.
After Manmohan Singh, many have lost faith in such intellectuals. Unless Rajan follows his words with quick and efficient action, this mistrust for intellectuals will only grow. Rajan has begun well. His debut has been a super hit but what one now needs to see is whether he is able to sustain this run at the box office, err… the stock markets. Abhi picture baaki hai dost…..
And yes, the markets are essentially purely driven by sentiments…