This is a question that is always difficult to answer. The best thing to do is to fully deflect the question!

However with a low IQ it is possible to attempt an answer to this! Even though I do belong to the Peter Lynch gang of saying ‘If you have spent 10 minutes thinking or talking about the economy, you have wasted 7 minutes’ here is an attempt.

What works against the markets:

1. The deficit in the government’s finances

2. The biggest MONEY raiser in the market is the government -both debt and equity – is also the rule maker. Pranab Mukherjee will ensure that the market is ‘good’ in the short term so that all the PSU shares can be listed or diluted further.

3. Not creating enough jobs at the lower end: we are proud of a big young population, but we are not able to create enough people ready for taking up jobs. We have a young population, too many colleges and many corporates looking for people. However the marriage is not too great…

What works in our favor:

– the so called worst states – Bihar, Jharkhand, Orissa, are all growing at a decent rate. Gujarat and Maharashtra – momentum will take them forward, so the growth rate of 8% is looking possible and achievable.

– the younger kids in the middle class are looking at equity for investing. Hopefully bank penetration will ensure mutual funds and unit linked plan sales.

-brokerage houses will want to reach all India levels in all directions and this will ensure that there is better penetration into the interiors…and that will again expand the market…

I have done 2-3 posts recently saying that interest rates seem to be going up…but the market pricing of risk on SBI bonds are not good indicators. Also the price of rate sensitives is not falling, financials are rising…these indicate that interest rates have almost fully peaked. The last 25 bps or 50 bps is always confusing…good time to lock in on debentures for say 15 years. If the SBI bonds are available at par or near par….you should take them or wait for the smaller banks to come out with an IPO…confusing times with interest rates and crude prices. All the best for those who watch the media for indicators…GOD BLESS YOU.

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  1. Subra Sir,

    Nice points.
    No one can time the market. But one thing is for sure, the market will open very strongly tomorrow. India in Semis. Market always performs better when India wins.

    Rakesh

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