First of all, I hate predicting – especially if it is about the future! Having said that it is necessary to look at some of the over optimism that is there in the market and at some of the problems too.
So today let us look at the issues:
A stagnating Europe and USA will mean bad news for China (for its exports), Brazil (commodities not being in great demand), India (inflow of investments) Russia (falling oil prices will hurt).
Let us make no mistake. A declining EU and a stagnating US cannot be good for rest of the world. The EU and US will try to continually try to maintain their political hold even as their economic hold is fast dwindling. Political fallout of all this ‘dadagiri’ apart there will be huge economic fall out also.
Indian businessmen and other Indian asset buyers are used to benign interest rates. However the ever increasing interest rates by the RBI will start hurting. As the quarterly results start coming you will see earnings eroded by rising interest rates. Funding for infrastructure projects will not be easy to get in a world where money keeps going to the ‘safe haven’ . Rising interest rates will also dampen fresh investment in infrastructure – even guaranteed returns will not mean anything unless the guarantees are by the Central Government. The guarantees of payments will not mention the delays that the government machinery is capable of doing!
All this does not abode well….Here I am not predicting doomsday, but clearly Apocalypse is not really built into Indian prices. Well not yet at least!
All the best!
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