On the international front, the world economy is yet to come out from the woods. The financial meltdown, owing to excess leveraging and the resulting liquidity crunch which precipitated the prolonged correction in all asset classes, is still haunting businesses across the world. Consumers now perceive higher risks and have shunned their appetite to consume more. Those businesses currently facing a slump in demand are now in the process of drawing up new plans to tackle the current situation. The way government fiscal packages, support grants and monetary policies are framed would decide the course of businesses in the near future. At least a few quarters would pass for the policies to have any effect on stimulating a fresh demand cycle.
The fall of most world market indices has proved the level of integration that exists between the developing economies and the developed ones. The fiscal and monetary policies of governments across the globe, including India, are the most important factors to watch out for in 2009. The lag that was seen when the crisis set in developing economies is also applicable as far as recovery in developing economies is concerned. Proactive policies in favour of growth and the reduction in the risk appetite of consumers will decide how soon all the affected economies will step out of the crisis.
As for the scenario in India, owing to several factors at play and also due to the uncertain business environment, it would be difficult to cite now as to at what point of time the market will stabilise. When investors begin to see clarity and visibility of corporate earnings, we can expect the market to find its balance. In view of the fact that overall economic growth is expected to be dented, most sectors are likely to show de-growth. As such, stocks of most sectors look attractive for investing over a long term. Some of the sectors move irrespective of the general economic trend and are therefore likely to benefit. One such example is the sugar sector.
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