Be ready for a rough ride

The results of the Assembly elections held in five states (not to forget the Mumbai Municipal Corporation elections held recently) clearly indicate that the Congress party is no longer popular among the aam aadmi. The drubbing that the Congress has received gives me the feeling that reforms would be a casualty. The first effect of the Assembly results would be visible on the forthcoming Union Budget, where the Finance Minister would more or less abandon reforms.

So, what impact would these results have on the stock market? Well, we believe that the stock market would remain under pressure after the Assembly results, and would search for more economic reasons to lift its sentiments. In the last issue of the magazine, we had discussed that India Inc.’s December 2011 quarter performance has not been so encouraging, and with the March 2012 quarter numbers unlikely to show any smart improvement, one needs to be ready for a rough ride. We have a strong feeling that the FIIs, which have been net buyers in the Indian market, may take a pause and wait for the government to declare its reforms agenda. On the other hand, the subsidy reduction that everyone was expecting in fertilisers and other food items may not pass through political wisdom. Crude has been surging, which is making India’s deficit numbers more worrisome. Even the RBI is unlikely to take any aggressive steps to reduce the rate of interest in its coming monetary policy, as the fears of inflation moving up are already in the air. On the international front, China reducing its GDP growth forecast to 7.5 per cent is making the international markets nervous, as this could impact global GDP growth.

Thus, the scenario that is emerging is not very encouraging. Over the last couple of issues, we have been advising our readers to keep booking profits, and we continue to advise the same despite the Sensex losing nearly 1000 points in the last fortnight.

One big event on the 16th of March is the Finance Budget, and this would be watched by many investors. Our past experience suggests that the Budget has been becoming more or less of a non-event for the market, and its impact does not last beyond two trading days. Also, the many promises made by the Finance Minister do not result into action (read our report on page number 28), and hence, basing the investment decisions on the Budget is proving to be futile. Nonetheless, your favourite magazine, DSIJ, would continue to guide you on the Budget day through our website. In fact, our website has many interesting Pre-Budget articles, including sector specific analyses on what each sector can expect from the budget. We would also be putting out our Post-Budget analysis on the website, and request you to keep visiting the same.

Before I sign off, I thank each and every reader who faithfully participated in our Content Survey and gave their valuable feedback to improve the magazine. We are analysing your feedback, and it is our commitment that you would see better content in the coming months. As a token of gratitude, we have selected 10 lucky winners through a draw, who will receive Victorinox Swiss Knives. The names of the winners have been published on page number 80 of this edition. Once again, I thank you all for your participation.