Markets Hold Promise Of A Cheerful Diwali!

Despite the government (read Finance Ministry) having requested the RBI to cut rates in order to bolster growth, the latter, in clear disregard of the request, has left the key policy rates untouched.

The UPA has lost valuable time of its regime over the past eight years in nonsensical issues like battling corruption and wrongdoings of its own people. It even failed to carry forward and in some instances took a long time to complete initiatives that were put in place by the preceding government, including some very ambitious infrastructure projects like the Golden Quadrilateral and the connectivity of rivers from north to south. Finding itself in a quagmire, it is finally looking at washing away its sins before the 2014 elections by announcing a spate of reforms. It has been touting its reforms initiatives to get the RBI to do what it wants. But the fact that still remains is that all that it did was long due.

After all the rosy announcements about how it was trying to rein in the fiscal deficit to acceptable levels and unleashing a spate of reforms, it was probably wishful thinking on the government’s part to assume that the RBI would silently toe its line. The RBI and its officials have been smart enough to recognise the improbability of the government achieving what it was setting out to do. It eventually decided to act according to its own code of conduct and concentrate on its set goal of trying to rein in inflation rather than reducing rates and fuelling it further.

Whatever the reason or the outcome of this may be, one thing that certainly emerges is that there is a complete lack of co-ordination between the various governmental agencies and institutions, including ministries that are mired in a battle of egos without bothering about what is good or bad for the economy. Headlines and sound bytes emerging from the two most powerful echelons of power and regulation in the country are screaming aloud why growth cannot come back and inflation be controlled. The RBI and the Finance Ministry seem to be poles apart in their thinking on these two most critical issues.

There are lots of options with the government for bolstering growth. Hundreds of infrastructure proposals worth more than Rs 2 lakh crore in value are pending with various economic ministries for their approval. Thus, the most important reform required at this point of time is for the government to ensure an effective, reliable and prompt delivery system for all its services to the public.

The time is now ripe to tackle corruption and crony capitalism head-on. The biggest and most urgent reforms that are currently needed are for controlling corruption and ensuring effective governance in all the delivery systems of the government. In fact, the real truth about fiscal deficit is mainly linked to governance deficit, which led to a lot of leakages in the treasury. Only if the quality of governance improves will corruption come down, tax evasion drop and revenues improve. Further, if the government sincerely CUTS on its wasteful expenditure, fiscal deficit will automatically come under control and GDP growth will increase.

So, dear investors, do not expect miracles in the coming months from the government. However, the economy is certainly taking a positive turn and that certainly means a positive environment for the market. As per our tradition, we are offering a recommendation of seven stocks to be bought on Muhurat trading that are poised to give you a good appreciation in the coming year. Do read our cover story.

Our portfolio of stocks recommended as Muhurat buys last year has done exceedingly well, providing an astonishing return of 29 per cent as against a rise of 11 per cent in the Sensex.

I sum up this edit by wishing every reader and patron of Dalal Street Investment Journal a VERY HAPPY DIWALI AND A PROSPEROUS NEW YEAR ahead on behalf of all the directors and employees of DSIJ. Let Samvat 2069 bring you good health, more wealth and greater happiness!

V B Padode
Editor-in-Chief