Category: Economy, Markets and Macro Views

India’s strong 25%+ bounce from lows, +ve YTD performance, and recent peer market outperformance has been backed by – Near-trough valuations, Signs of growth revival and resilience in consumption demand, Rising monetary flexibility and rate reductions, Liquidity and stabilization of domestic credit market. FIIs have bought stocks more than Rs 3,000 cr in CASH in the current rally.

The summer will be the season of election and global risk pullback will have a more lingering effect. Will this Rally Sustain or was it just a spike ? (more…)

Elliott Wave International in a report released just a while ago said

Prices in India’s Sensex have just broken above a downtrend line, imitating a pattern from 2004 that led a strong rally

The Sensex rose in the past few days, on optimism U.S. plans to rid banks of toxic assets will help ease the credit crisis and revive global economic growth. This five-wave cycle will include three rallies, with each peak exceeding the previous one. The first wave started with gains between April 2003 and January 2008, (more…)

The first working paper by the newly established Macro Unit in ICRIER – Indian Council for Research on International Economic Relations released yesterday forecast the Indian GDP growth for FY 2009-10 at 5.5% [Moderated].

The scenario with “no shock” which is considered as a case that would have been possible in the absence of the financial crisis, provides a growth of 8.4 per cent, which implies a recovery that would have been possible in the absence of the external crisis. (more…)

The Indian gems & jewellery industry is going through a difficult phase on the back of softer demand from key markets. This has resulted in significant inventory build‐up and a major postponement/cancellation of orders across the sector, and in turn has impacted liquidity.

Inventory Pileup:
Lower demand was evident in Christmas orders from the US and Europe, although the decline started towards the beginning of H208. Several developed markets – including the US, the UK, Japan and EU, which are India’s major export destinations – are in recession, clearly resulting in poor retailer sales. The Indian domestic industry has mostly stopped fresh purchases of rough diamonds and cut back on ongoing production, and many diamond and jewellery units have closed down production for a period anywhere from 15‐40 days. (more…)

In a report Morgan Stanley disagrees with the current rally in the Indian market. It appears that investors are starting to build a bull case for India. In agreement with India’s long-term story is intact but we do not see a reason to buy Indian equities at least until the elections. Recently developments in politics seem to be increasing the probability of very fragmented parliament, which could spoil chances for a post election recovery in markets as well with a likely downgrade of sovereign rating. (more…)

In the present credit crunch, investors seem to be more concerned about pressure on corporate balance sheets than on earnings. BNP Paribas has done an excellent research to estimate the risk to companies’ debt servicing capabilities and the risk to companies’ capex targets under various scenarios of revenue and cash flow decline (5% to 30% decline) from base case estimates.

Naturally, a company that faces risk to debt servicing under a scenario of 5% revenue decline from our estimates is more risky than a company that faces similar risk at 30% revenue decline scenario. (more…)