STOCK DOCTOR
dr gs sood
Watch the bull run
Happy
days are here again. The markets have moved fast in the last couple of
weeks, cheering the recent policy announcements by the Government and
abundant liquidity unleashed by central banks of the world’s major
economies.
In
what appeared to be a reforms blitz, the UPA government besides
declaring support to the domestic mutual fund industry announced a Rs 5
per litre increase in diesel prices, capped the subsidy on LPG
cylinders, allowed FDI in retail, aviation, power trading and
broadcasting services, declared disinvestment in public sector
undertakings even as it constituted a panel to study the controversial
tax proposals under the General Anti-Avoidance Rules (GAAR).
The
markets responded positively and decisively to these policy
pronouncements. However, some economists continue to be sceptical about
the positive impact of the announcements, citing the long and uncertain
time lag between the implementation of the reforms and their impact on
the economic upturn.
I
am of the firm opinion that the market operates mainly on sentiment,
with fundamentals playing only a secondary role. The fact that foreign
institutional investors (FIIs) poured in more than $1 billion within a
week of these announcements speaks volumes about the role of sentiments.
The response was all the more exciting due to the fact that the markets
were not expecting such announcements and that too in such a bold
manner, with the UPA government even opting to jettison a key ally. The
sentiments, when they turn for the good, can create a series of
reactions bringing in more things into play, increasing liquidity
thereby preparing the capex cycle to restart and strengthen the rupee.
This also has its impact on containing the fiscal and revenue deficits,
and inflationary pressures that a weak rupee is said to create.........READ MORE
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