Deteriorating Growth Positive sentiments
Pre-election rally is seems to be over and markets could be malevolent till May 16, 2014. Nifty is having a strong base at around 6700 and could sustain somewhere around these levels. Rupee/$ pair is still hovering around 60-60.50 and have potential to get appreciate further but only on the basis of KA (capital account), No current account led appreciation seems to be on cards! A capital flight to India before general elections is just on some positive sentiments and on power change conceptions but this is need to be understand that whomsoever will grab the rein of World's largest but titular democracy will not having any magical wand to revive economy in a go. Manufacturing and Mining sector is suffering from policy paralysis and the Industrial production is seeming anaemic (contracted about a % in last 6 months). MET Deptt. have already asserted about the deficit in Avg. rain precipitation. Therefore, higher CPI Inflation is inevitable and moreover the food deficit in paddy crop could be disastrous for vulnerable and economically deprived sections of society. RBI may miss out their CPI target of 8% this year as food inflation tend to go up if EL-nino carried drought would be severe. The new dispensation sworn in has to take radical steps in allocation of natural resources and subsequently has to pave their way in Environmental and ecological clearance too, in accordance to the rule book off-course.
The United States Trade Representative ban on Indian Generic drugs by putting India into special 301 report and EU ban on alphonso mangoes will definitely impact the export billings and Ukrainian crises if further exacerbated will definitely impact the Import bills. Thus, the Macro Economic factors are more or less sluggish and, pre or post election rally may take the markets onto hills but the sustainability is not guaranteed.
Till May 16, markets are detrimental as election results are uncertain, but the near future seems to be sluggish and deteriorating. Now, India has to see how compassionately the new government deliver to this anaemic economy.
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