Few Breathers in the current Gloom!

Greed, fear, hope, Regret, Misery, Lust, and guilt. And so the seven deadly sins roll out untamed. What stands now??? Will not be there few hours later!!!Forget tomorrow!!

In the midst of all the negative cues and fallacies, here's some very optimistic outlook of the present scenario....

Firstly, Observed glut in Global savings, but investment climate in the developed countries not so conducive to productive investment. So, the global savings will seek an outlet. Developing countries like India display a strong urge to grow, will continue to attract these funds. Future or say long run seems very fruitful and rewarding no matter where the Inflation or GDP takes us this fiscal year but the fundamentals of economy being so strong and robust that the bears will succumb.

Secondly, The main channel through which the global forces can impact India are Exports and Capital inflows. Capital inflows this quarter have been depressing but then so far we haven't been affected by the global slowdown on the export front. Though export of services has been affected to an extent, but so far there has not been any serious impact on the export of IT and ITES (IT Enabled Services).

Thirdly, it is unanimously reckoned that developed countries are under pressure to cut costs and this could lad to increased outsourcing to countries like India and China due to availability of Cheap and efficient labour.

Fourthly, Easing oil prices would ease pressures on the balance payments, Inflationary pressures(though domestic prices would not ease simultaneously as Oil Cos. continue to bleed). Already Trade deficit (Excess of Imports over Exports) expected this year is 10.4% this year up from previous year 7.7%. Easing Oil would decrease this figure as Oil exports bill will decrease. Also the off budget liabilities (oil & fertilizer subsidies) shall tank. Iran, Israel, Russia being the Spoilsports. The Bad men!!!!!!!

Fifthly, Recently IIP data (April June 08-09) of 5.4% down from 10.3% during the corresponding quarter last year, have shown a reasonably good growth in consumption goods indicating investment growth would be sustained (No wonder why FMCG sector shows strong resilience in spite of the strong market crash) but there is a decline in savings rate both public and private Corporate savings thus widening the CAR (Current Account Deficit).
Electricity Generation, an IIP component grew by just 2% in the first quarter (against 8% last year) which is totally unacceptable and unreasonable for a fast growing economy like INDIA. So quite reasonably, we can expect substantial improvement in the sector for the next three quarters. This would help to achieve robust industrial growth expectation of 7.5% for the whole fiscal year. PowerGrid, NTPC, Reliance Power (for obvious reasons) become hot picks.

Sixthly, Fiscal revenues to be buoyant because of revenue from disinvestments (reduction in capital investment) & Telecom( 3G) licensing. This would moderate the fiscal deficit (amount by which a government spending exceeds its income over a particular period of time) and help it to cool off to the expected 2.5% of GDP by the end of this fiscal.


These points might seem too optimistic, affirmative but INDIA continues to be a hot selling cake that every one yearns to have. India enjoys certain growth enablers such as its culture of tolerance, educational base, skilled individuals, economic factors like a well-developed entrepreneurial class, vast natural resources, strong resilience, strong democratic foundations, secular fabric and finally its young population.

All these would definitely catapult the economy in the coming quarters.

QWERTY Economics

Superior technological products need not always dominate the market! Wondering? Let Economics explain… Even today people use badly designed keyboards and suffer from pain in their hands. In 1936 August Dvorak designed a new keyboard. People using QWERTY (these are first five keys on the top row) keyboards did not prefer DVORAK keyboards because there would be compatibility problems. People who first used the QWERTY keyboard influenced subsequent users to us them and so on. So, the market was filled with QWERTY users. QWERTY, hence, remains the accepted design. This suggests that superior technology need not be the reason for product dominance. Consumer decision process plays a vital role. Economics calls this decision process "path dependence". That is, our decisions are based on others who earlier, took their decisions. And so it goes on.

NeuroEconomics

Weird, huh? Not very, in the world of stock market. Neuroeconomics is the science of the way our brain reacts when we take a decision. This incorporates using brain-scanning technologies to observe the way neurons react when you make decisions. Neuroeconomists, for instance, study how emoticeuticals (drugs that stabilize emotions) help equity traders take decisions during market crashes. By studying similar market conditions when traders did not take emoticeuticals, neuroeconomists may be able to measure change in behavior and accordingly design drugs to improve their decision taking ability.