Other than a few companies, most groups and companies have always been looked at with suspicion. The numbers aren't going to be great for a lot of companies, especially in the manufacturing sector. The liquidity crunch during the last quarter would have impacted the business for most companies. The early birds generally come out with decent numbers. The problem is with the bad set of numbers that invariably get postponed to the last days of the month. The good ones will be seen with suspicion - from the point of view of both - genuineness and sustainability. The market may react positively to bad numbers if they are not as bad as expected!!
The Obama stimulus package is getting diluted with difference in views on how it should be structured. Economists do not favour tax cuts as there is no guarantee that these will result in creation of demand. They are more in favour of increased spending in infrastructure to meet the shortfall in consumer spending. The counter view to this has been that infrastructure spending will not help those who have lost jobs. All this is likely to delay the announcement as well as structure of the package. The uncertainty has led to a reversal of the rally in commodity prices.
Meanwhile, the problems for the banking sector are not over. Bank of America needed a substantial bailout package. Two more US Banks have failed last week. The auto industry will again run out of money in a month or so. Oil, after a brief spurt to $47 levels, has again tanked to $36 levels. The global scenario is expected to remain gloomy for most of this year. In India, Satyam episode has shaken the faith of investors. Elections are now a few months away. Once we enter a quiet period there, the Government's ability to support markets, through stimulus packages, will be doubtful.
On the positive side, inflation has come down. Interest rates have been brought down too. Liquidity has eased considerably. However we do not believe that this will help in a quick revival. The biggest uncertainty for the markets and the industry will be the elections. Whatever forecasts are available as of now, do not make a pretty picture. The two large parties seem to have little chance of getting more than 60% of the required majority on their own. So we are likely to have another khichri government (which may be weaker than the present one), and that can be a scary thing for the markets.
The best case scenario for the markets is to linger sideways. And the worst case scenario is testing the previous lows and possibly creating new lows. Given the weak global scenario, the second one is quite likely over the next three to four months.
Vivek Bhargava
The Obama stimulus package is getting diluted with difference in views on how it should be structured. Economists do not favour tax cuts as there is no guarantee that these will result in creation of demand. They are more in favour of increased spending in infrastructure to meet the shortfall in consumer spending. The counter view to this has been that infrastructure spending will not help those who have lost jobs. All this is likely to delay the announcement as well as structure of the package. The uncertainty has led to a reversal of the rally in commodity prices.
Meanwhile, the problems for the banking sector are not over. Bank of America needed a substantial bailout package. Two more US Banks have failed last week. The auto industry will again run out of money in a month or so. Oil, after a brief spurt to $47 levels, has again tanked to $36 levels. The global scenario is expected to remain gloomy for most of this year. In India, Satyam episode has shaken the faith of investors. Elections are now a few months away. Once we enter a quiet period there, the Government's ability to support markets, through stimulus packages, will be doubtful.
On the positive side, inflation has come down. Interest rates have been brought down too. Liquidity has eased considerably. However we do not believe that this will help in a quick revival. The biggest uncertainty for the markets and the industry will be the elections. Whatever forecasts are available as of now, do not make a pretty picture. The two large parties seem to have little chance of getting more than 60% of the required majority on their own. So we are likely to have another khichri government (which may be weaker than the present one), and that can be a scary thing for the markets.
The best case scenario for the markets is to linger sideways. And the worst case scenario is testing the previous lows and possibly creating new lows. Given the weak global scenario, the second one is quite likely over the next three to four months.
Vivek Bhargava
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