Posts Tagged ‘World Bank’

Wise Money Weekly Update of The Market (Week: 25th – 29th January)

Hello Friends, here, we bring you the weekly view of the Indian as well as of the Global markets and latest global business and industry updates..

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Wise Money Weekly Update of The Market (Week: 25th - 29th January)

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A sell-off in global stocks, disappointment from key corporate earnings like L&T, possibilities of further monetary tightening by China and US president‘s proposal to put new restrictions on big banks weighed heavily on the domestic markets.

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In the forthcoming week, domestic markets are expected to remain volatile as traders roll positions in the derivative segment from January 2010 series to February 2010 series.

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Markets will also take cue from monetary policy which is scheduled to come out on January 29.

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Though tightening is largely expected by way of Cash Reserve Ratio hike as RBI has already started the first phase of ‘exit’ in its October 2009 policy statement but there is a belief if the RBI sucks out some liquidity, it may not raise interest rates, since liquidity is excess in the system.

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The Indian food price inflation is largely due to supply constraints.

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But going ahead anticipation of decline in food price inflation & lower borrowing from government in future because of huge money raising plans through disinvestment are some of the factors that are likely to determine RBI stance on increasing policy rates.

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The widely watched wholesale price index rose an annual 7.3% in December 2009, its highest since November 2008 and accelerating from a 4.8 % rise in November 2009.

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Food prices rose 16.81 % in the 12 months to 9 January 2010, easing from nearly 20 % in early December.

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On the Global economic front, GDP of China returned to double-digit growth in the fourth quarter of 2009 at 10.7 percent, and over the full year GDP surpassed the government’s target of eight percent.

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Back at home, domestic economy, which grew at 7.9% in the September quarter, is expected to grow 6-6.5% in the December quarter.

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The World Bank has raised its forecast at 2.7% for global growth in 2010.

Moreover it has raised its forecast for US growth in 2010 to 2.5% growth, after predicting 1.8% in June.

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Japan’s gross domestic product will expand 1.3% this year, more than the 1% predicted in June.

The euro area’s economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion.

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Stay Tuned for More on this..

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Hello Friends, here, we bring you the weekly view of the Indian as well as of the Global markets and latest global business and industry updates.

Dollar Supremacy to End? New Global Reserve Currency to Set In ?

UN called on Tuesday for a new global reserve currency to end dollar supremacy. Is dollar Supremacy at risk?

UN called for a new global reserve currency to end dollar supremacy. Is dollar Supremacy at risk?

The United Nations has called on for a new global reserve currency to end dollar supremacy, which has allowed the United States the “privilege’’ of building a huge trade deficit.

“Important progress in managing imbalances can be made by reducing the reserve currency country’s ‘privilege’ to run external deficits in order to provide international liquidity,’’ UN undersecretary-general for economic and social affairs, Sha Zukang, said.

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Speaking at the annual meetings of the International Monetary Fund and World Bank in Istanbul, he explained:

“It is timely to emphasis that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity.’’

Greater use of a truly global reserve currency, such as the IMF’s special drawing rights (SDRs), enables the seigniorage gained to be deployed for development purposes,’’ he said.

The SDRs are the asset used in IMF transactions and are based on a basket of four currencies—the dollar, euro, yen and pound—which is calculated daily.

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China had called in March for a new dominant world reserve currency instead of the dollar, in a system within the framework of the Washington based IMF.

Beside this another worrying news for Dollar lovers is floating around that Arab states had launched secret moves with China, Russia, Japan and France to stop using the dollar for oil trades, though denied by many of arab states.

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Where Are We Heading To? Part 2

Indian Stock Market Growth

From the positive happenings in the economy, let’s see how the stock markets have behaved amidst all this?

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The price charts of many companies reflected that the investors were in a catch-up mode.

This was evident from the stock price trajectory of most stocks, which saw a sharp spike in few days.

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In many cases, the stock prices nearly doubled in a matter of few trading sessions.

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It’s a kind of emotion that grips a commuter when he/she loses a train or bus by a fraction of a second.

When we see a bus/train departing in front of our eyes, we rush towards to it without caring about the risks involved.

What if you hurt yourself badly in the process? But who cares?

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Those days seem to be back where most of the frontline stocks are at their 52-week highs or better, but, still their valuations, measured by various ratios such as price-to-earning multiples or price-to-book value among others are far from the highs of 2008.

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Valuations come with expectations. 🙂

Higher the valuations, greater is investor expectation from that particular stock.

To justify the elevated valuations, corporate earnings have to grow at a significant rate.

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Companies also have to improve the quality of earning i.e. the profit growth has to be accompanied with an equally rapid rise in cash flows and dividends payouts.

But can this really happen? To support this, we have the World Bank statement, who said that India would grow 8.1 per cent in 2010, ahead of China (7.5 per cent).

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The numbers in the survey also suggest India is finally ready to rub shoulders with its northern neighbour.

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The point is, India is better placed to face the economic slowdown as compared to other large economies because of the diversified nature of the economy in which some sectors witness robust demand to mitigate the impact of a demand slowdown in other sectors.

It is clear that the Indian economy is recovering from the clutches of the world economic crisis.

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Even the performance of the stock market has shown signs of revival of investor interest and confidence, both domestic and

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The confidence of FIIs in India started to built up in the last few months which is evident from the FII figure mentioned above and tends to be in upbeat mood going forward.

Therefore, even if economic growth does recover in India, it would be a different than what we have seen in the past.

And to gain, investors will have to offload baggage of the past and look at the future afresh.

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A monsoon hit to the economy!

A monsoon hit to the economy!

With every passing day, hopes of a normal monsoon are receding.

Along with poor rainfall, hopes of better economic performance in 2009, too, may suffer a washout.The situation is one of concern.

Everyone now has fingers crossed about the next crucial 20 days. Surely, instead of see-sawing between hope and despair each time rains play truant, India ought to deal with the problem of its monsoon-dependence scientifically.

Representing around 17 per cent of India’s GDP, agriculture has averaged nearly 4 per cent growth over five years.The sector was expected to buoy India’s overall growth, hit by the global crisis.

Manufacturing is down. Exports are down. If the monsoon does disappoint, farm production will fall at about the worst possible time.

Nearly 70 per cent of Indians depend on farming. Many handling summer-sown crops like rice, soybean, sugarcane and cotton would be impacted, as also dealers in food and cash crops.

Rural demand has been robust. A poor monsoon could change that. Food prices are already high. They could hit the roof. Within the WPI, the food articles inflation stood at 8.65%.  Inflation for sugar and sugar products stood at a whopping 33.29%.  Poor rainfall will ensure that this problem continues.

Irrespective of how the situation plays out, studies on monsoon patterns indicate a generally erratic and weakening trend.Yet India’s output of water-intensive crops is to grow exponentially in future, implying massive groundwater depletion in wheat and rice-growing states.

Managing water resources – harvesting, extraction, storage or recycling – can’t but be top priority. Woefully inadequate irrigation infrastructure needs overhaul.

India can learn a lot from technologically innovative Israel, a model of efficient water management. Consider drip irrigation, which avoids evaporation by keeping the soil moist underground.

Also, power subsidies encourage waste of water. Their calibrated rollback is required, as also strict use of water meters.

Finally, there’s need to boost manufacturing to meet growth targets and ease dependence on agriculture.

By World Bank estimates, our water demand will outstrip supply by 2020. Staving off such a scenario will require more than propitiating the rain gods.

It is Need of hour that India’s dependence on the monsoons has to be cut down and minimized.

Can India run ahead of China?

Can India run ahead of China?

Can India run ahead of China?

Indians have for long suffered from an advanced case of China envy. It has never been just a question of higher growth rates in China. Visitors from India have also inevitably come back with breathless tales about the new downtown Shanghai, the magnetic levitation trains or the new highways being built across that country.

However, the World Bank said on Monday that India is expected to grow at a slightly faster pace than China in 2010. And the two economies will expand at around the same rate in 2011.

Is this a turning point in the long race between the hare and the tortoise?

There is little doubt that the gap between the rates at which the two emerging giants are growing has started narrowing.

China used to grow around 3 percentage points faster than India earlier this decade. That gap has now narrowed to the point of insignificance in the past couple of years, even without discounting China’s dodgy macroeconomic numbers.

This change is likely to be enduring for several reasons.

First, China is more exposed to the vagaries of the world market because of its high trade intensity. A Japan-style secular slowdown in the US and Europe over the next decade will hurt China more than India unless China moved beyond its admittedly successful mercantilism.

Second, the foreign direct investment boom in China since the mid-1990s pushed up its investment rate, enabled technology transfer and plugged the nation into global supply chains. All this took China closer to the global efficiency frontier, but it now seems that diminishing returns are setting in. Future growth will have to depend more on domestic demand and local innovation, which means that China will have to change its growth model.

Third, China is a fast ageing society, thanks to a one-child policy. This demographic change will increase dependency ratios and social costs.

India seems to be on a stronger wicket right now, thanks to its higher dependence on domestic demand, its vibrant entrepreneurial culture and a young population. But that should not mean that catching up or overtaking China is inevitable.

The joker in the pack is the quality of national leadership.

India needs to do several things if it has to realistically overtake China in the next decade: economic reforms, better infrastructure, internal security check, less bureaucracy and intensive skill development, for example.