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02 March 2017
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This time it's different

  • Written by SilkRose Fiscal Services LLP.
  • In category Blog.
  • 3 years ago.
Hot Hits: 923
 
Our recent interactions with investors and businesspersons have convinced us that the current market up move is distinct in some sense.
 
Historically, most bull markets have been driven by high hopes and fueled by greed of investors. Asset prices correct sharply as hopes are belied and fear overtakes the greed.
 
But in the current instance, We do not see much hope in the air. The usual euphoria that is usually seen with broader market indices at all time high, is conspicuous by its absence.
 
Greed and fear more or less are in balance. But still prices are moving higher!!!

The move to replace 86% of country's currency in a single swap; a strong drive by taxation authorities to enforce compliance has confounded the small and medium sized businesses. Their entire business model that was based on poor tax compliance, lack of transparency, and informal financing stands challenged. Imminent implementation of GST also adds to the uncertainty for them. Outlook for both private consumption and investment therefore remains clouded.
 
Severe correction and illiquidity in real estate market has eroded the wealth effect by a good measure.
 
Despite bumper crops across North Indian planes, the farmers do not appear enthusiastic, as crop prices have plummeted. The specter of El Nino, that impacted monsoon for two consecutive years, reappearing in late summer this year is also looming large on their psyche.
 
Financial sector is still struggling with humongous burden of non-performing assets. Though, the rate of accretion has slowed down notably in past couple of quarters, the recoveries of NPLs has not been encouraging by any measure.
 
To the contrary, new pockets of potential stress are emerging especially in power and telecom. The capacity utilizations remain low, and managements are not guiding any material pickup in next few quarters.
 
Bankers are also not sure about the repercussions of the shakeout in 'start-up" and "E-commerce" space. Lenders' direct exposure to these sectors may not be large, but personal credit to the employees who would lose their jobs could potentially bring some pain.
 
RBI has already indicated that the monetary easing cycle may be over for the time being. In fact, there are some voices already making a case for tightening of monetary policy, as higher global commodity prices, a stronger USD (as Fed hikes), and likely rebound in agri inflation, could raise inflationary expectations.
 
The macro advantage in terms of control over twin deficits and inflation could therefore also wane to some degree later this year.
 
The rally in stocks prices needs to be analyzed in light of these constraints.
 
....to be continued
Silkrose Fiscal Serviecs LLP & Adroit Research Team 
For any Queries: This email address is being protected from spambots. You need JavaScript enabled to view it.
 

Disclaimer: The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The author, directors and other employees of Adroit Financial Services Pvt Ltd and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above mentioned opinions are based on the information which is believed to be accurate and no assurance can be given for the accuracy of this information. Adroit Financial Services Private Limited and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this report. This should, however, not be treated as endorsement of the views expressed in the report.Adroit Financial Services Private Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH100003084. Silkrose Fiscal Servies is an Associate Partner with Adroit Financial Servies Pvt Ltd since 2015. #silkrosefiscal is NOT registered with SEBI as Advisor. The updates are purely a view point / public domain news and there is no assurity on the returns. Hence all the members are requested to apply their prudence and consult their financial advisor before acting on any of the recommendations by the company. #SFSL is not responsible of any losses incurred (if any) by acting on the updates. All news shared by SFSL is meant for free view and the company does not earn revenues from sharing any public domain information.


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Disclaimer: SilkRose Fiscal Services LLP (SFSL) is registered As AP. The updates are purely a view point / public domain news and there is no assurity on the returns. Hence all the members are requested to apply their prudence and consult their financial advisor before acting on any of the recommendations by the company. SFSL is not responsible of any losses incurred (if any) by acting on the updates. All news shared by SFSL is meant for free view and the company does not earn revenues from sharing any public domain information.

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