The page from ET portrays a gloomy picture of the financial markets and advises the investors to stay away and hold cash. The emotion of "fear" is evident when evaluations are made on the general perceptions of human mind rather than on the fundamental aspects which define a sound business. It is in such an environment that an intelligent investor should stick to the basics and evaluate the market as a whole and individual scrips in particular and arrive at logical conclusions on which decisive decisions and bold actions could be taken. When the market emotion of fear turns to blind optimism and then to frank greed, the intelligent investor makes the most on his investments.
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Financial Times
China data, rupee weakness to fuel negative sentiments in markets
- Story
- Comments (3)
The markets continued to correct last week. Although there was a technical bounce-back due to short covering on a couple of days the investor sentiment remained weak, driven by global uncertainty.
The markets touched a 52-week low during the recent correction and analysts believe there are chances of further corrections in the short term. The undertone in the equity markets is one of caution as large investors are tracking the developments in the Euro zone closely.
On domestic front, there are concerns that the GDP growth may end up below market expectations for the July-September quarter due to a slowdown in the manufacturing sector because of the high interest rates and inflation.
On the other hand, the sharp depreciation in the rupee against major world currencies is also a major cause for concern. The rupee has depreciated by around 15 percent over the last couple of months.
The situation is not healthy on the domestic and global economic fronts. Investors should be careful with investments.
These are some significant developments that are expected to drive the markets in the short term:
Crisis in Europe
The crisis in the Euro zone is spreading further and deeper. Portugal is the latest one to join the list after Greece, Italy and Spain. Portugal's credit rating was downgraded by a rating agency last week.
This strengthened the opinion that the Euro zone is heading for a messy situation led by some fundamental defects in the conception of the Euro.
The situation in Europe is quite delicate and is changing on a day-to-day basis. It's advisable for investors to stay in cash and wait for the situation to stabilise before making any new investments in the markets.
Weakness in rupee
The rupee dropped to the lows of the 2008 recession. The main reason for the weakness in the rupee is the ongoing uncertainty in the European markets which has created heavy demand for the US dollar (safe haven demand). This increased demand for the US dollar has put pressure on currencies across the globe.
The rupee is also impacted by the higher demand for dollars from oil marketing companies which need the dollars to import crude oil. Analysts believe the rupee can drop more if the Euro zone crisis deepens in the near future.
The Reserve Bank of India (RBI) is considering some policy actions to strengthen the rupee. Analysts believe any policy action by the RBI may slow down the fall in the rupee, yet, it will remain weak due to the uncertainty in the European countries.
Growth slowdown in China
There are widespread expectations of a slower economic growth rate in China in the coming months. Chinese exports growth hit an eight-month low in October as the industrial output grew at its slowest rate in a year.
Some preliminary survey results show that the manufacturing sector in China is shrinking and it will worsen in the coming days due to lower demand from the global markets.
On the other hand, the property market has also come down over the last few months. The average home prices ticked lower in October for the first time this year and property sales reported a drop.
The slowing growth rate in China will add to the negative sentiments of global investors as it will fuel fears of a global recession.
The markets touched a 52-week low during the recent correction and analysts believe there are chances of further corrections in the short term. The undertone in the equity markets is one of caution as large investors are tracking the developments in the Euro zone closely.
On domestic front, there are concerns that the GDP growth may end up below market expectations for the July-September quarter due to a slowdown in the manufacturing sector because of the high interest rates and inflation.
On the other hand, the sharp depreciation in the rupee against major world currencies is also a major cause for concern. The rupee has depreciated by around 15 percent over the last couple of months.
The situation is not healthy on the domestic and global economic fronts. Investors should be careful with investments.
These are some significant developments that are expected to drive the markets in the short term:
Crisis in Europe
The crisis in the Euro zone is spreading further and deeper. Portugal is the latest one to join the list after Greece, Italy and Spain. Portugal's credit rating was downgraded by a rating agency last week.
This strengthened the opinion that the Euro zone is heading for a messy situation led by some fundamental defects in the conception of the Euro.
The situation in Europe is quite delicate and is changing on a day-to-day basis. It's advisable for investors to stay in cash and wait for the situation to stabilise before making any new investments in the markets.
Weakness in rupee
The rupee dropped to the lows of the 2008 recession. The main reason for the weakness in the rupee is the ongoing uncertainty in the European markets which has created heavy demand for the US dollar (safe haven demand). This increased demand for the US dollar has put pressure on currencies across the globe.
The rupee is also impacted by the higher demand for dollars from oil marketing companies which need the dollars to import crude oil. Analysts believe the rupee can drop more if the Euro zone crisis deepens in the near future.
The Reserve Bank of India (RBI) is considering some policy actions to strengthen the rupee. Analysts believe any policy action by the RBI may slow down the fall in the rupee, yet, it will remain weak due to the uncertainty in the European countries.
Growth slowdown in China
There are widespread expectations of a slower economic growth rate in China in the coming months. Chinese exports growth hit an eight-month low in October as the industrial output grew at its slowest rate in a year.
Some preliminary survey results show that the manufacturing sector in China is shrinking and it will worsen in the coming days due to lower demand from the global markets.
On the other hand, the property market has also come down over the last few months. The average home prices ticked lower in October for the first time this year and property sales reported a drop.
The slowing growth rate in China will add to the negative sentiments of global investors as it will fuel fears of a global recession.
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Readers' opinions (3)
Parthasarathi (India)
University of California, San Diego, economist James Hamilton noted in a recent study that 10 out of 11 post-World War II recessions in the United States were preceded by a sharp increase in the price of crude petroleum. The only exception was the mild recession of 1960-61 for which there was no preceding rise in oil prices. This time also the crude price has risen over 100 USD. So get ready for another recession.
University of California, San Diego, economist James Hamilton noted in a recent study that 10 out of 11 post-World War II recessions in the United States were preceded by a sharp increase in the price of crude petroleum. The only exception was the mild recession of 1960-61 for which there was no preceding rise in oil prices. This time also the crude price has risen over 100 USD. So get ready for another recession.
A. S. Mathew (U.S.A.)
China's economy is going to hit harder than expected, because their economy and ecomical growth was totally based on export. The world-wide economic crisis will make China's economy to shrink considerably. In India, inflation might be great economic challenge to create greater problems, whereas in the U.S. deflation will make the situation worse. The U.S. and European companies around the world will be cutting salaries, and the standard of living around the world will be coming down. I have watched with great joy that less people are dying in the hospitals and highways of America and the funeral homes are hit with recession. Something good will come out this world-wide recession, because there is divine hand working behind this economic crisis.
China's economy is going to hit harder than expected, because their economy and ecomical growth was totally based on export. The world-wide economic crisis will make China's economy to shrink considerably. In India, inflation might be great economic challenge to create greater problems, whereas in the U.S. deflation will make the situation worse. The U.S. and European companies around the world will be cutting salaries, and the standard of living around the world will be coming down. I have watched with great joy that less people are dying in the hospitals and highways of America and the funeral homes are hit with recession. Something good will come out this world-wide recession, because there is divine hand working behind this economic crisis.
Everyone knows the German economy is sound and it is getting punished. Everyone knows the Indian economy is set to grow and the rupee falls. Everyone knows America domestic economy is drained by war and yet it appears to be going strong. Will the government speak of currency manipulation or should we rake that up?
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