Due to hectic schedule in the previous month due to Ramadhaan fasting I had been totally off the market. This gave me ample time to dig into some historical data about the economics prevailing in India compared to the global market. Everyone talks about the market fundamentals being intact but why all of a sudden there is so much of overvaluation and thus leading to such a frenzied bull run ? Lets get back a little over 1990’s when globally the market was on a very aggressive phase and Indian market was on its all time lows. On the global arena India was inching towards bankruptcy and the government was contemplating to peg the dollar. Thanx to some proactive measures by Rajiv Gandhi and Manmohan Singh who brought an end to the Licence Raj. This was the starting point towards opening up the economy. From a low point where India was ready to pledge a plane load of Gold bullion to IMF to save face to a current stage of Surplus Reserves is one impressive comeback at the the shortest way ! Unlike China that is ruled by an Iron Fist where the government is always at your shoulder India advocates democracy and a comeback of this sorts is all about strategic leadership and forward planning. Above all this IT industry has been one of the flagships that has helped the Indian economy grow.We have all piggy backed on that wave to this current status.
India’s Rupee had been on bearish clutches for god knows how long (Ever since I was born !). For the first time rupee seems to be strong against a weakening dollar. FII inflows are exceeding 10 Bn $ per month are clear indications of Investors looking at Indian markets with new respect and a great opportunity for them. This is reinforcing to the industry indirectly that Foreign companies are eyeing at large acquisitions across different verticals. Rupee has been showing strength because of a lot of market factors and better GDP growth rates.The fall side of the strong rupee is that IT firms are loosing on their earnings on a daily basis but that can be covered by contracts and better agreement terms.
Analyst claim that US economy is on verge of a depression, secondly in spite of the depression businesses in US have to survive so all firms are looking for outsourcing to cut costs and India is on a sweet spot there. Thirdly Indian economy and industrial advances look lucrative to foreign investors and an excellent resource to tap for their manufacturing and service needs. Above all India has been an advocate of democracy and the resource available here is globally oriented in terms of language unlike our neighbor China.
It is true that the market is moving at pure speculation right now but let me tell you something the fundamentals are still intact. Now how all this FDI is going to be translated into growth is something we need to wait and watch. If the market can move a 1000 points on the sensex in a matter of 5 trading sessions, the target we are aiming at is just 1800 points away and we have more that 50 trading sessions left in the year. Hope my reasoning makes sense as market sentiments are always governed by herd rules !
PS: Despite the recent downtrend after this post I still believe there is a strong rebound due soon that will help the sensex gain the predicted levels before the end of the year.