Is hope hyped up?

Events and expectations lead to markets pricing every positive development in.

Not too long ago, the rupee was battling to save itself from breaking the Rs.70 barrier. Exporters were making merry. The RBI was pulling out all stops to fight the fire and the government banned import of gold to shore up the rupee. Who would have imagined then that the RBI would be firefighting so soon to stop the rupee from rising too fast and breaking the Rs.60 barrier downwards. That is the extent of the swings in global volatility. A stronger currency means many things. Export competitiveness is bound to be hurt if the rupee rises any further. Imports could well regain some momentum. The government will be forced to step in with swift policy reversals on gold if the RBI finds it too tough to handle a rising rupee. Meanwhile, the stock market gets its highs on hopes of Modi magic. It would be good for investors to appreciate that the effect of magic is merely for a short burst of time. Betting heavily on Modi magic is ill-advised and only reveals a speculative strain of thought. Investing is very different from what is going on right now.

istrat: Avoid buying hype in the name of hope.

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