Quick edit:
The war on inflation seems headed nowhere. After several interest rate hikes, food inflation shows little signs of easing. Fuel price hikes are not helping matters one bit. The perverse argument that freeing diesel prices is a sure shot way of curbing long term inflation clearly shows the helplessness of the government. Rate hikes which were supposed to soften demand and therefore lower prices have clearly failed. The Government has no plan B. The markets are now watching if the Reserve Bank of India has a plan B. Leaving lesser monies in the system for spending is possibly the next best alternative to raising rates. Doing both will definitely hurt the Indian public. For the moment, we are clearly in a policy vacuum to curb inflation. The answer to our country’s inflation lies in the output of the kharif season and the coming rabi crop. The monsoon seems to be the only saviour in sight.
Impact: The result season hardly had any positive surprises. The negative surprises were many and the markets took them in their stride. The FII and DII behavior clearly shows that they are clearly trading a lot and yet investing very little. While churning is the prerogative of the investor, the high rate of churn runs contrary to established investment principles. One presumes that this churn is part of their reorganizing their portfolios and hopes to see lower churn in the days ahead. The global factors will continue to weigh on us and the volatility across markets should settle if the markets are to develop any uptrend. The Indian markets are likely to remain coupled to global factors and FII’s hold the key to market direction.
