Quick edit:
Is India really a poor country? If so, how do we explain just one temple having gold and precious stones worth 250000 crores in its cellar? How do we explain Indian imports of gold worth 5 lakh crores plus in three years between 2010 and 2012 when the USA was reeling under sub-prime impact and Europe saw one Nation after another going bust with central banks firefighting all the time? Questions like these probably highlight what we call the great Indian paradox. We are a Nation with an impoverished mindset. We remained expediently frozen in the politics of poverty alleviation because we believed only these fetched votes. Bad economics was seen as good politics by an Individual and adopted by a coalition at the center. A renowned economist presided over a coalition that perpetuated bad economics for a whole decade while the Nation patiently watched. At the same time, a few states ruled by the opposition have demonstrated visibly that good economics and good politics could tango together seamlessly. What India awaits is to see how the people will weigh the two ideologies and cast their votes in the next general election. Progress is a fail-safe political pitch vis-a-vis poverty alleviation and most Indians know it inside. Progress is also the answer to poverty alleviation. The markets will definitely jump the gun when it sees such a trend emerge.
Cycles always prevail eventually – Howard Marks.
Invest speak:
Economic variables tell us how our economy is progressing. Given the current state, we constantly look for reinforcing positive signals. For the moment, inflation and interest rates aren’t sending the right signals. They probably will test us for a while before they head lower. The visibly bright spot is in the current account deficit (CAD) has shown two successive months of narrowing. This essentially means that if we could follow up with a few more months of narrowing CAD, other variables will start looking up too. The CAD is a strong signal of where we are going. A falling CAD means that our imports are dropping & exports are growing. This should help the rupee which has been under tremendous pressure during the past 12 months. Oil prices are another variable that is very crucial for the CAD. Falling oil prices will greatly change the macro picture given that oil is our major import. We see early signs of softer oil prices. When oil falls, we will be able to fix inflation and interest rates decisively. Exchange rates will simply reset to the new reality.
Beating the investment cycle happens only after you take a small beating. You go down only to emerge on top of the cycle.