Recently the mood of our Equity Markets and the overall economic enviroment has changed. From a lull which was present from the last couple of years the Government suddenly announced a bouquet of reform into sectors ranging from Pension, Insurance, Mutual Funds, Retail, Aviation, Infrastructure etc etc etc.....To be precise some of them are:
- 49% FDI in Insurance and Pension Sector
- 49% FDI in Aviation
- 51% FDI in Retail
- Reforms in Mutual Fund Industry
- etc etc ......
After years of inaction and lull the announcement of reforms was so quick that it appeared like a storm. The entire economic environment suddenly became upbeat. Our rangebound Equity markets which were trading between 16,000 - 17,000 suddenly touched the 19,000 mark. Expectations are rife that the markets will shortly cross 20,000 mark.
It is noteworthy that UPA Government was under serious pressure from the opposition and its allies the Trinamool Congress not to announce these reforms especially retail, insurance and pension. Despite this pressure the government went ahead with this announcement sensing the Domestic and International outlook for growth of Indian economy. UPA had to lose the support of the ever noisy Trinamool Congress as the Mamata Banerjee led party pulled back its support from UPA. Just when it looked that the UPA government will fall Samajwadi party turned out to be the friend in deed for UPA supporting it from outside.
On Papers these reforms look fabulous. It looks as if we shall take leaps on the development front. However the not so clear side is yet to be seen. It should be kept in mind that these are just announcements. Although any announcement from the Government means big for the nation and its economy, they need to be approved in Parliament session to become a law. The most difficult part is yet to come when these reforms shall be put in next parliament session for approval. It will be an acid test for the UPA government to convince the opposition parties to get their support on these reform bills. Till the time this happens these reforms will just remain on papers.
Mr Chidambaram's actions to get things together and announce the bold reforms in such a short span of time are really commendable. Still my view is that these reforms are meaningless till the time they have a direct positive impact on the growth of our economy. Even after announcement of the reforms Global players are moving slowly and steadily on their India strategy as India faces a high degree of risk on the political uncertainity front. The road to an end to end implementation both for Government and gobal players is tough. But once the implementation is in place these reforms may prove to be a milestone in India's growth.
I strongly feel that markets have taken these announcements over enthusiastically and have moved faster than the pace of reforms. A small negative news on the domestic front can cause a bigger market fall compared to any global negative news as this bull phase is strongly dominated by local sentiments. My view is that markets have factored in these reform announcements and further upside lies on two factors:
- More reform announcements by Government as the speculation is rife.
- Implementation of the existing set of reform.
For Equity Investors Systematic Investment Plan remains the best mode in this volatile scenario. Lump sum investors need to have a 4 - 5 year timeframe to see a good growth at this market level.
At last the hopes are alive that these reforms shall translate into Law paving the growth path for our countr's economy.
- 49% FDI in Insurance and Pension Sector
- 49% FDI in Aviation
- 51% FDI in Retail
- Reforms in Mutual Fund Industry
- etc etc ......
After years of inaction and lull the announcement of reforms was so quick that it appeared like a storm. The entire economic environment suddenly became upbeat. Our rangebound Equity markets which were trading between 16,000 - 17,000 suddenly touched the 19,000 mark. Expectations are rife that the markets will shortly cross 20,000 mark.
It is noteworthy that UPA Government was under serious pressure from the opposition and its allies the Trinamool Congress not to announce these reforms especially retail, insurance and pension. Despite this pressure the government went ahead with this announcement sensing the Domestic and International outlook for growth of Indian economy. UPA had to lose the support of the ever noisy Trinamool Congress as the Mamata Banerjee led party pulled back its support from UPA. Just when it looked that the UPA government will fall Samajwadi party turned out to be the friend in deed for UPA supporting it from outside.
On Papers these reforms look fabulous. It looks as if we shall take leaps on the development front. However the not so clear side is yet to be seen. It should be kept in mind that these are just announcements. Although any announcement from the Government means big for the nation and its economy, they need to be approved in Parliament session to become a law. The most difficult part is yet to come when these reforms shall be put in next parliament session for approval. It will be an acid test for the UPA government to convince the opposition parties to get their support on these reform bills. Till the time this happens these reforms will just remain on papers.
Mr Chidambaram's actions to get things together and announce the bold reforms in such a short span of time are really commendable. Still my view is that these reforms are meaningless till the time they have a direct positive impact on the growth of our economy. Even after announcement of the reforms Global players are moving slowly and steadily on their India strategy as India faces a high degree of risk on the political uncertainity front. The road to an end to end implementation both for Government and gobal players is tough. But once the implementation is in place these reforms may prove to be a milestone in India's growth.
I strongly feel that markets have taken these announcements over enthusiastically and have moved faster than the pace of reforms. A small negative news on the domestic front can cause a bigger market fall compared to any global negative news as this bull phase is strongly dominated by local sentiments. My view is that markets have factored in these reform announcements and further upside lies on two factors:
- More reform announcements by Government as the speculation is rife.
- Implementation of the existing set of reform.
For Equity Investors Systematic Investment Plan remains the best mode in this volatile scenario. Lump sum investors need to have a 4 - 5 year timeframe to see a good growth at this market level.
At last the hopes are alive that these reforms shall translate into Law paving the growth path for our countr's economy.
