Mango's take on October 29

Raghuram Rajan raised the repo rate and signaled that he wants to attack inflation and he also made right noises about...

1. Inflation
2. Real positive return for savers
3. Importance for CPI

Meanwhile markets liked it, mostly they expected it as the bankers are gushing about the reduction in the MsF. Also the bankers get extra repo windows in 7-day and 14 - day. The FII's who drive indian markets are going to show new high in next few days ( possibly in 2 days)..will this bring retail investors into share market? I hope not.

Also whatever RBI eased is not going to help the corporate mafia and this will surely help banks to window dress their balance sheet for another 1 or 2 quarters. But surely the end game has begin for Indian banks.

Nationalized banks balance sheets are showing the true situation nowadays. Have a look at Syndicate bank and Maharashtra banks results announced in this 2 days....now since 2 banks has come out with ugly results all the bankers who were waiting in the sidelines to declare their results will come out.

these nationalized bank guys were waiting for some banks to declare results so that their number did not look ugly. Interesting.

Now I think with increasing inflation RBI is gonna to raise REPO every month and it is fun time. Meanwhile the much awaiting festival session is failed as per the preliminary news. But the end result has not come yet...

Let us wait.

Latest good news - CAD

Another reason for celebration for patriotic Indians. The CAD ( Current Account Deficit) has come at 6.7 which is worse than expected. While this is not unexpected for most of the real economists, economists such as Rangarajan and Montek Singh Ahluwalai have expressed surprise. These so called experts have been predicting bottoming out, peaking out things for the past 2 years without any data to substantiate their theory. Meanwhile situation has become bad to worse.

For the past one month, even FII inflows are reducing. My expectations are ( These can happen and the probability I assign is 60 - 90%

1.  Crude is gonna to go up ( Korea situation escalating which is also evident from chart patterns of crude)
2.  FII outflows will start from Indian markets ( Even reduced inflows will cause mayhem here given the CAD)
3.  Having received a left hook in February, car makers are looking to get right kick for March. This would be jolt for them. No need to talk about April which is traditionally dull month for auto sales.
4. US dollar index is going up which will accelerate nifty fall.

So what can RBI do?

It seems RBI is caught between the devil and the deep sea.

The Financial Stability Report paints a gloomy picture on Indian economy and not without reasons. The most serious of them is the news about the house hold savings stumbled to mere 7.8% last year from almost 13% couple of years ago. This is scary by any standards for any central bank.The very reason India withered away many financial sunamies are only to the high savings rate. In the mad rush to show 9% growth we turned into a consumption economy and traded our benefit of savings economy and thus exposing ourselves to financial crisis.

The banks are not at all in good shape and adding the restructured loans to the bad loans the total bad loans growth is at alarming pace as per RBI's own standards. RBI very will know of the fact that a quarter or half point cut in Repo cannot save the banks.  Any rate reduction from RBI will first be absorbed by the banks before they pass into the consumers and corporates. Most of our corporates forgot to do the business with reasonable margins, so I dont think they will be benefited with these token rate cuts.Now what can happen:

Scenario 1:

The RBI due to their own (overtalking) will be forced to cut interest rates in January 30, and thus putting country into deep financial mess. Remember any rate cut will be used by corporate and realty mafia to induce common people to consume more without any reason and thus avoid any meaningful correction to the overheated economy. So atmost this can be used to postpone the crash for few months. The inflation will not be contained given the fact that the Rupee is fast losing its value.

    **overtalking:  The RBI should have merely said that rate cuts will come once the inflation contains within the comfort levels. Instead of that, RBI has given a hard date thus cave in the pressures of blood sucking corporate mafia and to election minded finance minister
                               

                                                 to be continued

This country is going to collapse

"இந்த நாடும் நாட்டு மக்களும் நாசமாக போகட்டும் "

The above is a famous dialogue from a tamil movie which roughly translates into "This country and its people are going to suffer badly". This aptly fits to India's current state of affairs.

Today IIP data comes are 0.1. I am pretty sure that the govt spin masters did not want to show negative figures for second consecutive month. So they made as if it looks like a positive figure. The drama does not end here. The brokers ( lets cut rates lobby) started their rheoteric and this time they are very arrogant. They said that they are not bothered about inflation. So now the cat is out of the bag. We know all along these b******s are not bothered about aam aadmi and they are concerned about their fat paychecks and corporate profits. Since they are earning in crores in case of slow down or recession they can leave happy life. Only the middle class herd crowd will suffer hugely. Sadly this middle class idiots are not understanding this and playing cheer leaders to corporate mafia.

If we cut interest rate, we are officially gonna to say that our interest rate is fuckingly low than the official inflation. Won't foreigners laugh at us by seeing this.  Remember I am not talking about the CPI which many countries use. We talk about WPI.  CPI is 10 and more. WPI is 7 and more. Now already our interest rates are less than inflation which is a great joke. But we are now going to do that in terms of WPI. RBI is going to be a laughing stock.

Dont forget the currency is damaged and out of shape now. The prudent way is to raise rates. That is what a educated banker is supposed to do.

Also please dont forget that the rate cut will not be passed on the customers. It will be eaten by the banks.

RBI is misssing another golden opportunity to prick the bubble.

But one silver lining is Chakravarty is making right noises. But one summon from north block will make these guys to eat humble pie.

My solution
*******
Increase rates by 2 percent. We will be OK within one year.

First Post

Welcome to my blog.

In this blog, I will be updating my views of Indian Economy in general and Indian Share Market in particular.  I am small time trader who trades primarily in Nifty options.

I also invest in good quality stocks.