Monkey see, monkey do is an old adage. The Indian Stock Market seems to have learnt the lesson well.
Though the events happening in the market are hardly cataclysmic for the Indian economy or it's companies, Indian markets are like that only, reacting in a knee jerk fashion to global market movers. Partly, this is because of the overwhelming reliance on FIIs for direction.
This trend has, in fact, gained pace over the past 2 years, as FIIs have been the sole drivers of market action, even as both retail investors and domestic institutions have been missing in action.
But I believe that this global downgrade may not bad for our country in the long term prospective. I have strong reasons to believe that.
First thing is that slower global growth may be just what is needed to take the fizz off commodity prices, particularly crude oil, which have been moved up last year. Any sharp melt down in oil and other commodities will bring about an automatic solution to part of India's inflation problem, thus taking the pressure off the RBI to keep raising interest rates. Today petroleum ministry advised the government to cut down the price of petrol because the crude oil price went down to $80.
Second thing is that though softer commodity prices may trim profit projections for the few commodity companies in the Sensex, it will signal better profitability for the multitudes of other companies which use commodities and energy as inputs.
And the most important thing is that if growth in the developed markets looks questionable once again, India, even with a 'low' 7 percent growth may begin to look more appealing to foreign investors deciding on their relative allocations across markets.
(Courtesy Business Line)
Regards Hari " लोका समस्ता सुखिनो भवन्तु "
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