There Is More Pain To Suffer

Bloodbath, turmoil, panic, tumult, scare, you could call it anything but the end result is the same – a massive erosion of investors’ wealth. Markets across the globe spooked under geopolitical tensions as talks of a US military attack on Syria looked almost certain in the days to come. India, as we all believe is different. The country with a young and educated population is billed to be one of the most potent economic forces of tomorrow. So, obviously, we had to have some different reasons for our markets to collapse than just the geopolitical tensions of the Middle East.

The passage of the Food Security Bill (FSB) brings with it the fear of further exacerbating the fiscal mathematics. The huge subsidy that the bill envisages could throw government finances in further jeopardy. Already reeling under the pressures of a higher CAD the fisc will now have to bear an additional burden following the passage of the ambitious FSB.

The Finance Minister while explaining the governments’ position has been seen to be playing more of a blame game trying to pin the troubles being faced today on to the shoulders of his predecessors decision making. So much for collective decisions that we expect from our political leaders!

While everybody was focusing on fears of a ballooning fiscal deficit following the passage of the FSB, they seemed to have assumed that the Rupee will behave. It didn’t. The INR slid further and found itself in the pits falling to a new all time low. The rupee has breached Rs 66 to a dollar mark and is still not looking poised for a halt.

While all this was troubling the Indian markets globally too matters weren’t looking good. Not that we expected them to look good either. European stocks ended almost at a one month low where matters were already looking bleak with the US taper programme having gained more credence following economic data there which were further complicated by fears of a military attack by the US on Syria. Meanwhile, in the US the Dow fell to a two month low following the same set of problems as did the rest of the world. The possible attack on Syria led markets down through the day.

The day has opened deep in the red. Asian markets continue to reel under global pressures led by Japan, which at this moment is down 2%. There is no sign, even remote, of markets getting back on their feet at least for today. From Taiwan and China to Malaysia and Indonesia and from Korea and Hong Kong to Singapore every market is trading negative; the fall ranging from anything between one to one-and-a-half percent. The SGX Nifty which comes very close to determining the course of the Indian markets for the day is currently down by almost 75 points.

We need not write a conclusion to this morning call, telling you where the markets are slated to open and what kind of a day is waiting us. It is more than obvious that there are more negatives in the air than positives. The finance ministers’ ploy of announcing the fast tracking large infrastructure projects in a bid to perk up the markets has fallen prey to bigger worries. Crude has raised its head yet again and Gold is on a tear. The counting of CAD following these developments will hurt the sentiment deeper and make the markets gravitate further towards the ground. All in all, brace for some tough trading through the day.