Stock Market

Return of easy money good news for India. Pray, crude rupee stay steady

   Download Android App    Share in      FullScreen   CheckVideos

By DK AggarwalPolicy makers across Asia, Europe and North America have reversed course and some of the major central banks have turned dovish in their outlook.

The US Fed has signalled that it won’t go for a rate hike at least for a while, while the European Central Bank has cut inflation and growth forecasts, and said it would not hike rates at least through the end of 2019.

Recently, the Bank of Japan also strengthened its soft money stance with a pledge to keep interest rates low at least till the spring of 2020.

Central banks across the globe have/had pumped in huge amounts of liquidity into the financial system to support their respective economies after the subprime crisis.

To provide some respite to their economies, the US and the European Central Bank pumped in money and so did the Japanese central bank and the Chinese central bank.

That made their respective economies addicted to easy liquidity.

That resulted in the green shoots seen earlier in the global economy.

But now those seem to be fading away mainly due to the trade war and other lingering concerns such as Brexit, Italy’s fiscal situation and France’s Yellow Vests. Subdued momentum across the euro area has signalled weakening economic outlook.

Manufacturing has weakened in Germany because of protectionist trade policies and weakening global demand.

In France, too, confidence in manufacturing has declined to the lowest level in almost four years.

Economic growth in China appears to be stabilising; with the recent industrial and retail numbers showing improvement.

Even the first-quarter GDP print came in slightly above expectation. Going forward, a trade deal between the US and China would be a big help for the global economy, as that will diminish the fear among the exporters worldwide.

If not, protectionist measures, which other economies may opt for to shield themselves against the trade war, are likely to prove a barrier for global growth.

Undoubtedly, the reversal in stance by major central banks has been beneficial for emerging markets like India.

Both China and India have been engaging in monetary easing lately, with inflation under control.

At home, RBI has highlighted three key risks – rising oil prices, sticky core inflation and volatility in global currency markets.

Crude oil prices seem to be in runaway mode and this has potential to cause a spike in inflation.

A swelling inflation may act as an impediment in further lowering interest rates by RBI . Undoubtedly, the flow of easy money across the globe is expected to speed up growth in the global economy, growing forward.

At home, the easy money from across the globe has helped the domestic stock market stretch valuations.

Since March 2019, India has seen one of the highest foreign equity flows compared with other emerging markets.

They have been banking on the fundamentals of the Indian economy and expectation of a stable government at the Centre after the election.

At present, stronger economic growth potential and a stable currency have turned India into a bright spot. Chairman Managing Director,SMC Investments and Advisors Limited




Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021

Buy Our Merchandise (Peace Series)

 

Contribute US to Start Broadcasting


It's Voluntary! Take care of your Family, Friends and People around You First and later think about us. Its Fine if you dont wish to contribute and if you wish to contribute then think about the Homeless first and Feed them. We can survive with your wishes too :-). You can Buy our Merchandise too which are of the finest quality.

Debit/Credit/UPI

UPI/Debit/Credit

Paytm

STRIPE

Details
Category: Stock Market


21