Essentially the Finance Minister says that they will not curb FII investment in the near term, RBI will intervene whenever the rupee tries to rise quickly and higher prices are here to stay forever. To quote him "Prices do not go down. In fact they never go down". I foresee the following happening over the period of the next year.
1. Sensex hits an all time high however retail investor participation remains very weak. The common man has not forgotten what has happened in 2008-2009 and is going to stay on sidelines for atleast few more years before his memory begins to fail.
2. RBI raises interest rates as stock markets hit record highs. Interest rates begin to pinch the common man who has taken loans for his own house, education, home improvement, credit cards etc. Buyers keep buying houses in all cities except Mumbai where without 1crore of black money nothing moves
3. Prices of goods keep going up as speculators hoard commodities and producers reduce supply to maximize margins.
4. Companies try to be efficient to keep up with rising costs. Wages remain stagnant. No Pink slips yet.
Net effect
Stagnant wages, Higher loan payments, higher monthly expenses , lower savings, say bye bye to financial independence.
Welcome to the Matrix. If you take the blue pill, you get to see how deep the rabbit hole goes
Here is the finance ministers interview
In an interview with ET Now, Finance Minister Pranab Mukherjee says it’s not a time to put any restriction on the inflow of FII and that the regulators are closely watching the market. Excerpts:
What do you think are the primary reasons for the market rally we are experiencing currently?
Always the fear of having some sort of bubble would remain. I do not think this is a time to put any restriction on the inflow of FII. Certain market sentiments are there. Prospective investors are looking into the market, and naturally, India as an emerging economy, along with China and some other Asian economies, is considered a safe destination for investment. One of this upswing is that robust recovery which was expected in North America and Europe has not yet taken place and the IMF forecast has also been revised. We shall have to watch the situation. We reached more than 20,000 in January 2008. So, the stock market fluctuation always takes place, but we shall have to see that it does not have that adverse impact just like a bubble effect.
Is it safe to presume here that you are in touch with the market regular and keeping a close eye on how the market has really moved today?
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