31 Dec 2012

2013 outlook

The year closes with the Nifty just short of the 6,000 level and index futures a touch over; daily market volumes have tailed off in the past few days but the year’s volume of portfolio (FII) inflows has reached almost $20bn, just short of 2010’s record level. After a difficult and volatile year, we arrive on the threshold of 2013 with a surprisingly optimistic outlook:

                Politics: the government has succeeded in sustaining its new-found reforming vigour with parliamentary successes
                Economics: inflation is now trending downwards so that the RBI will feel justified in kicking off a monetary easing cycle during the March quarter
                Markets: even as we flirt with 6,000 on the Nifty, index valuation remains comfortingly within its historic range

21 Dec 2012

Three questions

Down Jones' Financial News asked three questions. Ian McEvatt responded:

Q1: What is the biggest danger facing the financial industry in 2013?
A race to the bottom in regulation where Wall Street lobbying money dilutes US action, but European Union committees continue to burden the sector with punitive regulation. Business will migrate away from EU.

Q2: What single change would most transform the European financial markets for the better?
Equalize the tax treatment of interest and dividends and disintermediate the banks from controlling sources of finance, in favour of markets.

Q3: What is your New Year’s resolution?
Promote the cult of equity; it was debt that crippled the world but equity markets are the victims.

11 Dec 2012

Making progress, not there yet

Global equity markets were mostly in the black as US jobs data came in modestly positive and China’s PMI turned mildly expansionary in October. India had a good week in politics as the government managed to sustain its opening of the market in multi-brand retail FDI in both houses of parliament. Market sentiment was restrained nonetheless as the Nifty managed a gain of only 28 points. Daily trading volumes stayed up near last week’s level, at $2.9bn as FIIs were net buyers of $470bn of cash equity and domestic institutions sold a net $380mil. Advances outnumbered declines by 3 to 2 but the malignant effect of ETF trading was once again evident in the points’ contributions. Three counters representing just 14% of total index market cap added a total of 44 points while one stock subtracted 16; thus net of four stocks, the index trod water. Volatility as measured by the India VIX drifted between 14 and 17 but closed where it opened, at 15. Index futures closed at a premium of 1.5% to cash. With a degree of political calm now, external risks may be more of a factor in the near-term; monetary policy is the key market driver but it is still to early to bank on it. The “fiscal cliff” has not yet been avoided.