(click on image or here to view)

Dear Niveshaks,

Dear Niveshaks,

Dear Niveshaks,

Yet another eventful fiscal year has come to an end. The financial year ending March 31, 2011 started off quite well with signs of economic recovery and growth trajectory back to the pre-crisis levels. However, towards the end of fiscal year, problems emerged both at the global and domestic level. At the global level, the major concerns were the slow recovery in theUS economy, the European debt woes and the crisis in the Middle East. The natural calamity in Japan further dampened the sentiments at the global levels. At the domestic level, the GDP growth in the last fiscal year was a strong 8.6 per cent in real terms. The major concerns at the domestic level last fiscal were the slowing production and the continued high inflation, particularly that of food items. The monetary measure taken up by the RBI is expected to moderate the inflation in the coming fiscal year.

The outlook for the fiscal year FY 12 remains positive with strong growth expected both in the emerging and developed markets. The sharp increase in the oil prices owing to the MENA crisis has added a bit of uncertainty to the pace of global recovery. However, it is a temporary phenomenon and the long term outlook remains positive. The inflationary pressures in most EMEs remain high and the central banks in most EMEs have responded by raising the key interest rates which should control the inflation in the financial year ahead. As far as India is concerned, the GDP in the current fiscal year is projected to grow by a healthy 9 per cent. Even though the IIP continues to be weak, other indicators such as the Purchasing Manager Index(PMI), direct and indirect tax collection, exports and bank credit suggest that the growth momentum persists. However, continuing uncertainty about energy and commodity prices may vitiate the investment climate, posing a threat to the current growth trajectory. In particular, the weak performance of capital goods in the IIP suggests that investment momentum may be slowing down.

The quarterly results of major companies remained in the headlines this month. The quarterly results have been mixed. While some big companies such as Infosys and Reliance missed the market expectation, the results of the companies in the auto, pharma and metal space remained in line with expectation. There was no significant impact of results on the markets with the markets remaining range bound through the month. The interest rate and the liquidity scenario have remained tough in the last few months. The outcome of the RBI policy review meet and its impact on the market would be something to watch out for in the coming weeks.

This issue brings to you some more interesting and insightful topics. The cover story this month focuses on the rally in the gold prices, the reasons for the same and the way ahead for the gold prices. The article of the month explores the monetary transmission mechanism in India and ways and means of improving the same by developing the BCD nexus in India. Another article in this issue focuses on the convergence of the Indian accounting standard towards IFRS and its implications for India. The issue also features an article on the new regulatory framework released by RBI for the subsidiarisation of foreign banks in India. Lastly, the Classroom this month explains the topic of leasing. Hope you find the issue an interesting read.

Stay invested.

Rajat Sethia
(Editor -Niveshak)

(click on image or here to view)

Dear Niveshaks

It was January 2008 when our sensex touched its peak of 21000. Then came the scary October 2008 when it slid to 8000 mark. And now, again, it has swiftly taken a big leap to pat the 18000 mark. What a roller coaster ride it has been. One of the important pulling factors behind this upside swing has been the drastic monetary steps such as slashing CRR by 300 basis points taken at that point of time which infused confidence as well as liquidity in the market. However, looking at it in a short frame of time, I see that the things are a bit unusual. In an ever-volatile stock market, I find it tough to recall the last time, when the broad based indices — Nifty and Sensex — remained stagnant for the past six months. But this has been the case with Indian stock market since October last year. It has been lurking roughly in the same range of 17000 to 18000. Another food for thought for many Niveshaks is the fact that Sensex is not really far from its all time high. And at the same time, many stocks especially in the information technology, banking and pharmaceutical industries have already reached their all time highs. That leaves investors and people like us confounded to the future course of the market.

The euphoria is not restricted to India only. World stocks are also slowly inching close to their respective 18 months’ high on signs of improving global growth but the Europe remains on the backseat due to prevailing worries about Greece’s debt problems. The recently released strong U.S. data from jobs to manufacturing has spurted hopes that the world’s biggest economy will come out of woods soon. In addition to this, the present dynamics of global oil price movement and currencies’ exchange rate is expected to have a lasting impact on the global economy.

Strengthening U.S. dollar has brought some correction in the oil price which had reached its 18 month high of 87 dollars a barrel. Rising rupee against dollar will also give import based Indian companies an advantage but it may come in the way of RBI’s monetary policy tightening if it chooses to slow down this rise. All of these factors along with the recently released strong IIP numbers and annual reports by Indian firms make us believe that the Bull Run is here to stay.

In continuation with our sustained endeavour to get the latest insights from the corporate, we welcome Ms Deepali Bhargava, India Economist for ING Vysya Bank as the guest of this issue of Niveshak. An illustrious economist - Deepali has to her credit, consistent & accurate directional calls on inflation, interest rates and INR. In a special session with her, she has talked about the Indian economy's recovery path, recent RBI's monetary policy and some issues related to exchange rate policies.

This issue of Niveshak brings to you some more interesting and insightful topics. In the contemporary fierce competition in markets and race for showing higher profits and growth, many companies manipulate their financial position and results to hide the true picture of their financial health. The repercussions of this are in front of us. We saw numerous accounting scandals resulting in bankruptcies and fall of some major firms like Enron, WorldCom etc in the recent past. But the question arises as to what are the different means of manipulating financial statements. So our cover story addresses this question by elaborating various ways of fudging financial accounts and statements and means to detect such abnormalities. Hope you find this issue an interesting read.

Stay invested with us.