The negative sounds from Hungary that the country’s debt situation is in grave situation spooked the markets in Europe and United States. Dow fell by more than 320 points shaving off almost 3.25% in a single trading session. The sentiments are deteriorating as first time we are seeing governments failing. When companies were failing in US the government came to rescue, who will keep rescuing governments? Later state secretary of Hungary has said that the remarks were “unfortunate” and the government will be capable of servicing the debt. Though these words came as a damage control formula they will fail to bring back the confidence, in immediate future, which had slowly been built over last ten days
The problems of the Indian government are also not ready to die. There has been lot of uproar over Raja on which our Honest Prime Minister has not been able to take any action due to the love which he has fallen with his chair! Now it is very clear that our cricket minister (since he is more involved in cricket than his agri ministry) Sharad Pawar is involved along with his daughter Spriya Sule in the IPL scam. If these two ministers are shown the door the congress government also can fall without the support of DMK and NCP. Stability was the reason Sensex had hit two upper circuits when congress emerged as the single largest party, now it is clear that congress cannot deliver the anticipated stability. Mamata Banerjee becoming stronger is also a bad news. We know how Jayalalita, Mamata, Mayawati can behave when they become stronger! The situation is not good for market. Though nothing spectacular may happen immediately, market players will be seriously watching the political situation.
The positives are that the growth numbers recently announced are extremely good. Almost every sector has grown and the growth in manufacturing sectors augurs well for the economy. It is going to become mandatory for listed companies to have minimum public shareholding of 25% which will now again open the doors for further disinvestments. In our TIA (Tamilnadu Investors Association) article last month we had mentioned that the government may rack in 90000 Crs out of 3G (including BWA) now it looks like they would fetch in more than a Lac Crore! The companies are going to bleed but it would considerably reduce the pressures of fiscal deficit. Govt. now needs to act fast on how to cut the debt, so that situations like Greece never happens in India.