The Chinese dragon breathed fire and singed markets globally be it equity, commodities or currencies. China depreciated its currency on three of four days by about 4.5% and the whole world was bleeding. China is the world’s second largest economy and the largest consumer of crude oil and copper amongst others. Crude oil prices are at a six year low while copper prices are below mining cost. When a giant falters it takes everyone in its stride and there is mayhem.
In a mere two days the Indian markets were reeling and the small cap midcap space was hurting no end. Parliament logjam went to its logical end and the last ray of hope that something may happen on the last day too just disappeared. What was achieved by the people who opposed would be known when the next session of Parliament happens and who was the gainer and who the loser also known.
There is one big sufferer in this game and that is the nation and it is indeed an insult that all this happened when the nation was celebrating its Independence Day. One wonders when we will be liberated from such politicians who are holding the nation to ransom.
Friday was yet another day and markets rallied strongly. The rally was on account of expectations of a rate cut considering that wholesale inflation registered the ninth consecutive month of negative growth. Wholesale inflation is now at a forty year low and is at levels last seen around 1976. Is this a statistical fact or reality, it really sounds nice to hear. The second story doing the rounds was that the government is planning a special two day session to clear the GST bill before the Bihar polls are notified. The possibility of getting the same is there and the government needs to isolate the opposition party which caused the logjam. If others agree to support a discussion there is a distinct possibility that GST could still be on track.
Primary market seems to be springing back to life. There are as many as three IPO’s whose roadshows have been scheduled in the coming week. These issues would open for subscription from the 24th of August onwards. One must keep their fingers crossed and hope that pricing remains realistic and sustainable. One or two bad issues and the entire environment and feel good about primary markets would sour.
Whether rate cut happens or not, bears took a hiding and markets are back to square one. After a volatile week we were marginally negative but the vulnerable segment which is the smallcap and partially midcap showed signs of weakness. With quarterly results season over and no clear trend available, it would be left to China and our government to give direction to the markets.
China is a cause for concern and one hopes that the project codenamed “Indradhanush” for the public sector banks brings succour to all concerned.
