Indian Inflationary Concerns!

With a falling global food credit and steep rise in food prices, the indian government faces one of the biggest challenge to prevent the strongest growth momentum witnessed by the indian economy from beaten down. The rise in real estate prices and the food prices are coupled and can never be justified. For Example the indian government has been saying for sometimes that the sugar output is nearly 50% above sugar demand this year.

The indian sugar demand is around 19.8 met ton whereas the output expected was 28 met ton. Sugar companies in india has been witnessing some huge losses in their balance sheets for nearly 2 consecutive years. But the sugar price had seen a dramatic rise of nearly 60 percent in 7 months time. This shows the control that the government has on controlling food prices.

Real estate price rise is another threat and shows similar patterns to the U.S housing price rise in 2005. The RBI governor himself has said that he has been "Shocked" by the inflation figures that has recently come out. Can the indian economy absorb shocks like these and move on? or the economy is well insulated by policy makers to overcome a shock of this sought?

The salary paid by the I.T companies is attributed to the steep rise in indian real estate prices but the truth is that speculators are speculating on the salaries offered by the I.T. companies.

Stock investments that could be beneficial in these times:
One could look into stocks that are involved in agricultural realted and agri products. Some companies that could benefit from the food price rice are KRBl, a leading basmati rice producer.(NSE symbol:KRBl) Rei Agro, Balrampur chini , itc, jain irrigation, Ksb Pumps and Kohinoor Foods. Investors can position themselves into rice producing and exporting companies as the Asian rice crisis happening is a bit hard to resolve.

Stock Market Crash 2008

Indian stock markets are never free from falling big. India is never a safe investment forever. The market crash in 2008 was a anticipated one, but a fall of this extent was never anticipated by even the big of the bear.

Why do market crash like this? why every crash in indian markets are steep and big? The answer for these questions are simple and known by every professional trader who trade in the markets for a decade and seen the recession in 2001. The fall in every markets are attributed to the "stupid money" which enter big and swiftly into the markets without knowing the tendency of markets and their fundamentals.

The stock markets world over esp. emerging markets are speculated keeping in mind the growth these markets would see in the 'future'. Every markets that have been valued based only on the future have seen a steep fall.

The Indian markets fall to this extent, is mainly again due to the stupid money that entered to the markets. It is termed so because the money enters into the market at the fag end of the bull and exits at the fag end of the bear. This money is part of all markets.

In india most of the retail investors money entered into the markets when the markets where at 20k and most of them exitted at 17k. The main problem with this money is that it enters into a stock only based on its price performance rather than the 'value' that is embeded in them.

Who speculated the market?

It is hard to point at someone, but definetly the money that had speculated on the emerging markets have made most of the returns. In India FIIs bought heavily when the markets were at 16k and sold heavily when they were at 20k.

What is the attitude of speculative money?

Speculative money might also termed as smart money, because a lot of excellence is needed to time the market at the right time, else it would be a disaster..........

What is speculation?

Buying into the future. Still people talk about future story without keeping in mind what is happening now.

For indian markets to be valued at 20k the outcome needed is a growth of 9-10%, which is not a easy task but a challenging one. There were arguments regarding the valuations of chinese markets and indian markets. But the real fact is shanghai at 6000 has equivalent risk to india at 20k. The risks embeded in the markets are now exposed out. People challenging india's growth story must keep in mind the risks,

what if india faces a severe drought?

what if the inflation reaches out of control?

These situations can also can happen, the indian economy is not yet shaped to withstand a drought at all. The food price rise must be controlled immediarely, else no one knows.... the outcome. Still the FInance minister says that he is believing a growth of 9% but not definite.