The stimulus too…

The govt. announced stimulus package-2 has also failed to lure the industry, so will be the market. The Govt. is looking for a long-term sustainable action where as the markets are interested in immediate benefits to see the sentiment revived. The strong hands are interested in long gestation period of rise with intermittent sharp rally where the reverse is true with the small investor.

The RBI announced a rate cut of 50 bps in CRR and 100bps for Repo and Reverse Repo to release nearly 20,000 crores in to the system. The GOI simultaneously announced liberalized ECB norms that can benefit the big reality players and some measures in customs duty to curb the free flow of cement from the neighboring countries. This will benefit the cement companies those were strapped to a fixed price for more than 2½ years. This will have a counter effect on the construction companies already surviving on thin margins were given credit but not the profits.

The real worry for now to next 3 quarters is the demand contraction. The seriousness of economic worries will hit the head lines when the demand contraction in the domestic markets face. The Indian economy is growing on the export fillip despite a large domestic demand existing. Now the challenge is that the exports will be seriously getting affected days to come and the supply glut will impact the purchasing interest of the consumer.

The net-net the Indian economy will see troubled months a head but this period can be considered as a “capacity building opportunity” by the big industry houses.