This was to be the year of surprises, and hence, it was apt that the last couple of months were also on a predictable trend – defying all the expectations and market views. There were people who were clamoring for a year-end rally (including myself), and then there were the Bears who thought sanity was just around the corner. However, it was not to be – nothing happened in the last few weeks.
Apart from the shocks of Dubai (where everyone over-reacted, and then quickly forgot all about it), and downgrade of Greece (which almost no one took notice of), nothing has really happened. All the central banks have continued to stand by their expansionary policies, giving their own sets of reasons. Gold crossed over its previous best, only to come down again (though might go up on another round of central bank purchases), and EUR also is getting closer to its highs. There is a high chance that this would be a quite year end – and a small chance of a small correction.
I’m not bullish on the markets anymore, and think the rate hikes would start earlier than most people anticipate. Inflation is going through the roof, and if the government has to even perform lip-service to the poor strata of the society, then they would need to at least try to bring them down. And whatever they may say, inflation is not totally a supply-side problem in India. Give them loans at 7-8% (which is the trend now), and you know that people would buy almost anything. Markets seem to be running out of steam (though this may be the December effect also with lot of money managers on vacation).
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