Ms Madhabi Puri Buch, MD and CEO, ICICI Securities Ltd quoteMay 16th, 2009 - 11:46 pm ICT by Sampurn Wire
May 16, 2009
The mood of the moment is clearly upbeat. The largest and most complex election process on the planet is complete. The impact of the results on the markets is clearly positive. Both in the short term and long term. In the secondary markets and the primary markets.
Why ? It is almost as though investors had pressed the ” pause” button on major decisions on account of ” uncertainty”. With the clear mandate to the new government and the strong expectation of stability for the next five years, the ” play ” button will be on. If global cues continue to be positive, the ” play” could even become a “fast forward”.
Specifically, the liquidity in global markets is reasonably strong, local mutual funds have been in cash for some time and internationally the risk appetite has increased significantly. The volatility index, commonly seen to be the ” fear index” doesn’t look quite as “fearful” as it used to.
Add to that that India continues to enjoy a competitive advantage amongst emerging economies : the three aces :
the demographic advantage of a young,english speaking,productive population
the domestic consumption advantage of a growing middle class consuming a variety of products and services including in rural India the financial stability advantage of a financial system that is stable and well regulated.
The FII flows would follow.
In respect of the primary market, the new government would present the full budget, there would be clarity on the fiscal deficit. Interest rates would see stability thereby opening up the debt capital market. Possible disinvestment of PSUs to meet part of the fiscal deficit could see an additional impact in terms of giving the equity capital markets it first major IPO or FPO.
In the long term the new government has a unique opportunity to add to its strategic policy initiatives. The country today has a fiscal policy and a monetary policy. There is today, a unique opportunity to create a “markets policy” that will direct what the country wants to see as the balance sheet of India Inc. The mix of Debt and Equity, the mix of Long Term and Short Term funds, the mix of Domestic and Foreign funds.
The country looks forward to five years of health capital formation in the economy….five years of a healthy and robust capital market.
ICICI Securities is one of largest integrated securities firms in India covering the needs of corporate and retail customers through investment banking, institutional broking, retail broking and financial product distribution businesses. I-Sec has over 300 ICICIdirect Stores and employee strength of almost 3,000 people.
Tags: debt capital, disinvestment, domestic consumption, emerging economies, equity capital, fear index, financial stability, fiscal deficit, fiscal policy, next five years, pause button, play button, policy initiatives, primary markets, productive population, psus, risk appetite, secondary markets, strategic policy, volatility index