The Hindu Business Line : Will investors take a bite at the cherry?

Divya (a journalist) is just entering her home after returning from work when she is surprised to see her friends Jogin (a student), Mack (an American expat working in India) and Bidyut (an economics professor) waiting outside.

Divya: Ah, the trio is on the prowl.

Jogin: I had some work nearby and thought will

give you a surprise visit. I thought bringing Bidyut

and Mack along would be safer, just in case …!

Divya: Everyone seems to be busy with something

or the other. How come all of you are roaming

around without worries?

Jogin: Who said we are not worried. I am worried

that Chidambaram stepped down but the markets

did not jump at the news.

Bidyut: It is more than likely to react positively now

with the government announcing the stimulus package.

Divya: The package will be primarily used to

prop up exporters, builders and infrastructure projects.

This, with the latest rate cuts, should help stabilise the

markets even if FIIs pull out.

Jogin: The package would restart several huge projects

and the ripple effect will be felt all around. But will the

consumer spending fire up without banks cutting

interest rates? I mean, they need to be confident

before planning expenses.

Divya: … especially with job loss threats still around.

Mack: Economists in the US had asked questions

on these lines. When Obama promised a stimulus

package, they were wondering how and how much

of the money will reach consumers.

Jogin: Valid point, given that the country has seen

colossal job losses. Official figures say over half a

million are unemployed.

Bidyut: No doubt there is so much focus on stopping

GM, Chrysler and Ford from collapsing.

Mack: The three have asked for $34 billion but some

estimate the companies might need four times more.

Divya: To make things sweet, the auto majors have

agreed to sell their corporate jets and GM and Ford

chiefs have agreed to work for a $1 salary.

Jogin: Ya, but what about the bonus? Don’t most

of these people take home bonuses the size of

some country’s economies?

Mack: To make matters worse, car sales have been hit

across the globe.

Divya: Several central banks cut rates these past weeks

hoping that would increase spendings.

Bidyut: But no matter what, airlines are facing some

trouble or other. After facing the ire of employees over

job cuts, they are now in the line of fire from agents

for cutting commission.

Jogin: I would say the agents are rightfully scared.

With recession and low tourist traffic, they now have

to lose commission. Some say the airlines’ move

could leave many agents unemployed.

Bidyut: They should take tourists to Reliance

Petroleum’s Gujarat refinery to see the company’s

newly launched trial runs.

Jogin: Finally one news that can make the Sensex

jump. The trial runs could spell good news for shares,

given the market cap of the company.

Bidyut: Good news of the market is that SEBI has

extended cross-margining to all participants and made

listing of close-ended funds mandatory. These should

boost trading.

Divya: Now it remains to be seen if investors will

use the opportunity or prefer to wait.

Ram with inputs from Badri

Blog at http://MarketChat.blogspot.com