Young Investor


K. VENKATASUBRAMANIAN | Updated on October 29, 2011


Despite being a curtailed session of trading, the Diwali week brought considerable cheer to investors with the markets zooming along.

Sanket: At last we have seen a momentous week for the markets, especially on Friday when we had a splendid rally. Some Diwali dhamaka for investors!

Natasha: Yeah, true. But it has been solely on the basis of global cues. The euro zone countries led by Germany and France have thrashed out a deal to work around Greece's debt woes and lend financial stability to the region.

It also helped that the US had a GDP growth of 2.5 per cent, pleasantly surprising stakeholders.

Sanket: It remains to be seen if this deal takes the euro zone out of debt woes, even as economists such as Paul Krugman have said that it is unsustainable.

Closer home, the RBI has once again increased the short-term interest rates by 25 basis points. When all the earlier hikes to stem inflation haven't yielded the intended results, there has been mixed reaction from analysts on this one. Meanwhile, food inflation has gone up to 11.4 per cent.

Natasha: However, there is something to cheer about too as the RBI has also freed savings bank interest rates. Yes Bank has already increased rates to 6 per cent from 4 per cent. SBI is expected announce some hike soon. Isn't it nice that we can earn more from our salary account now!

Sanket: Not if you maintain zero balance! And staying on with banks, SBI is expected to get Rs 8,500 crore capital infusion. The department of financial services has reportedly asked for an additional Rs 14,000 crore for recapitalising of some other public sector banks.

Natasha: The season of infusions may continue as the beleaguered Air India too may get Rs 23,000 crore over a period of 10 years. The cabinet has reportedly asked for RBI's views on corporate debt restructuring for short-term working loan.

Sanket: Meanwhile, the power position has reportedly gotten worse. It seems some 32 thermal plants are operating with less than four days' coal supplies. There just seems to be no power to fix this problem!

Natasha: Corporate earnings too have not been very encouraging. Sesa Goa has reported a loss of Rs 12 crore on account of decline in volumes and higher interest outflow.

Union Bank of India reported a modest profit growth due to increased bad loans and slower offtake. State Bank of Mysore had a 17 per cent decline in net profits. Bucking the trend, Federal Bank has reported a 36 per cent increase in net profits.

Sanket: You can probably extend the trend to movies as well. The much-hyped Shahrukh Khan starrer Ra.One has not really set the box-office on fire! But, let's keep all this gloomy talk aside and hope that the newfound momentum in the markets sustains even after the Diwali season!

Published on October 29, 2011

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