IIP, inflation, interest rate hikes, petrol price rise, rupee depreciation…as ever, the markets had plenty to worry about this week. Here is a slice of the conversation at the studio:

Aditi : What a tough week! Looked like the stream of not-so-good news for the economy was never going to end. I'm reminded of Shakespeare, who said, “When sorrows come, they come not single spies, but in battalions”.

Vikram : True! The country seems to be losing the battle against an economic slowdown. The Sensex plunged over two per cent on Monday, when it was announced that factory output had grown only by 3.3 per cent in July, touching a 21-month low. It was not good news either from the inflation data, which almost touched the double-digit mark in August.

Aditi : And that sealed the fate of interest-rate sensitive sectors of corporate India. Whoever had any doubts as to what RBI would do in its policy review on Friday after the lacklustre IIP growth, knew that a 25 basis points hike in the repo rate was on its way. And it indeed came!

Vikram : With these hikes, both rate-sensitive sectors such as auto and real estate and sectors like infrastructure/construction which are heavily dependent on borrowings may see tough times. But it looks like India Inc. may soon be able to borrow more overseas, as the government is likely to revise the current annual ECB (external commercial borrowing) limit of $30 billion upwards. The near-zero rates abroad would be a relief from stiff rates at home!

Aditi : That's a ray of hope. However, the auto sector may continue to witness challenging times. Already, auto sales have moderated in the last few months. And apart from these macro-economic troubles, companies like Maruti Suzuki have other in-house issues like production losses weighing it down. This week, workers of Suzuki Powertrain and Suzuki Motorcyles joined the ongoing Maruti workers' strike. Suzuki Motor Corporation, itself, decided to dissolve its relationship with Volkswagen, citing inability to receive any technology transfers from the German auto-major.

Vikram : What further dampens sentiments for autos is the hike in petrol prices, for the second time in four months. However, the very same devaluation of the rupee, which has prompted this fuel price rise, has brought cheers to export-oriented sectors such as pharma and IT! Technology stocks such as Infosys, Wipro and TCS lead the Sensex rally of 1.5 per cent on Thursday.

Aditi : Talking of exports, the growth has already moderated this year. With a worsening European debt crisis, the global economic picture is getting gloomier by the day. It will be interesting to watch where the demand will come from in the months to come.

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