May 2010 was a bad month for Indian stock market. Selling pressure continued almost all the trading days. But towards the end of the month some recovery also seen. Global uncertainties were the major reason behind this bear run! Doubts about the long term prospects of Euro zone countries are worrying the investors across the globe. As a result of this Indian investors also lost confidence and they engaged in bulk selling. After the global financial crisis  Euro zone crisis is the worst one and now also it is sustaining. FII sell off made a bad impact on Indian indices during May. They sold Indian equities worth Rs.9436.70 Cr. When the residues of the crisis settle down it is expected that they will come back to Indian market. However India’s growth story is still promising, Indian corporates are performing well.
Sensex closed at 16945 in May. It recorded a decrease of 3.5 percent against it’s April closing figure of 17559. Sensex traded in the range 15960-17537 during May. Nifty recorded a fall of 3.64 percent to close at 5086. Smallcap stocks can’t survive the selling pressure and they were down by 7.17 percent- the worst performance by this sector in 2010. Midcap stocks were down by 4.87 percent. All sectors except Health Care and Oil and gas were under selling pressure in May. Metal stocks plunged 14.25 percent. Whereas Reality stocks fell 11.3 percent against last month closing figure. Both banking and power sector stocks were down by 4.4 percent. Health care sector was up by 2.71 percent. Oil and gas sector recorded a growth of 2.6 percent during May.
Domestic mutual fund companies were net buyers. They bought equities worth Rs. 98.60 Cr. Indian market opened weak in June also. But traders are of the view that once the issues settle down there will be renewed buying interest. FIIs withdrew their money only to protect their capital. In the long term view, when Indian market is concerned, we have the growth potential.
Indian economy grew  8.6 per cent during the last quarter of 2009-10, mainly powered by Industry and service sectors. Now the country has an overall GDP growth of 7.4 per cent in 2009-10. Which is more than expected. Inflation eased to 9.59 percent in April. This is the second continuous month the inflation figures show a downward trend. According to reports monsoon will be on track. If this happens in line with expectation food inflation would also become lower. Which is a prime concern for Indian economy.
Indian Finance Minister Mr Pranab Mukherjee expects 8.5 percent GDP growth in 2010-11, which seems to be attainable according to present estimate. From the global financial meltdown we have learned that Indian market is capable of bounce back from any lows. Every crisis is an opportunity. Now is the time to buy good picks at moderate rate. Opportunity never knocks twice!

Regime change
When the UPA government came into power for the second time Indian indices regained it’s confidence. During it’s first tenure in 2004-2009 the farm loan waiver proposal by the then finance minister P. Chidambaram  attracted much enthusiasm. When the UPA government came into power for the second time expectations were high. In the new ministry only some names of ministers changed. Finance ministry came back into experienced hands. Finance minister Pranab Mukherjee presented his first full fledged budget one month ago.
In primary analysis the budget gave a clear vision regarding the economy of the country. It proposed a gradual decrease in fiscal deficit. It estimated the fiscal deficit of the government would become 4.1% by FY2013. More funds have been allotted to infrastructure products. After the budget petroleum products became costlier for retailers. The budget which aimed at consolidated growth evoked cheers among India incorporated.
Budget raised the PSU divestment target by Rs.15,000 crore to Rs.40,000 crore. Government also want to collect Rs.36,000 crore from 3G telecom license. These alternate methods to find revenue are welcome moves from the part of finance minister. Indian share market expected less from the budget and it’s reaction was somewhat neutral. The second coming of UPA government in India definitely raised confidence level of investors in India and abroad.   Which will add fuel to the growth story of India as a whole.

Banking sector reforms
Another significant point in the last budget was realted to banking sector reforms. Which was a major development during the last financial year. Governments vision is clear-reach out to the large rural population. Almost 70 percent of Indian population resides in villages. The banking density in India is pretty low comparing to it’s massive population. Hence government is going to grant banking licenses to private players and non-banking financial companies (NBFCs). Global major Goldman sachs already applied for the license. Indian banking sector will witness a drastic change when this happens. It will become more competitive and the rural population would be benefited. Getting loans will be much more easier and economic independence  will be the result. More and more Indian banks are now opening their shops abroad, the numbers will increase. Service sector contributes 62.6 percent of Indian GDP, and financial services is one of the major contributors. FY 2009-10 paved way for banking sector reforms in Indian economy.

Kirit Parekh committee report
Another inportant happened during financial year 2009-10 was the submission of Kirit Parekh committee report. The  committee deals with oil pricing reforms and was constituted during the last interim budget. The report proposes complete deregulation of petroleum prices in the county. If the report is implemented as such petroleum prices will increase. Recently prime minister Dr. Manmohan Singh stated that regarding oil pricing some strict measures should be taken. This statement in very much relevant now a days since government spends lot of money in terms of compensation to oil companies. Kirit Parekh committee report would lead to the supremacy of public sector oil companies. The price burden will directly go to the consumers. The committee report and how it will be implemented has got significant impact on Indian economy.

Tax reforms
In simple terms government can find out revenue by two means. By spending less or by taxing more. But both these methods has got so many limitations. Spending less means slow in growth rate taxing more also means the same. So something long lasting is the need of the hour. The implementation of new direct tax code (DTC) and Goods & services tax (GST) are the two major developments. These changes were proposed earlier but now delayed by one year. It is believed that now it would be in place by April 1, 2011. These common tax proposals would prove beneficial for Indian economy. Apart from this individual tax slabs are increased, which means more purchasing power to the public. Now this happens on a yearly basis. Positive for Indian economy.

Altogether India is changing in terms of economy. Everyone now realities that. In the financial year 2009-10 sensex recorded a gain of 82.4 percent. Now our only concern is inflation. The stimulus packages contributed much towards the raising inflation figures. India recorded an inflation rate of 9.89 percent in February 2010. In March we may have a double digit inflation. Inflation shows the health of an economy but when it is out of control it is dangerous, since it eats purchasing power of the people. In the near term credit rates will increase. But if we grow at decent levels (that will happen for sure) we need only to fear less. During the financial year Tata motors recorded an increase of 311 percent in it’s ahre price. The share price of infrastructure major L&T increased by 147 percent. Not only banking sector Indian education system also going to undergo changes. Aviation and insurance sectors waiting for policy approvals. The entertainment sector is growing. India continue to be the number one hub of movies around the world. People are getting more exposed to technology. Financial year 2009-10 indeed prepared the script of the growth story of Indian economy.

I always admired P. Sainath. Not because he is famous. I liked his way of reporting. Recently he has been in Trivandrum, capital of Kerala (the southern most state in India), for the release of his book in Malayalam. P.S Jayan has done an interview with him in Mathrubhumi daily. I cut it and kept it in my dairy. Later I decided to write an article about it.

More details about P. Sainath is available in the following link.

http://en.wikipedia.org/wiki/Palagummi_Sainath

This is an Independent translation of the interview. I found his observations have got much relevance today especially when we are heading for a union budget.
P. Sainath wrote his book ‘Everybody Loves a Good Drought: Stories from India’s Poorest Districts’ from his real life experiences in Bihar. His fight was against the bureaucrats and the middle men in the system. The search for the miseries of Indian farmers made Sainath the most famous rural reporter in the world.
India ranks fourth in terms of millionaires in the world. But in terms of human development index India’s rank is 134.  Cuba at 54. Sriland and Bolivia are well ahead of us. These countries may not have the wealth that India has. But they implement poverty eradication programs more fruitfully. India has the most number of under nutrition ed children in the world. These are the naked facts says Sainath. We talk only about our GDP figures and IT revolution. National family health survey pointed out that 46 percent of children, below the age of 5, lack nutrition in India!
India shines because of the GDP numbers but 31 percent of the GDP is handled by only 52   millionaires in India. More than 300 days in a year Sainath lives in the villages of India. He does not call him as a development journalist instead he calls himslef “Rural Reporter”. Sainath disagrees with today’s style of ‘glamour reporting’. Earlier he said that there are two types of journalists, one is journalist and the other is stenographer. But now he says he was wrong in calling the journalist a stenographer. Because it is a shame on the stenographer himself. Today’s journalists receive money from Ambani’s and write for them so they can not be termed as stenographers blames Sainath. Now reporters are not ready to do hard work. They want to finish their jobs as early as possible without doing home work  Sainath pointed out.

In a study done by London business school it is found out that Sweden is the most innovative driven economy in the world. Sweden has ousted US from the throne. The top five economies are  Sweden, Japan,US, Finland and Singapore. Countries are selected in terms of technological skills and usage of communication technology. The study observed that Sweden has got the “finest distribution” system and also “excellent internal and external communications”. It has also got a very good skilled labor force too. The study also took into consideration the work done in order to overcome the recent financial meltdown.
Japan ranks second in the list. Japan showed an extra ordinary recovery over a span of 65 years. Mainly because of the upper hand in technology. On a purchasing power parity (PPP) basis Japan is the third largest economy in the world after US and China. Their fiscal deficit and the aging population are the  major worries of this nation.
The US is the most technologically powerful economy in the world, the study realized. Almost all the technological developments happen in US for the first time. They are at their summit of communication revolution. But the recent global financial meltdown left some blow on the US economy. The rescue package proved to be very helpful but  the US lost it’s first place as the most innovative economy around the globe.
London business school survey called Finland and Singapore as decent economies. They are the most correction free economies around the globe. Finland and it’s service brand Nokia took the communication revolution to next level at least in third world countries. The per capita income of Finland at par with France,Germany and Italy. Which makes the economy much stronger. Both Finland and Singapore are best examples of free market economy. Singapore GDP growth rate was 7 percent upto 2007, but due to recession 2008 growth figure came down to 1.2 percent.