Waiting for better times
There is at least one category of people which reposed its fate in the Indian government’s reforms announcements: that is foreign institutional investors. The FIIs have pumped in `1,21,652 crore ($23.15 billion) this year till December 21, according to the Securities and Exchange Board of India. After the government announced its reform measures in August, it is estimated that on an average they have invested around $1 billion (`5,000 crore) on a weekly basis. One must record appreciation of the FIIs for recognising which side their bread is buttered. They got a double treat in India: one, as Indian markets were among the best performers in 2012, gaining around 27 per cent, and thus increasing their wealth to that extent; and second, due to the rupee depreciating against the dollar. Indian market valuations made them more attractive than other emerging markets: they got more bang for their buck!
The tea party at the stock markets for FIIs is expected to continue at least for 2013’s first quarter. The Reserve Bank is most likely to cut key policy rates at the end of January, as it indicated during the mid-quarter review on December 18. The government is also expected to start implementing key reforms in earnest. Globally too, the “fiscal cliff” in the United States will either be resolved, calming the markets, or it could stay unresolved, leading to a temporary adverse knee-jerk reaction. Generally, things should look up both in India and globally, and at least 2013 should be better than 2012.