- Stock markets have a tendency to exaggerate during elections. The stock markets crossed the 25000 mark in the recent elections and has surged the already sky-high expectations from the new government.
- Optimistic scenario in the face of a stable govt includes:
- Swift economic reforms that result in quick changes in the economy.
- Debottling stalled infrastructure projects.
- Initiation of the next capex cycle.
- Cutting down of rates by the RBI.
- Reality:
- One fourth of the delay in projects is due to the centre, the rest is mainly due to the states.
- Resolution of delayed environmental clearances and legal bottlenecks will take longer than what the stock markets anticipate.
- Cumbersome land acquisition process will increase project costs.
- Existing political vacuum will need time for correction.
- Future of FDI appears hazy.
- http://www.thehindu.com/todays-paper/tp-business/dont-count-on-euphoria-alone/article6023501.ece
Exams Perspective:
- Stock Market
- RBI
