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The biggest possible barrier to India's growth markets

The biggest possible barrier to India's growth markets
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FY10 was a thumping year for the auto industry as sales volumes zoomed. Strong growth was seen across segments - commercial, two-wheelers, three-wheelers and passenger vehicles. This buoyancy continued in FY11 too, as total domestic auto sales volumes grew by a robust 26% YoY. This was led by healthy demand across both urban and rural areas. What is more, this growth was witnessed across product segments as can be evinced from today's chart of the day. That said, although growth has been robust over the past two years, whether this can be sustained going forward remains a challenge. This is on account of rising inflation which has led to RBI hiking interest rates and higher input costs.

Gold has seen its prices touch new highs. And along with it the gold Exchange Traded Funds (ETFs) have also seen their prices spiraling upwards. But the rise in prices of the latter has become a cause of concern for all. A large part of the price increase in ETFs is due to the huge amounts invested in them by the hedge funds. And these hedge funds tend to book profits when their targets are realized. Whenever this would happen, it would lead a decline in the prices of these ETFs. The worrisome factor is that the pricing of these ETFs is linked to the pricing of gold. Experts around the world, including IMF (International Monetary Fund) are concerned that any exodus of funds from the ETFs would lead to a decline in the prices of gold. However, the fund houses that have launched these commodity based ETFs have stated that they do have adequate mechanisms in place to prevent this from happening. Even commodity experts feel that any decline in ETF prices would not lead to a decline in gold prices. It is actually the other way round.


It was a mixed week for the world markets as markets in Europe and US closed in the positive while most of the Asian markets closed the week in the red. Germany was the biggest gainer of the week up 3% while China was the biggest loser of the week down 3.3%. European markets were helped by data from the US that consumer spending was up by 0.6%. As a result, the European markets were buoyant during the week. France was up by 2.1% while UK was up by 0.9%. In the Americas, US was up by 2.4% as a result of strong earnings being posted by companies. However, Brazil was down by 1.7%. In Asia, only Japan closed the week in the green (up 1.7%). Singapore and Hong Kong were down by 1.4% and 1.7% respectively. Even the Indian stock markets closed the week in the red, down 2.4% due to persistent selling by FIIs and expectation of another round of interest rate hike by RBI.

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http://www.equitymaster.com/5MinWrapUp/detail.asp?date=4/30/2011&story=3&title=The-biggest-possible-barrier-to-Indias-growth

1 Response to "The biggest possible barrier to India's growth markets"

Beststockstips12 said...

It is very nice post. Well done.
MCX Commodities Tips

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