Do policy makers have any other option?

After recent Federal Reserve meeting, when Chairman Ben Bernanke’s commented about tapering of bond buying program, global financial markets have become very volatile. U.S. benchmark 10 year treasury yields touched 2.8% recently from 1.6% in early May. Hot money started flowing out of emerging markets (EM) following some kind of theme like sell EMs and buy U.S.!

As a result of this majority of emerging countries’ stock and bonds sold-off, currencies started depreciating. Being part of globalized world now, India too is going through all these market phases. Apart from global issues, India has its own problems like large current account deficit, corruption and scandals, policy paralysis making it as non-favorable destination for investment at least for now. Indian growth, measured in terms of GDP, slowed to 5% levels from above 9% levels, Industrial Production data is not showing recovery signs, Consumer Inflation still very high and whole price inflation started inching up again; currency depreciated more than 12% in 12 weeks. 

Indian central bank, RBI is under pressure to support the growth, curtail depreciation of Rupee, monitor the capital flows and has to maintain its independence. RBI is exactly in “impossible trinity”.  

Consequently government and RBI took several measures to curb the currency depreciation and capital flight from India, like hiking gold import duty couple of time, banning importing of bullion coins and medallions, asking gold importers to keep 20% of total imported gold for exports and exports-purpose, domestic liquidity tightening, reducing the limit for Overseas Direct Investment (it’s like Indian FDI abroad) from 400% of the net worth to 100% and so on.

Many commentators are now criticizing these recent policy moves and intervention in market. It’s not the question of either supporting or opposing them, whether policy makers have any other option which will help them in near term? Of course there should not be any second thought on long term plans to correct the fundamentals; but what about immediate future as Keynes famously said “In the long run we are all dead”. 

This brings back the old question, whether markets are efficient or in other terms does efficient market hypothesis holds true? Going by Keynesian concepts and economic boom and bust cycles it does appear like markets need an invisible-hand to guide them and calm the nerves. But that again depends on how big that invisible-hand is, how far it is non-conventional in its approach and how much market is ready to listen to it and trust. Only time will tell!

Can hawkish monetary policy alone, control the inflation?

Indian central bank, Reserve Bank of India is meeting on 3rd May for monetary policy meeting of 2011-12 and expected to increase interest rates by 25-50 basis points to rein the inflation. At that time RBI governor Mr. D Subbarao might wonder about the above question as he already increased the interest rates, 8 times in last one year or so. But still many analysts believe, RBI is behind the curve to curb the inflation pressure, as Inflation measured by CPI is in double digits (or near by) through out the year. A year back RBI’s comfort zone of inflation was 5.5% and now it has been revised multiple times and more recently to 8% from 7%. Because of this condition there is a talk going on about Indian economy overheating and India not able to handle the growth!

Economist, Sir John Maynard Keynes and Keynesians believed that “changes in the interest rates do not directly affect the prices and inflation is due to pressure in the economy”. They feel that supply of money is a major, but not the only, cause of inflation. They might be right or wrong in the case of other parts of the world but in Indian case it looks like they are correct. Indian inflation may be due third form of Inflation, i.e. Built inflation and neither Demand-pull inflation (increase in demand) nor Cost-push inflation (drop in supply)! In Built-in inflation, people expect higher prices for future from past experience and also supported by price/wage vicious circle.

The very basic point about inflation is, going by the definition, “its rise in the price levels of goods and services in an economy”. Considering the definition, let’s look at the causes of the inflation in Indian case.

First, inflation can be due to erosion in the buying power of the trading medium, i.e. country’s currency. The best example is recent hyperinflation of Zimbabwe where-in, 1 million Zimbabwean Dollar was equal to 1 American Dollar! But Indian rupee, in last two-three years traded against the major currency, i.e. Dollar in a band of Rs. 44 to Rs. 48 per Dollar. So there is not much scope for this argument.

Second, the Cost-push inflation due to sudden drop in the supply side of the economy. In a globalised world, supply side shocks may not lasts too long, particularly not two years and so (as Indian Inflation is in double digits for almost two years). Take recent example of Onion price, due to shortage, prices doubled and even tripled for a month or so, but once the supply resumed, prices cooled off. The same logic applies to Oil prices also whose price spiked due to Middle East crisis and hopes of recovery. If Oil price spike is only because Middle East crisis and not due to recovery, then it’s very difficult to sustain at this level!

Third, Demand-pull inflation due to rise in the demand because of higher expendable income helped by higher income and supported by higher spending by private and government. According to one school of thought, “Demand inflation is constructive to a faster rate of economic growth since along with favorable market conditions, it will stimulate investments and expansions”. They say, higher growth comes with higher inflation and we need to learn to live with that, if we want higher growth.

The Demand-pull inflation along with Built-in inflation is the most feasible reason for the Indian inflation from above mentioned three types of causes. Digging even further tells us that inflation is a part of the broad economical cycle and very structural in nature. So to curb this kind of inflation, there should be combined efforts from RBI (in monetary front), Governments (in reducing fiscal/current a/c deficit by reducing spending), lesser Borrowed inflation (from across the border in terms of imports), people’s mentality and so on. Finally we must remember nothing is decoupled in an open economy!

Is Euro following fate of Bretton Wood’s Gold standard!

Before going to Euro, I would like to touch upon the Bretton Wood’s Gold Standard for the benefit of my readers. Bretton Wood’s gold standard came to existence from a war (2^nd world war) and ironically dissolved with a war (Vietnam War). After 2^nd world war, to build the International economic stabilization, certain countries came together to form a monetary system for trading, exchanging mutually tradable currency and etc. The main designers of this system were Briton’s Sir John Maynard Keynes and America’s Harry White. Even though Keynes had an Idea of new reserve currency called “Bancor” but that idea has been rejected by White and others, indicating people moving towards US rather than UK! So countries which came together, agreed to peg their currency to US dollar and US dollar in turn will be pegged to Gold, $35/Ounce and formed the organization called IMF (International Monetary Fund). The entire system was based on some condition for member countries like subscription quota for membership, trade deficit maintenance like balance payment issues and etc. But after some time due to macro economical cycles, certain changes in the world economy like, recovery of Europe, Cold War between US & USSR, globalization of banking/currency system, fast emergence of Japan, Vietnam War and balance of payment issue with US made the cracks in the gold system, making it to fall out in 1971, by then US president Nixon unilaterally withdrawing the pegging the Dollar to Gold. Which is popularly know as Nixon Shock!

Now coming to Euro, it came to existence in 1992 for most of the European Union countries as the member. The Euro formation was on some conditions like such as a 1. Annual government deficit: The ratio government deficit to GDP must not exceed 3%
and Government debt: The ratio of gross government debt to GDP must not exceed 60%.
2. Inflation rate: Not more than 1.5% higher than the average of the three best performing (lowest inflation) member states of the EU.
3. The interest rate must not be more than 2% higher than in the 3 lowest inflation member states.
4. Exchange rate: countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for 2 consecutive years and should not have devalued its currency during the period

But at present some of the European countries don’t look to fit any of the above conditions except currency condition for example…

Country	Government Deficit to GDP forecast	Government Debt to GDP	Inflation and Interest Rate
Ireland	10%	120%	0.6% & 1%
Greece	7%	140%	5% & 1%
Italy	4.5%	120%	1.8% & 1%
Belgium	5%	100%	3% & 1%
Spain	7%	65%	2.5% & 1%
Portugal	5%	85%	2.5% & 1%

From the above table we can say all troubled European countries like Ireland, Greece, Spain, Portugal, Italy and Belgium are

àFacing government deficit to GDP is more than 3%, which is the minimum requirement condition for EURO/EU.
à Government debt to GDP required condition is less than 60%, but each country’s debt to GDP easily exceeding the prerequisite condition. And also from country perspective Debt to GDP ratios of 120% (Ireland) and 140% (Greece) are not good. We have present example of Japan’s Balance Sheet problem due to which it lost two decades of growth and witnessed lost decade.
àNow coming to Inflation and Interest rate, see the real interest rate of each country. As ECB decides the Interest rate of the region, countries with different inflation (particularly too high and too low) will be under tremendous pressure. This might push them currency devaluation/revaluation which is again restraint condition

--- will be continued...

Ultra low interest rates in certain regions may cause global imbalance

To avoid present financial crisis developed countries like US, Japan, UK and European Countries are keeping ultra low interest rates [0.1% of Japan, 0.25% of US, 0.5% of UK and 0.25% of ECB (deposit) ] and more over governments & central banks of these countries flooding the their respective economies with lot of Quantitative Easing (QE) by printing more money as that is the last resort in monetary policy to boost the economy.

Countries opt for QE which are facing the problem of low inflation or threat of deflation and they might have already substantially lowered the interest rate nearer to Zero. So to boost the money supply in the economy central banks are compelled to print more money and purchase government bonds from different financial institutes like banks and NBFC (Non Banking Financial Services), in turn flooding these financial institutes with lot of cheap money.

Most of the economist and policy makers provide Keynes theory of "General Theory of Employment, Interest and Money" basis for their move towards monetary easing and QE.

But Sir John Maynard Keynes proposed this theory in 1930s then world was not so globalized as it is today and world was facing double dip recession or popularly known as The Great Depression mainly due to some bad moves like liquidity tightening by FED and protectionism by global leaders.

Where as now world is more globalized than ever and we are era of "BUTTERFLY EFFECT" of Chaos theory. No country is no longer 100 percent closed economy, so no country can say it is totally delinked from rest of the world. Ultra low interest rates in these countries and QE is flooding their banks with cheap money. And this cheap money is leaking to emerging markets. This "HOT MONEY" is creating its ripple effects in commodity market, emerging country's stock markets and their macro economy.

Commodities like Copper, Silver are trading at their peaks in last 2-3 decades and Gold is trading at all time high.

And hot money from these countries is flowing to emerging markets like there is no tomorrow. For example Indian markets witnessed highest ever inflow of FIIs in September month in last 17 years, from the day FIIs allowed. More than 5 billion dollar hot money flooded in Indian markets boosting Indian markets 13% rise in September. Srilankan stock exchange "Colombo Stock Exchange" has given more than 100% return in one year from sub 7000 levels to 16000 odd levels.

Brazilian currency "Real" is appreciated a whopping 30% from March 2009. Indian currency appreciated almost 7% in last 6 months and currency appreciation is common problem to all emerging markets. Already US-China currency war is on and Brazil is shouting at its full strength.

Due to this their respective central banks will (or would have already started) intervene in forex markets by selling their own currencies leaving their local banks with lot of liquidity. This liquidity is in turn creating a pressure on inflation which is already high in certain countries like China and India.

Ultimately its a "ZERO SUM GAME". In past also lower interest rates in initial parts of 2000 (to avoid ill effects of dot com bubble burst) lead to asset bubble in US which caused present crisis.

Multiplier & Accelerator Effect

Today there is a very good article in The Hindu about how NREGA is helping in terms Multiplier & Accelerator effect in this crisis to Indian Economy.

The New International Currency

From 2nd world war there is a constant approach towards a new international currency. But every time it was opposed by the MAJOR INDUSTRIALIZED COUNTRIES. Now in this crisis time also there is this talk is going on. And this got substantial boost after the G20 meeting.

Here are the some of the opinions...

Mr. Swaminathan's article in STOI

Mr. Nageswaran's article in mint

Financial Express article

In related to this see what Mr. George Soros thinks about the US economy.

Monetary Stimulus/Fiscal Stimulus-->Helicopter Money

All countries & companies are trying save themselves from the recession or depression by various tactics. In these tactics Fiscal & Monetary policies are major ones and remaining are the part these policies or slightly related to these policies.

Today when I was posting this article Dow Jones was down by 200 points mainly because of the negative news from General Motors & US Economy, which may be heading for another depression. After receiving 13 Billion US dollars package also, General Motors is on the verge of the bankruptcy. City bank, after getting stimulus packages also, its stock was trading below 1 US dollar because of lack of investor's faith in it.

To counter the cycle of the recession [which may lead to depression] UK has reduced the its interest rates to historical low of 0.5%. Today's UK move is towards the liquidity trap about which I have explained in the below paragraphs. Along with UK, European Region which is in recession technically, today its central bank, European Central Bank (ECB) has reduced the interest rates to 1.5% from 2%, lowest since it formation in 1999.

Some time back I wrote about the "helicopter money". Today I am posting about the "helicopter money" because, present situation is leading to that condition.

Before presenting the present condition, I would like remind my readers about the what is helicopter money? And when it arises?

Helicopter money is the ultimate solution to the liquidity trap. Now you may ask what is liquidity trap?

A liquidity trap is a situation in which a country's interest rate has been lowered nearly or equal to zero to avoid a recession, but the liquidity in the market created by these low interest rates does not stimulate the economy. In these situations, borrowers prefer to savings rather than spending. This makes a recession even more severe, and can contribute to deflation. And interest rate cant be negative. This situation leads to helicopter money.

Helicopter money is situation in which Governments/Monetary Authorities gives the money directly to the consumer/resident of the country bypassing the financial intermediaries like banks. Keynes is considered is as the inventor of the Liquidity trap & Milton Friedman has coined the Helicopter Money.

Now coming back present conditions, Japan has cleared the cash in hand bill to the every resident of the country. This is nothing but helicopter money concept where in every Japanese resident is expected to get the 12000 yen costing total about 20 billion US dollars. Children under 18 and people aged over 65 would get 20,000 yen as part of the scheme. Japan took this controversial step because, it left with no other option. Every thing has been tried & tested including the fiscal stimulus & lowering interest to 0.1% level.

Mint:Rediscovering history - Niranjan Rajadhyaksha

As economic activity around the world shrinks at a pace that few expected, the obligatory amnesia of bull markets is now being replaced by a new respect for the past.

Bull markets inevitably lead to the arrogant and ignorant belief that the old rules can be swept away and that economic history is irrelevant. And wiser people who warn that grief has inevitably followed earlier bubbles are scoffed at.

Historian Niall Ferguson recounts a telling episode in his new book, The Ascent of Money. He was invited to speak to a group of bankers at an expensive conference held in the Bahamas in November 2006. “The theme of my speech was that it would not take much to cause a drastic decline in the liquidity that was cascading through the global financial system and that we should be cautious about expecting the good times to last indefinitely. My audience was distinctly unimpressed. I was dismissed as an alarmist,” writes Ferguson.

The tendency to dismiss what happened in the past is less common these days. In fact, as the intensity of the recession in the rich nations increases, the urge to dig deeper into history rises in tandem. And many old and buried ideas are being resurrected.

The initial trek into the past that started after the first credit shock in September 2007 did not go too deep into history. Most economists and analysts were content comparing the downturn—and speculating about the revival—by looking at the mild recessions of the 1990s and the early part of the current decade in the US and Europe. This one was expected to be a repeat of the immediate past.

But they started traveling further back in time when the initial hopes of a quick dip and rebound evaporated. After jumping to the sharp and painful recession of the early 1980s, the debate has now settled into the 1930s: What caused the Great Depression and how can a repeat be avoided in these times?

The D-word has already got an airing in recent weeks. British Prime Minister Gordon Brown said earlier this month that the world needed to agree on monetary and fiscal stimulus to get out of depression. His opponents pounced on him while his media managers dismissed it as a slip of the tongue. But the International Monetary Fund said a few days later that the rich nations are already in depression.

Memories of the gloomy 1930s and greater attention to Japan’s economic stagnation over the past two decades have also helped resurrect economists who provided unconventional explanations for what happened during these two episodes. The old consensus has crumbled.

We have already seen the Keynes revival, as economists have scrambled to learn from the insights of the most influential economist of the interwar years. But others have also got a new prominence. I will just mention two economists here: an American who lived during the Great Depression and a Japanese who has a refreshingly different take on why his country’s economy has stagnated.

Irving Fisher has been the target of several barbs because he made one of the worst market calls ever. He said mere days before the US shares fell off a cliff in the crash of 1929: “Stock prices have reached what looks like a permanently high plateau.”

But Fisher also later came up with an explanation about the depression that followed. This is the debt deflation theory, which essentially says that indebtedness forces families and businesses to sell collateral that pushes down their prices even more and further raises the threat of insolvency. I doubt Fisher is taught to economics students these days. In an article in VoxEU.org, Enrique G. Mendoza of the University of Michigan offers some advice to government around the world: Hire Irving Fisher.

Meanwhile, many are taking a closer look at what Richard Koo of the Nomura Research Institute described earlier this decade as Japan’s balance sheet recession. In an analysis that has striking parallels with Fisher’s prognosis in the 1930s, Koo says over-leveraged Japanese firms trying to reduce debt did not have the stomach for new investment. The fall in the value of pledged shares is creating a milder variant of this problem in India.

The point is not that economists such as Fisher and Koo have the keys to the kingdom. Economists will struggle to explain why economic activity waxes and wanes—and why some recessions can be long, brutish and nasty.

One of the few good things to emerge from the current crisis is that it is has partially rehabilitated heterodox economists such as Fisher, Koo, Hyman Minsky and even John Kenneth Galbraith. And there is a greater respect for economic history.
It is easy to pretend that you are living in unique times when the laws of economics are suspended. But that is only till you get ambushed by reality.

Business Standard: Pranab unveils fiscal stimulus III

Finance Minister Pranab Mukherjee today announced a stimulus package for the economy, the third this financial year, cutting excise duty and service tax two percentage points each, effective midnight, and extending previous excise cuts beyond March 31, 2009.

Service tax has been cut across the board from 12 per cent to 10 per cent and the excise has been reduced by the same margin only for items that currently attract the 10 per cent rate.

Consumers are expected to benefit significantly from this latest cut in indirect tax, since over 90 per cent of excise duty collections come from the 10 per cent slab rate, which is levied on white goods, metals, commercial vehicles, iron and steel and cement. Tyre makers have already responded by announcing a two percentage point cut in prices.

Overall, consumers can expect a more than 2 per cent reduction in retail prices if the excise and service tax cuts are passed on fully. This is because the Value-Added Tax (VAT), which is levied at the state level, is applied over and above the excise duty, said Vivek Mishra, partner, Ernst & Young, an auditing and consulting firm.

Most items attract 4 per cent or 12.5 per cent VAT rates. At 12.5 per cent, a two percentage cut in indirect tax will lead to a 2.3 per cent reduction in retail prices.

In terms of a deficit-financed stimulus, economists said cutting indirect taxes is more effective than government spending. “By cutting taxes, the government has put more money in people’s hands rather than spending on its own,” said D K Joshi, economist with Crisil Ltd, a ratings and advisory firm.

Agreeing that indirect tax cuts are more effective in stimulating demand than direct tax cuts, Abheek Barua, chief economist with HDFC Bank, said, “Cutting income tax rates, for instance, often leads to higher savings instead of increased spending, as precautionary savings increase when people are faced with uncertainty”.

Duty cuts to boost the economy

Today Finance Minister Mr. Pranab Mukherjee announced the much needed duty cuts in the last day of the interim budget discussion of Parliament.

Excise duty has been reduced from 10 per cent to 8 per cent and the service tax cut from 12 per cent to 10 per cent. And 4% excise cut announced earlier in the stimulus package in December will continue beyond March 31. In addition to these majors, FM also announced Excise duty on bulk cement to be 8% or Rs 230 per metric tonne, whichever is higher and Naptha exempted from customs duty; extends customs duty in Naptha beyond March 31, 2009.

This is much needed action government should have taken before itself. Some people may argue that because of Duty cuts there is revenue loss of around Rs.28000 crore. Ya that's is true in normal conditions. But present conditions require some extraordinary majors to pull back the economy to grow at 7% to 7.5%. Since I think Tax cuts are most effective in boosting the domestic demand as compared to other majors like fiscal & monetary stimulus packages. And in case of monetary relief there will be time lag between the central banker's relaxation & individual banks relaxation which may not as act immediate boosting factor. And the problem with the fiscal stimulus packages, here in India particularly we have implementation problems. And in present scenario governments (Central & States) dont have full fiscal year also for big packages to announce.

These duty cuts are definitely going to help ailing manufacturing units [which are showing negative growth from last couple of months through IIP nos] & service industries. And duty cut on cement is a good relief to the real estate & construction industry which are presently facing the liquidity problems. And if industries transfer these relaxations to consumers then there will be impact on demand side. This domestic demand is India's life line in this crisis time. Since our Indian growth is more of domestic consumption oriented than the export oriented like China. 60% to 65% of our GDP is consumed by Indian population itself. And if governments succeed in boosting the domestic demand then half of the India's problems are solved. Instead of implementing the protectionism policies, government should think about the other alternatives like "Excise & Service Duty Cuts" so that, there will not be international trade retaliations.

And looking at the monetary conditions there is lot of room for reduction in rate cuts by central banker. Since individual banks are keeping there excess money into safe hands of RBI [instead of lending] through Reverse Repo route which is 4% presently. So there should be reduction Reverse repo from 50 to 100 basis points so that banks will look towards the alternatives like lending to Prime Customers.[Since there is risk of increment in the NPAs also] In addition to that there should be reduction Repo rate also so that there is proper balance in the corridor of Repo & Reverse Repo. Ultimately there should be money flow in the economy to boost the economic activities. But I dont think central banker should think of altering the CRR & particularly SLR. Because if we look at the Call Money Ratio it is between corridors of the Repo & Reverse Repo rate, so banks are not facing any problem with the liquidity adjustments between themselves. It is expected that RBI may act by this weekend in easing the monetary majors.

Bottom line:

Lets be hopeful that our Indian economy, counter cycle the present scenario by August/September 2009 with a new government & with its new policies...

Say's law-->Keynesianism & Its Implementation

Today I an article in Business line from Mr. Harish Damodaran. In which he has beautifully explained the concept of Say's law, Savings & Investments, Keynesian concept with respect to Say's (which I posted twice from the Keynes book) & implementation of the packages which th government is announcing now...

Has the worst market scenario been discounted?

Couple day’s back I was reading business line, in which I got this article from Sudip bandyopadhyay CEO, Reliance Money. It talks about inflation, its controlling, growth and etc. So I am posting this article for you guys, good article read it and revert back to me…

John Maynard Keynes famously said, “In the long run we are all dead”. Defenders of markets sometimes admit that they do fail, even disastrously, but they claim that markets are “self-correcting”.

During the Great Depression, similar arguments were heard: governments need not do anything, because markets would restore the economy to full employment in the long run. But, in the long run, we are all dead. Markets are not self-correcting in the relevant time frame. No government can sit quiet when the country goes into recession or depression, even when caused by excessive greed of bankers or misjudgment of risk by security markets and rating agencies. But if governments are going to pay the economy’s hospital bills, they must act to make it less likely that hospitalization will be needed.

Containing inflation in India is not a matter of choice for policy makers; rather, it is a matter of necessity. Rising prices affect a vast majority of the population. Therefore, it is imperative that the policy makers take all possible steps to curb its further rise. Given the predominantly monetary phenomena that it is, the RBI is the first stop for the policy makers to address this issue. Hence, tightening the monetary policy — by tightening liquidity in the market — is certainly a move in the right direction.

Commodity prices are coming down from their peak of a few months and this may bring inflation down. For the government, here is a chance to catch up with the absurd deficit on the oil account. However, much more needs to be done to impact the supply side of the problem as well. The public distribution system (PDS) is in disrepair and requires significant improvements in the form of greater transparency and accountability.

The markets witnessed significant bouts of profit-booking last week following which one saw the broad indices closing in negative territory. Two important events which the markets were expecting this week included the IIP numbers and the SEBI meeting to discuss the P Notes issue. Both of them did not spring any negative surprise and were on anticipated lines.

However, what spooked the market was the negative surprise coming in from a sharp rise in inflation to 12.44% as compared to 12.01% earlier. This is reportedly the fastest rise seen during the last 16 years. The market was also concerned on the news that the government has finally decided to pay 21% more than the proposed pay panel recommendations to central government and railway employees.

Meanwhile, the Prime Minister’s Economic Advisory Council (EAC) has clearly mentioned that the GDP growth during FY09 is likely to slow down to 7.7% against earlier estimates of 8.5% — with agriculture growth pegged at 2% during the current year against 4.5% recorded last year. Some of the important concerns raised by EAC is the alarming rise witnessed in off budget expenditures, especially pertaining to fertilizer subsidies, oil bonds to OMCs which taking in to account all other such expenditures could touch 5% of the GDP. This is over and above the budgeted fiscal deficit of 2.5% during 2008-09. EAC has also warned that inflation could further spike to 13% before it peaks out. It also expects the tight monetary stance from the RBI to continue before results get reflected, with the annual inflation targeted at 8-9% by March 2009.

Some positive news which flowed during the week included the indirect tax collections from excise and customs duties increasing by 13% in July ’08 and by 12% on a cumulative basis during last four months ending July ’08 of this fiscal. On the crude price front also, OPEC has further cut its forecast for global oil demand growth in 2008 and expects production more than adequate, signaling a more comfortable supply and demand balance scenario.

It is expected that during this week, one could witness a small knee-jerk reaction initially due to several negative macro headwinds but thereafter, there is a strong possibility of some sustained value buying coming in from funds and long term investors, since it seems that the worst scenario has already been discounted in the stock prices by the markets. The market is also eagerly awaiting the reforms promised by the finance minister after the government won the trust vote last month. Any positive news on that front should boost the market sentiments.