Saturday, June 21, 2008

Hard times ahead !!!

So finally, double-digit inflation is here to stay. And while it was expected to some extent because of the fuel price hike, but no-one expected it to touch 11%, as was announced on Friday. Certainly not the markets, which had factored a 10% figure. And when lightning struck, the indices took a big beating and ended well below the crucial 15000/4400 levels. And this time, not many analysts are taking a call on the next 'support' levels. What that means is that how long and deep the market falls is anyone's guess. Now with Ms. Behenji withdrawing support to the UPA, the stage might be set for another tumble at the markets this week.

But for the common man who is more concerned about how much one kg of onions cost rather than how much the Reliance share fell, things are becoming increasingly difficult. With the fuel price already hiked (and once oil crosses $150 by July, as is widely expected, one can expect further pressure on the government), most essential commodities are likely to go up sooner or later. And rest assured, you can expect public transport to be dearer as well. This will lead to decreased consumer spending and hence falling demand for a variety of goods, thereby hurting many a company's bottomlines and, in turn, their investors, many of whom are the same consumers that are not spending !!! So it ends up at a double whammy, the common man/retail investor has not only to deal with higher spending on what is essential for him, but on the other hand he also is witness to falling returns from his various investments !!

And the sad part is, no-one is sure how long will this last. Till then, one can only wait and watch...


1 comment:

gayatri said...

some large foriegn financial institution's peak inflation estimate is 17%!