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May 06, 2008

April Market review

In spite of the continuing uncertainty in global markets as a result of the credit crunch, the Indian economy has been commanding a healthy share of the financial pages.


Although the Indian stockmarket has fallen over 20% this year, it is still viewed by some commentators as offering attractive potential.


With 1.1 billion people, India has the world's largest English-speaking population. In addition, its positive birth rate implies that the size of its workforce will continue to grow for the foreseeable future. Spending by the country's emerging middle-class of 50 million, which is equal to the combined population of Singapore, Hong Kong, Malaysia and Australia, is also cited as a potential driver of growth.


Having experienced a prolonged period of slow growth, the Indian economy is now growing at 8-9% per annum, a rate of growth that is second only to China.


One source of concern is inflation with the country's annual rate of inflation having increased to a three-and-half year high of 7.41%. At such a high rate, there is concern that inflation could threaten the country's growth projections and offset recent gains in productivity. There has also been comment that it has the potential to bring about the collapse of the Congress-led UPA coalition government, as it will create fiscal strains for a government that provides large subsidies for food and fuel.


While the Indian Sensex index is currently sitting at 16,000, down 23% since January this year, it remains 19% higher than a year ago and there is a view that it could reach the 50,000 mark by 2020.


Although the outlook in general looks positive, there are some obstacles to continued growth including bureaucracy in the labour market and a weak infrastructure. In addition, the agriculture sector, which employs nearly two-thirds of the workforce but contributes 21% to gross domestic product, is stagnant, creating an imbalance in India's growth.


Elsewhere, the credit crunch is continuing to exercise its control with the US and the UK central banks striving to assist their respective economies while continuing to be wary of the ever-present danger of inflation. Time will tell whether the Bank of England's special liquidity scheme of around GBP50 billion will smooth the path or will turn out to be a last-ditch attempt to keep the economy on an even keel.


Turning to oil, a barrel of crude has risen to a record at just under USD120 in the wake of a strike at the UK's Grangemouth refinery and an attack at Nigeria's largest oil and gas terminal, where output has fallen by 50%. New York oil futures are now 82% higher than a year ago.


Looking at currencies, the euro has risen against the dollar to stand at USD1.5674 following an industry report that showed that German consumer confidence has risen unexpectedly, and comment from the European Central Bank that interest rates may not be cut further to stem inflation. Consumer prices in the 15 countries that share the euro rose at an annualised rate of 3.6% in March, which is the highest rate in almost 16 years.



The information set out herein has been obtained from various public sources and is published by way of information only. The Spectrum IFA Group can accept no liability of any sort in relation there to and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.


Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.


This information is only provided as a guide and, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.


If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631, via my website
www.financialexpat.com or via e-mail steven.grover@spectrum-ifa.com  
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