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Anxiety over Greek referendum, short-lived volatility expected

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By Rohit Vaid

Mumbai: Slight volatility is expected to hit the Indian equity markets in the coming week as investors will be jittery on account of the Greek referendum, upcoming first quarter results, the monsoon’s progression and key macro economic data.

However, market observers predicted to IANS that the volatility could be short-lived, as strong domestic fundamentals, economic reforms and a pick-up in government and private investments take place.

“Markets are expected to be slightly volatile in the beginning of the week due to the Greek referendum. For the short-term the Greek issue will be big enough for the market as a cue,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“However, after the initial factoring-in of the situation, the domestic fundamentals such as policy initiatives and data points will be back into focus. These domestic factors are positive and will drive the markets to stability,” he added.

According to Dipen Shah, head of private client group research with Kotak Securities, the markets are hopeful that the outcome of the Greek referendum will not have any significant repercussions on the global economy – and especially India.

“The Indian economy is not linked to Greece in any major way. While there can be an impact on currency due to potential outflows, the strong forex reserves should help in reducing the impact to a great extent,” Shah said.

The Greek government has called for a referendum to let the people decide on the terms and conditions of another bailout.

Gaurav Jain, director of Hem Securities, elaborated to IANS that the positive bias in the Indian markets is expected to continue with Nifty having the potential to reach the 8,700-mark on the higher side.

“If things turn out to be negative, then the positive bias will help in mitigating the damage. Nifty in that scenario can be pulled down to the 8,000-mark on the lower side,” Jain said.

The markets will be looking ahead for key inflation and factory output data points like CPI (consumer price index), WPI (wholesale price index) and IIP (Index of Industrial Product) numbers.

“Traders will be eyeing the industrial production data for May scheduled to be announced on July 10. Needless to say, the progress of the monsoon will also remain in focus for the entire month,” Jayant Manglik, president for retail distribution with Religare Securities, told IANS.

The IIP data assumes significance as that for core sector industries released on June 30 showed the fastest pace of growth in the last six months ended May 2015 – at 4.4 percent year-on-year.

The eight core industries which comprise 38 percent of the total weight of items included in the Index of Industrial Production (IIP) stood at 178.6 as against 162.4 in April.

Analysts also point out that the countdown has begun for the earning season scheduled to start from July 21, which they believe holds the utmost importance in shaping the market’s direction.

“There is a hope that the first quarter (Q1) numbers due to be released soon will be better than the Q4 of 2014-15. Factors like lower inflation, easing of monetary policy and stable rupee are expected to be translated into better Q1 numbers,” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.

“There is also hope that the Q1 guidance is also going to be positive. However, in the worst case scenario, the markets seem to be ready for any negative surprises, especially in sector or stock-specific areas,” he added.

According to Anand, the market trajectory will also be influenced by the political climate leading up to parliament’s monsoon session later this month. The session is crucial because major bills such as on GST (goods and services tax) and land acquisition will be presented in parliament.

“The progress of monsoon will also be in the focus. We have noticed weakening of monsoon in the early part of this month. The continued weakness coupled with any adverse inflation numbers will give out negative signals for future lending rate cuts,” Anand added.

The barometer index of the Indian equities market, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), gained 281 points or 1.01 percent during the weekly trade ended July 3.

The index closed at 28,092.79 points from the previous weekly closing of 27,811.84 points on June 26.

(IANS)

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Aging US Population Creates Problem for Economy

Americans are getting older and family size is shrinking

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Aging, US, Population, Problem
The U.S. birth rate dropped to a 32-year low last year. Pixabay

Americans are getting older and family size is shrinking, which means the nation will have fewer working-age adults going forward.

“I think it is a cause for concern if we are calibrating our expectations of having a strongly growing population,” says David Kelly, chief global strategist for JP Morgan Asset Management. “If you’re investing in things like the housing industry or the auto industry and you need an ever-growing population, then you have to adjust to a world in which the U.S. population is growing more slowly.”

By 2030, one in five U.S. residents — 20%— will be older than 65, compared with 13% in 2010 and just under 10% in 1970.

Various studies show that not only does an aging population cut into economic growth, but older workers who stay in the workforce tend to be less productive.

Aging, US, Population, Problem
FILE — Caregiver Warren Manchess, 74, left, shaves Paul Gregoline, 92, in Noblesville, Indiana. The share of the U.S. population over age 60 is expected to rise by 40 percent between 2010 and 2050. VOA

Meanwhile, as Americans age, the U.S. birth rate dropped to a 32-year low last year. Fewer than 3.8 million babies were born in 2018, down 2% from the previous year. Overall, the population grew 0.6% in 2018 compared to 1.2% growth in the mid-1990s.

That’s not necessarily a negative in the long run, says Kelly, adding that if you look beyond economics, a growing world population will potentially do more damage to the planet. Instead, he says, policy makers should plan for the expectation of a reduced workforce.

”There’s so many things in this world you can’t see coming. Demographics you see coming from a mile off,” he says. “It should be something that we try to adapt policy to as opposed to a lot of the things that we’re very unsure about, which we can more reasonably hesitate to act on. We really should adapt to a world of slow population growth because it’s clearly happening to us.”

He expects the lack of workers to spur the growth of robotics and artificial intelligence to replace the missing human labor. And he says Americans need to “get over our delusions” and prepare for U.S. economic growth to slow a bit.

Also Read- GRAIL Announces Significant Progress on Blood Tests to Detect Cancer

Another fix for a diminishing workforce is to add more legal immigrants rather than restrict them. Immigrants tend to arrive in the United States during their working years.

“I think what you need to do is, first of all, change immigration policy so you can do something about the lack of immigration growth or lack of population growth,” Kelly says. “But also you need a more open trade policy. If we don’t have big growth in our population, we won’t have big growth in our domestic markets. If we want to attract fast growing companies they’ll have to see the world as their market and not just the United States.”

Kelly believes the U.S. economy can easily adjust to the challenges of slow population growth, but he worries politics could get in the way.

”Of course we can adapt to this stuff,” he says. “The real question is a political question because it seems even as our population matures in years, it seems that our political system gets less mature in terms of thought process.” (VOA)