FOR U, ME & CRICKET, LET’S SKEW THE LAW OF AVERAGES

The sentiment remains low with India crashing out of the World Cup and Sensex starting on a negative note on the very first day of the financial year. For a change, apart from the usual rationalization, profit booking was cited as the valid reason for BSE Sensex declining by almost 0.3%. Sensex has been up by some 15% since January and our cricket team has also been on the winning spree since defeating Australia in T20 series in February.  I think the best rationalization in both the cases is the ‘Law of Averages’, which has come into play. Everything balances out in the long run or in more complicated terms, the relative frequency with which an event occurs in repeated trials will converge to a stable value over time as the sample increases. Some pessimists have even predicted Apple’s downfall in the coming future based on this law. Whatever may be the case, the question remains, do you believe in this law or can it be defied.

I don’t know whether we can defy it or not, but one can definitely work around it. As for our benchmark indices we need not worry, that is what core sector growth is telling at 5.7% for February and with the expected repo rate cut in the first bi-monthly policy on 5^th April, growth engine will refuel it-self for future growth. Lower deposit rates and lending rates on the basis of marginal cost formula augur well both for the borrowers and banking sector especially PSU. On the macro front, high forex reserves, low external government debt and stable exchange rate will help us to fight any number of no balls against cheap Chinese imports, Europe and Japan’s ongoing stimulus or the impending rate hike by US FED.  As for cricket which is our national religion, hope of 1 billion people will skew even the law of averages.