Asia tablet makers take a bite out of Apple

Since Steve Jobs stepped out onto the stage to launch the world’s first iPad in the second quarter of 2010, Apple’s offering has been the device to beat in the tablet space.

Apple has sold over 170 million tablets since the iPad’s debut and if analyst expectations are to be believed, that number will balloon in the current quarter thanks to the release of the iPad Air and iPad Mini with Retina.

But while many analysts are bullish on Apple’s latest offerings, the cold hard facts reveal the iPad king is losing market share in the tablet space.

Read more: Apple’s tablet competitors

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And the verdict on the iPad Air is…

New data compiled by research firm IHS show Apple’s market share slipped to 29.7 percent in the third quarter from 33.5 percent in the previous quarter.

Meanwhile, aggressive pricing strategies are seeing companies such as Samsung, Lenovo and Taiwan’s Asus gain ground in the tablet space.

As demand for smartphones tapers off, Samsung has begun to focus on the tablet market. The South Korean tech giant is now one place behind Apple with 22.2 percent of the market.

Addressing analysts on its third quarter earnings call, Samsung said it plans to increase tablet shipments by 20 percent in the fourth quarter to take advantage of demand over the all-important Christmas period.

Rhonda Alexander, director of tablet research at IHS, says Samsung is employing a similar strategy to the one it used to beat Apple in smartphone shipments – offering users a range of options at a variety of price points.

“The erosion in Apple’s unit shipment market share was inevitable… Cheaper almost always wins the volume race, and the competitors were quick to adjust pricing when it became clear that it was impossible to achieve anything close to Apple’s unit growth at the same price level,” she said.

This has seen a surge in the number of tablets selling for less than USD 250 dollars – helping lift Android to the number one operating system by tablet shipments in the quarter.

But the race to the bottom on prices is putting serious pressure on product quality.

The IHS survey remarks on the rise of so called ‘white box’ vendors – little-known regional tablet makers in China that form a large portion of the ‘others category’ – which accounts for 34.2 percent of the market. They sell 7-inch android-based devices for $100 or less.

“The cheaper tablets tend to have much higher return and failure rates. This results in much shorter overall product lifetimes in the Android market than in the iOS space, and contributes to iOS still leading the tablet market in installed base, despite Android’s lead in unit shipments over the past year.”

 At Apple’s fourth-quarter results, it claimed to hold an 81 percent share of tablets currently in use. This is a key metric used by content and app developers for deciding which operating systems to align with. Many developers have voiced their frustration with the Android operating system due to the lack of uniformity across devices.

For these reasons, Alexander says the tablet market remains bifurcated, noting “Apple is yet to experience any serious competition for the premier customer” and should therefore be “on track to lead the tablet market on revenue for years to come.”

Other analysts expect strong demand for Apple’s new products.

“We expect extremely robust demand for Apple’s new product portfolio and expect upside to be contingent on Apple’s ability to continue ramping supply of the new iPhone and iPad products. Beyond the December [quarter], we expect solid momentum behind [Apple] to continue into 2014 as the iPhone and iPad hit larger geographic rollouts,” Deutsche Bank analyst Chris Whitmore said in a note. He expects Apple to sell 24.5 million iPads in the December quarter.

Rob Cihra of Evercore predicts Apple will sell 25 million units in the period.

“We think the new iPad Air revamp in particular ignites a bigger refresh cycle than widely expected, even while Retina looks supply constrained into the March quarter,” he said.

Is China causing a global wine shortage?

Coupled with a drop in global production to its lowest level in 40 years, China’s growing thirst for wine is contributing to the risk of a global shortage, a report from Morgan Stanley has found.

According to the report, increasing consumption levels in both China and the US combined with declines in European production in 2012 following poor harvests in France, Italy and Spain, has raised the risk of a global shortage, which could lead to higher prices and increased demand for exports.

“Data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released,” the report said.

Read more: ‘Red obsession’: How China is transforming the bordeaux market

Move over Bordeaux:French premium winemakers eye China vintage

Aglass of Meow-lot? Japan launches wine for cats

Morgan Stanley noted that in 2012 there were only 1 million excess cases, a sharp fall from 600 million in 2004 when wine production peaked. Furthermore, the report found that after adjusting to allow for non-wine uses (such as making vermouth), demand for wine actually exceeded supply by 300 million cases in 2012, the deepest shortfall in over 40 years.

This shortage is expected to be exacerbated as demand from the US, the world’s second largest consumer of wine after France, and China, the fifth largest importer, grows.

China’s appetite for wine is set to boom over the next couple of years as households become wealthier. Wine consumption in China has doubled twice over the past five years and is expected to double again by 2016 to 400 million cases, matching US consumption levels.

Meanwhile, global production levels haven’t kept pace, and have been on a downward trend since the early 2000s. Europe, which makes 60 percent of the world’s wine, has seen the steepest decline of 24 percent since 2004.

However, according to Michael Daymond-King, fine wine consultant at global wine merchant the Bordeaux Index, the report overplays concerns about a global shortage in the wine market.

“The [Morgan Stanley] report focuses more on the cheaper end of the wine market, priced under USD 20 per bottle. There are certainly less of these cheaper wines being produced in Europe, but I doubt whether it will impact prices, because there is still enough volumes coming from Australia, Chile, Argentina and New Zealand,” he said.

In terms of rising demand from China, Daymond-King agreed that appetite is booming, but said in his view strong production levels within the country will compensate for much of the increased demand. Meanwhile, growing consumption levels of wine in the US would be easily met by supplies from Australia, he added.

“People forget that China is a big consumer of wine but also a big maker of wine,” he said.

But the Morgan Stanley report said that although China produces 180 million cases annually, it won’t be able to produce enough wine to meet domestic demand and will therefore have to import the difference.

China currently imports 20 percent of its total consumption, mainly from France.

Global consumer confidence up, except in Asia

The latest survey of consumer confidence around the world revealed that while confidence was returning to developed markets such as the US and Europe, confidence had been shaken in emerging market economies in the Asia-Pacific region.

The quarterly survey, carried out by global information company Nielsen, measured local job prospects, personal finances and immediate spending intentions and showed that consumer confidence was improving in developed markets. It was “holding steady” in most emerging markets.

The global consumer confidence index reached 94 in the third quarter, a two-point increase from the same quarter last year but unchanged from the previous quarter. In Europe, the index increased three points to 74, the biggest quarter-on-quarter increase since the first quarter of 2010. In the US, meanwhile, consumer confidence hit its highest level since the third quarter of 2007.

The survey was conducted online among more than 30,000 respondents in 60 countries. It found that, globally, plans to buy new clothes, spend on vacations, out-of-home entertainment and home improvements increased 5 percentage points each in the third quarter.

Nielsen conceded that the results only provided a perspective on the habits of existing internet users, not total populations, and that internet penetration rates differ by country which could affect the results.

The jump in confidence was greatest in Portugal, although confidence remains low compared to other European nations. The fall in confidence was the most pronounced in Ukraine.

Read more: UK economy: High confidence but decade-low living standards

In the UK , the number of consumers believing that the country is out of recession was at its highest point in five and a half years.

The only main concern for UK consumers that had increased on the previous quarter was rising utility bills, the survey showed. That comes as six of the country`s largest energy providers hike their bills by an average of 9.1 percent ahead of the onset of winter.

Read more: UK energy companies under pressure to explain price hikes

As developed markets showed a return to consumer confidence after six years of economic crisis, however, only marginal consumer confidence increases were reported in Latin America and Middle East and Africa.

Furthermore, in previous emerging economic powerhouses such as India and Brazil, consumer confidence was waning and recessionary sentiment was increasing. That reflected fears over the slowdown in economic growth that has beset both countries.

In terms of regional consumer confidence, however, everywhere except Asia-Pacific had experienced an increase, perhaps reflecting tensions in the region`s emerging markets during August and September, the period in which the survey was conducted.

At this time, Asia-Pacific economies were reeling from intense capital outflows on widespread expectations that the U.S. Federal Reserve could taper its bond-buying program, a policy which has supported investment in the region as investors searched for higher yields.

Read more: Global sell-off worsens on flight from emerging markets

Indeed, in addition the Nielsen survey revealed a marked increase in recessionary sentiment from respondents in Indonesia, Thailand and India where the summer sell-off was most pronounced.

Despite the slight decline in confidence, however, the intention to spend was most evident in Asia-Pacific and North America, showing that the momentum of consumption has not slowed down – particularly in China.

Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen, said that it was important to keep the declines in perspective.

“At the same time, we have to keep modest developing market declines in perspective. While India is significantly off peak optimism of 131 measured three years ago in 2010, it is still one of the largest and most confident countries in the world, and that has an impact on the entire region.”

Conversely, he added that while it was positive to see an improvement in confidence in developed markets, it was going to be “a slow climb for economic conditions in the global economy to recover, and there is no sign of rapid expansion around the corner.”

– By CNBC`s Holly Ellyatt, follow her on Twitter @HollyEllyatt

Copyright 2011 cnbc.com

Are markets at risk of 1999-style Fed bubble?

As the continued rise in US stocks to record highs has led to some speculation about the formation of a market bubble, analysts told CNBC that investors are not appreciating the full risk of another 1999-style bubble.

This week the SandP 500 and the Dow Jones Industrial Average  both surged to record highs of 1,775.22 and 15,721 respectively. The two global benchmarks closed slightly lower on Wednesday, however, following slightly less dovish than expected comments from the Federal Reserve.

According to Michael Gayed, chief investment strategist at investment advisers Pension Partners, the healthy performance seen this year has been purely driven by the Fed`s expansive quantitative easing (QE) program, rather than valuations, a sure sign of the potential for a correction.

“You are seeing fairly sizable inflows into equities – the most since 2000, yet inflation expectations are still not trending up… [It] now appears to be the start of a potential bubble given how far US equities have diverged from the underlying economy, inflation expectations and the overall reality of where we are in the economic cycle,” he said.

“This is really a big, big problem that is being under-appreciated,” he added.

Gayed drew parallels with the market environment seen in the late 1990s, when huge appetite for internet-based stocks led to massive gains for US indices and their eventual crash in 2000, broadly known as the dot.com bubble.

A similar trend is emerging in US stock markets today, he said, due to the Fed`s huge monetary stimulus program, which has pumped $2.8 trillion into the US economy since late 2008. But rather than stimulate the economy, the flow of easy money has instead stimulated the stock market.

“[As a result] they are risking the embarrassment of another 1999 Fed induced/liquidity induced bubble,” he added.

The Pension Partners` chief investment strategist highlighted a number of warning signs that a bubble could be forming in the US stock market, including the recent poor performance of US small caps, strong appetite for defensive sectors and the fact that bond yields were not rising in a way “that suggests the stock market is right about the future.”

“Big [corrections] in stock market… are preceded by complacency, the illusion of stability, leverage and a sense of entitlement,” he added.

However, Gayed also told CNBC that the Fed`s “power of words” which has been demonstrated by the huge impact its use of the word `taper` has had on markets could give the central bank the ability to prevent a severe correction.

“Just by introducing the word `taper` yields spike. Maybe they can use a few words here and there to just calm the stock market down,” he said.

Gayed`s concerns echo a number of industry commentators who have recently started to warn of a bubble forming in US stocks.

Larry Fink, CEO of Blackrock, the world`s largest money manager, warned this week that the Fed`s quantitative easing policy was leading to the formation of market bubbles and advised the central bank to start tapering immediately.

Meanwhile Robert Heller, former Governor at the Fed from 1986 to 1989, told CNBC on Thursday that markets were “perilously close” to the formation of a bubble.

The SandP 500 and the Dow Jones have risen 24.5 percent and nearly 20 percent, respectively, year to date.

-By CNBC`s Katie Holliday; Follow her on twitter @hollidaykatie

Copyright 2011 cnbc.com

Four major emerging nations face crucial elections

With India, Indonesia, Brazil and South Africa scheduled to hold presidential or general elections within the next 12 months, politics are set to be a key driving force in emerging markets.

The elections will be scattered throughout 2014, with South Africa’s general election to be held between April-July, India’s general election to be held by May, Indonesia’s presidential election due in July and Brazil’s presidential election set for October.

“These countries will see a change of administration at a time when all their economies are coming off the boil, which really ramps up the risks surrounding the elections,” said Stephen Wilford, director, Asia Pacific, Global Risk Analysis at Control Risks.

Read more: Emerging markets to shake up Fortune 500 list

“The new leaders will have to try and execute structural reforms in an environment of slow growth, which makes the task all the more difficult,” he added.

 According to Alastair Newton, senior political analyst at Nomura, India’s general election is the most important of the bunch.

Read now: Soaring India stocks have strategists on edge

“India looks to me to be a different story – that’s where markets should be concentrating their attention in the emerging market elections next year,” Newton told CNBC Asia’s “Squawk Box” this week.

“If [Narendra] Modi does storm home with a solid plurality, we could see reforms which are going to lift India’s growth not back to double-digits, but maybe back to 7-8 percent,” he added.

Narendra Modi is the prime ministerial candidate for the main opposition Bharatiya Janata Party, which is seen as more market friendly and amenable to structural reforms than the ruling Congress party.

 Indonesia, meanwhile, will get a new leader as the incumbent president Susilo Bambang Yudhoyono (SBY) is constitutionally barred from seeking a third term.

The prospect of reformist Jakarta Governor Joko Widodo being elected as president has gotten investors excited. Widodo, who has quickly risen to the top of opinion polls, is seen as a clean politician who has not used his governorship for personal enrichment.

Read more: In Indonesia, a Governor at Home on the Streets

Analysts, however, don’t believe his election would be a game changer for the economy.

“In Indonesia, there’s a real buzz and hope that the Jakarta governor can make a big difference. But he doesn’t strike us as someone who is in favor of market friendly reforms. For example, he has agreed to a big increase in Jakarta’s minimum wages, and he’s also opposed the increase in subsidized fuel prices,” said Robert Prior-Wandesforde, director of Asia economics at Credit Suisse.

Newton of Nomura says while the country’s stock market will rally if Widodo becomes president, it will be a “false dawn.” “I don’t think Widodo will be any more successful with structural reforms than SBY has been,” he said.

As for Brazil, recent opinion polls have confirmed current President Dilma Rousseff as the clear front runner, according to Reuters.

Similarly, in South Africa, the ruling African National Congress party is expected to win the elections next year.

—By CNBC’s Ansuya Harjani; Follow her on Twitter:

    @Ansuya_H

Is Asia facing a housing debt crisis?

High household debt levels are spurring concerns about Asia’s housing sector, but even if mortgage rates start to rise, a US-style crash may not be on the cards.

Around the region, household debt levels are high, with household-debt-to-gross domestic product at 81 percent in Malaysia, at least 77 percent in Thailand, at 77 percent in Singapore and 75 percent in Korea, according to data from Standard and Poor’s.

“Asia has had a good run so far, but increasingly the internal risks of Asian financial systems are rising. So, whatever we faced in 2008, if it were to come again now, the implications would be even more damaging,” said Ritesh Maheshwari, managing director at SandP.

Read more: Household debt: Singapore’s ‘Achilles heel’?

Where’s the next property bubble building?

Are markets at risk of 1999-style Fed bubble?

In 2008, the global financial crisis peaked as a buildup in the US of bad mortgage loans, many of which were securitized and used as collateral, caused many large banks to go under.

Maheshwari noted mortgages around the region have very high loan-to-value ratios, sometimes as high as 90 percent. In the US in 2008, loan-to-value ratios could be over 100 percent of the value of the home.

“The moment there’s more than [a] 20 percent correction [in home prices], you’re going to go into negative equity,” he said. But he noted, “Negative equity in Asia doesn`t mean you`ll start defaulting. Our mindset isn’t that the house is less value than the loan, so chuck it, because the bank can come after me for my other assets.”

In the US, banks can’t chase buyers for other assets if the house is forfeited, he noted. There is more of a social stigma in Asia when individuals are faced with debt collectors at the door as well, he noted.

Others also see less reason to be concerned Asian homebuyers might walk away from mortgages.

“Families tend to pool savings together,” said Frederic Neumann, an economist at HSBC. “Unlike in the US, there is no good personal bankruptcy in Asia where individuals come out of the bankruptcy in a few years,” he noted. “Individuals would carry that burden with them for the rest of their lives. It`s very difficult to wipe your slate clean, unlike in the US.”

Neumann also noted mortgages in Asia aren’t securitized, with banks keeping the loans on their books. “There’s much higher incentive to make sure there’s fairly high debt-servicing capacity,” he said.

Maheshwari also doesn’t expect house price declines in Asia would be as sharp as in the US. “Part of the reason the decline is so steep in the states, is people were borrowing against the home to consume. Home equity loans don’t occur here,” he said. “The level of stretch is not as much as in the US.”

He noted SandP isn’t yet adjusting its ratings on the region’s banks, but added, “We shouldn’t get complacent.”

Neumann noted that the high household debt could cause larger problems.

“As long as interest rates don’t go up and property prices continue to climb, we don’t think that will have any impact on consumption,” Neumann said. “Once interest rates start to rise, at the very least, you’ll have a sharp impact on consumption in Asia.” He doesn’t expect rates to rise for at least another year.

“The threshold is higher, but we shouldn’t rule out a severe financial stress if Asia were to plunge into deep recession,” Neumann said.

What’s in a name? Wealth and social mobility, study says

Want to make more money and have a higher social standing? Well, in the UK, if you’re a Percy, Baskerville or Cholmondley, your luck’s in. The rest of us have the same chance of climbing the social ladder as we had before the industrial revolution, according to a new study by economic historians in the UK and US.

Research by the London School of Economics (LSE) published on Tuesday showed that despite a leveling of the social playing field thanks to education, family names have a direct impact on social mobility. In the UK, there are several names stretching back almost a thousand years still dominating certain high salary careers.

Read more: Income inequality: Is it good for everyone?

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Is income inequality as American as apple pie?

Entitled “Surnames and Social Mobility,” the study by LSE economic historian Dr Neil Cummins and Professor Gregory Clark from the University of California Davis researched the genealogical history of English families with rare surnames, first recorded in the Norman age (from 1066 onwards).

Using data provided by genealogy website Ancestry.com and studying the UK distribution of those surnames over the past 800 years, they found that social status, wealth, education and occupational status was highly heritable – even more so than one’s height – and could be correlated to one’s family name.

To measure the average social status of surnames, the academics focused on their frequency at two elite UK universities, Oxford and Cambridge (collectively known as “Oxbridge”) which were also founded in the Norman age.

“Just take the names of the Normans who conquered England nearly 1,000 years ago. Surnames such as Baskerville, Darcy, Mandeville and Montgomery are still over-represented at Oxbridge and also among elite occupations such as medicine, law and politics,” Dr Cummins said of the findings.

Other names in the top 10 “wealthy” list were Berkeley, Neville, Packenham and Percy while among the poorer surnames were Boorman, Cholmondley, Defoe, Goodhill, Ledwell, Rowthorn, Sidwells and Tonbridge.

Importantly for the study of social mobility, the name checks showed that social mobility in England is hardly better now than in pre-industrial times and had not been improved by mass publicly funded education and universal voting rights.

“What is surprising is that between 1800 and 2011 there have been substantial institutional changes in England but no gain in rates of social mobility for society as a whole,” Cummins added.

They also found that it takes at least half a millennium for the UK’s elite class to shake off their lineage and “converge with the average members of society” – at least 400 years slower than economists had earlier predicted, meaning that the rate of social mobility — both up and down the social scale — is far slower than expected.

The study comes at a time of widespread concern over social mobility in both developed and emerging market economies. The gap between rich and poor has been steadily growing particularly in the US.

The Congressional Budget Office reported in 2011 that between 1979 and 2007 the top 1 percent of households saw their income grow by 275 percent, while for the bottom 20 percent, income grew by just 20 percent. For the middle 60 percent of Americans, average incomes grew just under 40 percent.

In the UK, however, the latest figures from the Office of National Statistics (ONS) showed this year that the income gap narrowed in the UK between 2011-2012.

The agency’s data showed that while the richest fifth of UK households had seen their household income drop 6.8 percent since the start of the economic downturn in 2007-2008, the poorest fifth had seen their average income rise by 6.9 percent.

The world’s most powerful person is not Obama?

President Barack Obama has been bumped off the top spot of Forbes’ annual ranking of the world’s most powerful people—by his Russian counterpart.

Vladimir Putin, Russia’s president, was named the most powerful person in the world in 2013 by the publication, climbing two places from the previous year. He was followed by Obama at No. 2 and the general secretary of China’s Communist Party, Xi Jinping, who jumped from No. 9 in 2012 to No. 3.

Politicians dominated 2013’s top 10, with German Chancellor Angela Merkel coming in at No. 5, the highest ranking for a woman. Britain’s Prime Minister David Cameron, however, fell out of the top 10, being named the 11th most powerful person in the world.

View slideshow: World’s top female policymakers

Read more: The richest person in every state

2012’s Forbes Power List

Central bankers also fared well, with Ben Bernanke, chairman of the Federal Reserve, and Mario Draghi, president of the European Central Bank, ranking No. 7 and No. 9, respectively.

Bernanke’s designated successor, Fed Vice Chair Janet Yellen was a newcomer to the list, coming in at No. 72. She was one of only nine women ranked to the list of 72 people, although this marked the highest representation of women to date.

Former US Secretary of State Hillary Clinton did not make the list, although her husband, former President Bill Clinton, took the 43rd spot.

Only one business person made the Top 10, up from none last year, with Wal-Mart CEO Michael Duke ranked No. 10.

To compile the list, Forbes looked at whether the candidate has power over a lot of people, for example, over a billion Roman Catholics look to the pope as spiritual leader, helping Pope Francis’ ranking of #4, and the financial resources they control, such as gross domestic product for heads of state.

The publication also assessed whether the candidate was powerful in “multiple spheres,” and if they actively used their power.

Forty percent of the people ranked were billionaires, including the richest man in Africa, Nigerian billionaire Aliko Dangote, who took the 64th position.

Bill Gates slipped two places to be named No. 6, and eighth was Saudi Arabia’s King Abdullah bin Abdul Aziz.

Pope Francis was the highest ranking newcomer at No. 4. The CEOs of Volkswagen (Martin Winterkorn at No. 49), IBM (Virginia Rometty at No. 56) and Oracle (Larry Ellison at No. 58) were also among the 13 new names on the list, as was Samsung’s Chairman Lee Kun-Hee, at No. 41.

Tech CEOs also fared well this year, with Amazon CEO Jeff Bezos jumping from the 27th spot in 2012 to the 15th this year following his purchase of The Washington Post. Apple CEOTim Cook also climbed the rankings, from No. 35 last year to No. 19 in 2013.

Soaring India stocks have strategists on edge

Indian equities have had a stellar run over the past two months, recently rising to a three-year high, but analysts warn that the market rally is ripe with risks.

“Investors ought to be cautious on India. The economy will continue to suffer from a poor growth-inflation mix, leading to a high cost of capital,” said Nicholas Ferres, investment director at Eastspring Investments.

“In this context, the valuation multiple for the market does not provide sufficient compensation for risk, in my view,” he added. The benchmark S&P BSE Sensex is trading at a price-to-earnings ratio of 16.8.

Indian shares have surged around 13 percent since the US Federal Reserve’s decision to delay tapering its USD 85-billion-a-month asset-purchase program in late August, driven by robust inflows from foreign investors.

Geoff Lewis, global market strategist at JP Morgan Asset Management, who has an underweight position on India, is also cautious on the outlook for the market given sluggishness in the broader economy.

 “We look for more analyst earnings downgrades in coming months in response to the slowing economy,” he said. India’s economy is expected to grow 4.7 percent in the fiscal ending next March after expanding 5 percent in the previous year, which was the weakest since 2002-2003.

“We are also concerned that if there is another wave of outflows from emerging market triggered by Fed tapering, then India could see more significant outflows than in the summer,” he added. Foreign investors withdrew around USD 3.8 billion from the local stock markets between June-August as concerns around tapering reached fever pitch.

The central bank is expected to maintain its bond-purchasing program until April 2014, according to the latest CNBC survey of economists, strategists and money managers.

 Politics will also be a source of uncertainty for the market before the upcoming general elections scheduled to take place by May 2014, said strategists.

“Currently, the election looks very hard to call, and adds to market uncertainty,” Lewis said.

“But investors would probably welcome signs that the Bharatiya Janata Party [the main opposition party] was moving into the lead, as Narendra Modi could be expected to kickstart the reform process. That is a scenario we would need to be aware of, given our current underweight position,” he added.

Narendra Modi, who is serving as the chief minister of India’s Gujarat state, is the BJP’s candidate for prime minister. He has been applauded by the business community for his investor-friendly policies that have led Gujarat to double-digit economic growth.

Nomura, which upgraded Indian stocks to an overweight on Tuesday, cited the upcoming five-state elections – which will be held between November 11 and December 4 – as a positive driver for the market.

“We expect the BJP to perform strongly in the state elections. If the BJP emerges stronger from the state elections, this would be seen as increasing the likelihood of a BJP-led government at the center. Sentiment could improve as a result, since the BJP is seen as more market friendly and more amenable to structural reforms,” wrote Sonal Varma, India economist and Alastair Newton, senior political strategist at Nomura in a report.

Markets are still reaping the “honeymoon” benefits from Raghuram Rajan’s accession to the RBI governorship on September 4, the bank added.

 Deustche Bank also has an optimistic view on the market. Last week, the bank raised its year-end target for the Sensex to a record-high 22,000 from 21,000 – around 5 percent above current levels.

The bank cited factors including receding investor pessimism, a bottoming out in the economy and withdrawal of liquidity tightening measures by India’s central bank.

El-Erian: How long will the Fed’s elixir last?

By maintaining an unchanged policy stance, the Federal Reserve delivered on consensus market expectations. The question now is: How long will this sustain the mix of financial conditions that the Fed and investors desire, and — most importantly — is needed to improve job prospects given the extent of Congressional dysfunction? Namely, strong equities and no undue disruptions to fixed-income markets, housing finance and the economy’s broader financial conditions.

To answer this question, we need a good handle on how quickly the Fed will be able to move from relying on (ultimately) transitory sources of support for markets to well-entrenched improvements in underlying economic fundamentals.

Unfortunately, today’s statement didn’t advance much our collective assessment of how the Fed sees its policy experiment evolve from here — particularly with respect to future benefits for the economy, longer-term collateral damage and unintended consequences.

Accordingly, to understand better what lies ahead, investors need to assess and re-assess the two sets of “big threes” that have enhanced recent market gains.

Read more: Taper tease? Market worries Fed will end easing

Slightly less dovish Fed sends ripple through the market

The first set has to do with the Fed’s big three policy tools.

Here, the central bank pleased investors by maintaining floored policy rates, accommodative forward guidance and USD 85 billion in monthly purchases of securities. In the process — and particularly after the taper scare of May-June — markets have been rewarded for regaining confidence in the notion of a “Fed put.”

When it comes to the economy, however, the Fed was a lot less clear today on how it see the other big three evolve — namely the channels through which its policies impact private-sector behavior.

The Fed’s current policy stance enables a further shift in portfolio allocation to risk assets, higher corporate buybacks and dividends, and, most importantly, additional time for the real economy to heal.

It is important to periodically remind ourselves that Fed officials are not interested in financial-asset prices as an ultimate objective. Rather, they regard them as a means to generate higher growth with stable inflation.

At a time when political polarization undermines comprehensive policy responses, financial markets are the Fed’s only large-scale conduits to the real economy — albeit highly imperfect and distortionary conduits.

With the Federal Open Market Committee statement out of the way, attention now shifts to the release of the FOMC minutes. Together with a string of economic-data releases, they will shed greater light on the future evolution of the “benefits, costs and risks” of the Fed’s current policy stance.

In the meantime, don’t look for much change in the large disconnect between a buoyant Wall Street and a still-muted Main Street. Over the longer-term, however, only a broad-based and durable economic recovery can validate the current pricing of many financial assets.

As yet, there is insufficient evidence to assure us that Fed policies will indeed succeed where it matters most — on Main Street.