Ambiguity in Fed statements about exiting the asset purchase program set up a volatile up and down day in stock markets around the world. Financial markets have come to rely on easy money through QE, any reversal could cause a sharp downturn in markets of emerging economies.

Regulatory arbitrage occurs when two sets of rules of regulations create a loophole that can be exploited without violating either law. Market players cleverly use such arbitrage in product design and features until these gaps are reduced or removed.

PFRDA released a press note showing the returns of the various NPS options for the year 2012-13.  The numbers look better than the PF and PPF returns. However, the methodology used to compute returns and the accounting practices are different, making it tough to compare NPS with these traditional products.

The market is expecting RBI to reduce rates and ease liquidity in its May 2013 policy. The premise is that declining core inflation has given RBI the ability to stimulate growth without fear of overheating. But the final policy decision would depend also on future expectations of inflation and current account deficit.

As the country readies for the Union Budget 2013-14, macro economic indicators show both positive and negative trends. Conflicting indications in current account deficit, fiscal deficit, inflation, bank lending and interest rates have to be balanced carefully in the budget provisions.