Monday, March 12, 2018

Indexes Rise But Prices Fall

There is divergence in what the Government says and what people are feeling on the ground(at least those whom I am talking to).Its like the weather where some feel oppressive while others are merely uncomfortable.

There is definitely within the BJP government a section of policy makers who feel that the simple formula of rhetoric,some public pro-poor measures and blaming all ills on previous governments(non BJP) going back some 60 years is the surefire way to win elections.

The farmers are agitated and with reason,till date no support system in place to insure against crop failure,lack of proper education facilities,lack of irrigation,no scientific support to the majority of them and a general apathy makes migration and living on city foothpaths seem a better alternative?

Taxes - no country has a more complex or multitudinous number of taxes than India.Those who pay tax are over burdened with a plethora of cess etc that is suffocating,those who do not pay still get away and you have shams like India's leading billionaire actor pretending to be a farmer to avoid paying taxes!

GDP numbers have grown but probably in sale of combs because employment generation is at an all time low.The textile and agricultural segment that used to provide opportunities can no longer be depended upon.

There are hardly any original ideas,the much fetted 'entrepreneurs' like Ola or Flipkart are mere copycats.I am very pessimistic about the new crop of IIT and IIM graduates.Just 1 in a 100 things of doing good for those at the bottom of the pyramid.

How long will the goodwill between Trump and little rocket man last?Trade wars?Syria?Russia?

Many variables but I feel that the Indian markets are looking at internal conditions and rebalancing accourdingly and there is still a lot of pain left.Nifty can easily fall to 9700 but truth be told I think its real value is close to 8700 right now if we remove private sector banks,Reliance and the I T pack.The mid and small cap pack has lost approximately 30% in price terms and liquidity has dried a sure sign of investor fatigue.

GST remains a work - in - progress.Where are the other structural reforms?The index may merely be down 8% ,it does not give atrue picture as most non index stocks have lost 30-35% of their value and I do not mean the PNBs of the world.

Wait and watch how the situation unfolds and I would only look at investing on the long side sometime in the month of April 2018.Not before.

Tuesday, February 20, 2018

Profligacy of Government is a Taxpayer's Burden?

It all started as a co-incidence.

The elevation of Jerome Powell and Prime Minister Modi's Indian Budget presentation.The markets - both Indian and the Dow were at record highs.There was not a single cloud on the horizon.Stocks were jumping 3-4% on a daily basis.Some doubled in a mere 3 months.

Investors found it unbelievable.Thing is,just when they started to believe and put their money where their heart said,the markets started to tank.

Offcourse,it has not been as spectacularly bad as the infamous "Black Monday" of the fateful October 1987 but the jitters are obvious.

The application of Longterm Capital Gains Tax on stocks held over one financial year at 10% has affected sentiment.We are now probably the most highly taxed market in the world?

Every Finance Minister has found it convenient to add the dreaded word "cess" to every annual budget.The hike seen as nominal when added to the various taxes  costs a whopper.

In these 3 years so many expectations have been belied.Other than some necessary reforms the policies or (mis)policies of the previous government continue in some form or the other.

Yes the Public Relations have been spectacular.That is one of the few positives.presenting India to the world as a destination has been worked upon.

The roads still in shambles,the infrastructure pathetic,agricultural practises still 18th Century,the dependence on the Monsoon undiminished.Profligacy of the Government has become a cross to be borne by the taxpaying public.

The emergence of the Punjab National Bank that is equivalent to one third of their capitalization has been a shocker.Yet the government and the leaders slumber on in their belief that they are doing a fantastic job.

The RBI is counting demonetized currency even after a year,the audits are sloppy and a premier institution's reputation lies in tatters.Commentators who till last month were predicting this to be India's decade.....century.....are at best silent and at worst being vocally negative.

The truth lies somewhere in between.

Systems need to be overhauled.More so attitudes.The Rulers and the ruled equation needs a new formula,afterall the demography is skewed in favour of youth!
Indian leadership?

Amidst the gloom & doom,I have 6 Reasons to feel upbeat and hopeful for the future :-

1.Corporate India is shrugging off demonetization and GST and volumes are up

2.Crude oil(which we import for 80% of our needs) is attracting fresh investments and likely to              remain in a band of $60 - $80

3.There are no alternatives to equity so the populance will shrug off the LTCG tax and focus more         on returns

4.This market correction globally would have blown off some of the froth,mind you I say some of         rather than all of it as I see the time correction continuing till mid April 2018 at least

5.The need to overhaul infrastucture globally will be very positive for commodities and the sole             factor of China growing exponentially or not would not matter as much

6.All these 'scams' are good for the system as some long delayed measures have to be implemented       and can no longer to swept off and hidden as the public demand grows for creating a safer and             more risk averse structure

It is important not to get stampeded into thinking that all is lost as there is always hope.The macro fundamentals of the Indian economy remain on keel.Remain invested,avoid greed and try to rationalise whatever good or bad news comes on the grapevine !!

Isn't it darkest just before dawn ?

Monday, January 1, 2018

Lessons for 2018

Another year fades into memory.New words that entered our lexicon - 'demonetization' and "GST" seem like known devils that may yet cause strife.

The highlight offcourse has been the cow saving brigade and only years later will be come to know if indelible scars have been left in Indian citizens of different faiths?How can a Government that calls itself progressive and for reforms hark back to a baser and more parochial view is beyond me.

The ordinary citizens are more affected by jobs,food prices,infrastructure as the results in the Gujarat elections points too and going forward that will remain the main issue and not a temple to Ram.

The Indian equity markets have remained robust and a time and price correction is much required as the Nifty PE ratio continues to close in of 25X kind of valuations.

Will corporate earnings catch up in January 2018?Although expectations are positive,I do not see it moving above the 15% range on average.

We need roads,we need ports,most of all we need an organised market mechanism,affordable storage chains to minimise wastage and keep perishable food prices from spiking.60+ years and counting yet that is yet to happen.

Corporate taxes still too high in India.No sign of investments kickstarting new entrepreneurs and lack of imagination in implementing "Make in India" has really not created any buzz even after 3 years of majoritarian government.

The opportunity in the infrastructure,road-ports and cold storage sectors is vast.The turnaround in airlines looks here to stay even with ATF inching up.

The new shift in power in Saudi Arabia will keep the prince interested in having crude prices on the higher side to fund his deficit.

I think value buyers will find plenty to think about as well as fund managers will find that they are having to work harder to eke out benchmark beating returns in 2018.

Just hope that Kim Jr's missiles do not malfunction and land over Japan.
Just hope that The Donald doesn't get bored and looks to start a war in the middle east
Just hope the Inran backed Houthis do not come into possession of ICBM.

Domestically any hike in "Long term Capital gains Tax " or change in tenure from 1 year to 3 years will lead to a short sharp negative reaction......but the kind of returns that the markets have generated will mean that investors will have no other option than to invest.

Happy investing in 2018.

Monday, September 25, 2017

Hi Nifty or Hai Nifty !!!!

Well after a stupendous run and more the Indian markets have begun a descent.

Will it be a perilous steep one or will the markets find a ledge to recuperate,revitalize and try to climb their way back up the cliff that is 10K only time will tell?

However the murmurs about growth not panning out and DeMon(etisation) and GST taking the blame is really not the true story.

Mr Modi and his PR team started taking themselves too seriously and their agenda of cleanliness and anti-corruption while a very good one never really created any jobs in the past three years.Not just that their attempt to change every process right down to trying to bring in far right RSS obscurantists back into the history books has been nothing short of a massacre.

Yogi as CM is a disaster.In India's largest state there is utter business paralysis,children die like flies,people are beaten on the streets,women raped yet the Government only gently chides him from time to time.

I seriously think Mr Modi is a secret admirer of Late Indira Gandhi and has embarked on a course where he wants to be remembered by historians as a "tough guy".

The little rocket man and trump sideshow is just a secondary act that could any day turn vicious.

I am told by some very knowledgable folks that crude will never get back to its old prices again but I see a sustained breakout above $50 that could cause some damage to India's BoP.

Hi is a somewhat upbeat greeting......and means good times wherein Hai connotes a more negative or mournful expression....so its anybody's guess at this point.

However I am very upbeat on specific stocks that will see earnings catch up with valuations and many ignored stocks that have withstood the tests.Nifty should see 9600 levels before getting back into the swing post January corporate results which are likely to be more 15% rather than the expected 20%+

Sunday, August 20, 2017

Infosyian Roads....!!

One of the companies that has never been out of the Nifty 50 since the incepton of the Nifty is at tipping point.

INFOSYS                                                                                                                 CMP Rs 896

Considered the bell weather of the Indian Information technology industry since ages and a laggard of late is still an impressive business.Established in 1981 and listed on NYSE its a US $ 10.4 billion company with a market cap of approximately USD 35 billion.

From 2004 to 2016 it has moved from a revenue of USD 1 billion to USD 10 billion which Mr Sikka when he joined promised to double by 2021.From banking software to ERP to now getting into Cloud computing there are few things that Infy has not been doing.

I strongly feel that the ouster of Mr Sikka will not have any material long term impact on Infosys bottomline or strategy.The executives at the top level have been trying to find strategies to counter the change in environment especially after the election of President Trump.

Promoters of Indian companies do not know how to let go and Mr Murthy moving out of executive roles on turning 60 was a welcome change where children and grandchildren acquire an early role in management of family companies.It is not surprising that he too was unable to let go.

Mr Seshadri the chairman had been some scrutiny in his previous company Essar and elevating him was Mr Murthy's biggest blunder.Was it friendship or something else is not clear but it was an irrational decision from a logical person.

Mr Sikka with his MNC background and capitalist business methods were bound to clash with the orthodox tamil brahmin culture at Infosys. And it has happened.

Yes there will be attrition and short term disruption again depending on who becomes the new CEO.Going ahead my feeling is that in a couple of years infosys will adapt and change to its environment and become a better ROI generating business.

They have the pedigree and long term investors can buy a solid business at disruptive prices !!

( I have not taken into account the buyback offer at Rs 1150 which is at a whopping 26% premium to today's price)

Tuesday, July 25, 2017

Nifty 10,000:From Here to Where and the China factor?

So the indexes have hit another new high.Since December 2016 its been one way traffic not just in India but globally too.With crude prices hovering at historic lows and the general situation appearing to be better the markets have not found any reason to go down.

Its funny how every time there is a new high the "experts" come out of the woodwork predicting all kinds of numbers in the next 5 years.Everytime.

Yet its been a slow journey to reach new peaks.From 5K in 2007 its taken a decade to double yet during the heady bull run of 2006-07 there was talk of nifty getting to 25000 by 2020.

That dream remains a dream.

I have a feeling that the Indo-China standoff,the Fed and regulatory action by the Indian government will become the reason for some profit taking in August - September 2017.

For long term investors that would be a chance to add some more quality businesses to their portfolio but i fear for those dealing in penny stocks that will once again leave them holding worthless stocks at improbable prices.

Pharma,infrastructure,some Banks,some NBFCs look like continuing the positive trend and the focus once again will shift to quality managements,moats,margins(3Ms).

A level of 9400 -9500 would be a comfortable entry point for those with a longer term view and the inability to not look at prices daily.

Employment generation has been poor,infrastructure development has been poor,the Cow was made the central issue by this government and it might become its achilles heel.

PM Modi is not the maverick everyone thought,he is a dyed in the wool bureacrat who despite his thumping majority believes in the traditional ways and means with policies that are more PR than reality.Disappointing.

Yet India and its economy will continue to grow and with slight management a growth rate of 7-8% should continue.

Xi Xinping the Chinese president is a throwback to medieval princes and I worry about a new belligerent China that has discarded its victim approach and appears set to be a bully in the mould of imperial Japan and Nazi Germany of yore.

"Made in India" has been a complete failure till date and unless the trade imbalance and the growing clout of Chinese companies in the domestic economy is taken care of we might lose the economic war with China before losing militarily,because surely this is war.

Other than Modi there are no leaders in India,only cattle.

Hence there is no plethora of ideas just the ONE way.Sad to say.

Yet the inherent energy of India and its people will prevail.A lot needs to be done and that is where opportunity lies.In building roads,ports,heavy industry and human values!

Wednesday, July 19, 2017

A Tale of Two Brothers:Losing my Sandy

December 2015.It is a strange but common tale I am about to tell.

Three weeks ago my daughter brought home two stray pups from the road outside.Of a mother dog that survived and scavenged on the streets.We fed them and tucked them in our room at night.In two weeks they developed the curiousity to venture out on the streets.To try anything that looked new.

How important environment is I have learned at this age.They adapted to the TV in the room,the doormat and towels that provided warmth and slept in my daughter's arms.Ate out of a bowl.

In their naivete there was no difference between pampered pets and these survivors.

I have learnt a lesson in attachment.Soon we as a family were worried if they looked sick,if we did not see them for a few hours.Calling up from office to ask after their welfare.

I have learnt a lesson that intelligence and talent is everywhere,even in those whom we disparage.In the curiosity of these two fluffy brothers one a little plump the other a runt we found two lovable rogues with their individual personalities.

There is no cast,no creed,no religion.Just the necessity to survive Life.They have given us such a time,chewing sandals as their teeth developed.Running at each other,mock fighting to develop the skills they would need to live.

And I have learnt the hard lesson that Life is unpredictable.One of the brothers sickened yesterday,did not see him for the night and today my daughter came home crying that our 'chottu'was dead.

This while we were busy as its brother was already sick and we were feeding it with specially bought chicken(my wife is a vegetarian).Sacrifice.

In one day our routine was devasted.How one can love and lose and feel an abyss.All in four weeks.Just shows its not the quantity but the quality of the relations in our life that matter!!

As I write the surviving little pup has eaten a little and drunk some water.It seems a small victory.

Today I know why I have always supported all the 'underdogs' of the world.

Why I have never cared about the rich - poor,insider or outsider.People talk of building legacies and long term views but who knows what tomorrow will bring.

I can but try to understand a microcosmic bit of what Buddha or the other Indian sages have tried to say.Its not difficult to hold on.

Its most difficult to let go.

17th July 2017.The surviving little pup now one year and nine months old just died from jaundice.By the time we realised he had sickened and his usual naughtiness was missing it was too late.

12 days of IV and a host of antibiotics and a tale of doctor negligence latter my Sandy is gone.Gone the verve with which he welcomed us back home from work.Gone the morning biscuits,gone the running like a greyhound from one side of the house to another.
Gone the standing on table and nibble the ear.Gone standing on two paws on the balcony  to see us of to office.

He came into our life as a storm and left as a tempest,coming to us sick and weak and dying of a heart attack quietly on the bed surrounded by his foster family - us.What moments of affection of sheer joy of(especially)for me coming to know through him so many purely humanistic traits - a love of bengali sweets,a love of mutton.

The sense of loss is beyond belief.The house seems empty and I keep expecting him to pop up out of the other routine.Not having to get up on time to cook chicken or fish or mutton for him,his empty food bowl and water container stares at me accusingly.Too young,too full of life to go so suddenly leaving behind the memories of his shadows.

Somewhere up there he waits to be reunited......