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Thursday, July 25, 2019

Public Relations Trumps Reality in Indian Markets

Is India on the path to a lost decade!Has public relations and perception trumped the reality?Has the Emperor lost his clothes?

Stunned that in a country of a billion people we cannot find 10 who understand the economy or the repercussions of action.Making big proclamations that have no connection to what is going on around you,data fudging and sheer financial muscle to buy the opposition do not augur well for the country.

The markets have fallen,so called long term investors are screaming blue murder on social media,yet the underlying message is grim.

Slowdown in the hitherto safe automobile and FMCG segment are pointers to a drastic fall in the internal consumption pattern,the Monsoon is weak. The Banking system paralysed,the politicians busy with reaping their own gains.Globally the sabre rattling between the US and China and Iran and Russia is a waiting unlit cauldron.

Yet in such situations are bull markets born or reborn. The true long term investors would find many wonderful businesses that have come off high P/E.

But today I think I would like to talk of bad businesses,failed businesses yet those that are in critical sectors like banking or consumption or commodities.

If you have a long term portfolio,my advise is to also have a 'disaster' portfolio,as long as you are disciplined enough to limit it to funds that you can wait to lose or recoup after a lonnnngggggggg lonnnnngggggg timeGMR infra,Yes Bank,Vedanta are a few examples that in the coming few years just might be the multi baggers you wish. The wonderful thing is that all you need is ONE such 100 bagger to ensure your portfolio beats the benchmark alpha.

I hear tales of Mutual Funds being safe(they are just as volatile as direct equity),infrastructure being the next big thing(since 2005) and sundry other myths.

Back your Research because that is the crux.Politics and their cause and affect will come and go.Expect volatility. FDs are not not tax efficient. All Debt Funds are not safe.Do your RESEARCH.

*Stocks mentioned are not recommendations.Check with your Financial Advisor

Friday, July 5, 2019

Where Have They All Gone....An Ode to Calcutta

Sometimes very rarely one takes a break from the normal routine of life. Remembering old passions,half formed ideas of escapades that now seem silly. Of situations one thought one could never get through but now only the edges of that memory is all that remains. A nice warm glow.

Listening to the voice of the Nooran sisters singing at the Nakodar fair, the voice washing over me leaving distant echoes. I was born in Bengal and most closely it reminds me of gusty winds of a Nor'wester leaving the wood frames of old windows rattling in passing.


Of how closely we are mixed. The Bengali and the Punjabi, Hindu and Muslim....so many great cultures mixed since the times of Alexander that it is now difficult to say where one ends and the other begins. Of food and dishes that define our heritage but are those Persian, Afghan or Greek?

This idea that is India.

Hinduism has been a religion of patience, absorption. Sufism is its closest companion. Song, dance and the gentle sarcasm of Bulle Shah, the faithful stupidity of Heer and Ranja.The voice of Ustad Nusrat Fateh Ali and Begum Akhtar.Of listening to a record of  Mehdi Hasan singing "Ranjish Hee Sahi..." building up to a crescendo.

Of Ghalib and Zauk, Mir and Momin. With every passing year, the aficionados of Hindusthani classical music shrinks until pockets are left like puddles drying after a spell of summer rain.Yet nationalists say that they are for the country!How much or how little do they really know? Of listening to snatches of conversation with my father compared to whom I am pretty near illiterate.

Of "Faguner Mohonay..." and Rabindranath's famous"Akla Cholo...."

Each one from North, South, East and West know small intricacies of their culture that no one else knows. Culture and old traditions disappear like our wildlife and our flora because we are too busy with unimportant issues.

My rant is not to bring back lost glory(really?), culture has so much bearing on who we are and how we navigate life.

In my first job at ANZ Grindlays Bank, meeting many iconic Punjabi businessmen like Mr Malhotra who used to own Blue Fox, amazing zest for life, stories being one amongst legendary characters now long gone. Meeting a bunch of Anglo Indian clients at Ripon Street who were more "Propah" than the British. The Bohra Muslims....Paintwalas Batliwalas who have run their enterprises and make Calcutta what it is....the most giving, sophisticated yet effervescent city in India.

Maybe it is my ode to Calcutta but I wonder where did those old risk takers see in a marshy land that is hot for 13 months out of 12.A pimple beside a mighty muddy river that we love to dirty yet it is our holiest.

Should Old acquaintances be forgot and never thought upon,The flames of Love extinguished and fully past and gone,Is thy sweet heart now grown so cold,that loving breast of thine;That Thou one canst never once reflect,on Old Lang Syne
                                                                                                           - Robert Burns

For Mr Nair, a man from Kerala who chronicled Calcutta and its myriad loves,of Punjabi families like mine who came seeking wealth and never went back.

I would love to hear stories of migrants who made this city it's home over the decades

vishal.prabhakar71@gmail.com  twitter:@dzanjo71 M: +91 9831554477

Tuesday, June 11, 2019

The Price of A Trade War

Going back to the great Indian "Tamasha" of an Election in May 2019 and the stunning,unpredictable  majority win by the incumbent government ensures that the focus has shifted back to the economic side of things.

Trump's Trumpet↴

Twitter has been The Donald's trumpet,bleating out inanities,news,threats,views,personal opinions and this most colourful of characters has really let the World know what he even dreams about I guess.

It does however provide a highly unreliable feedback of coming policy decisions or actions.

The Price of A Trade War⇘

I cannot fault American logic as China and a lot of other countries have utilized 'favour' clauses to stack up trade credits in their favour by subsidizing production and gaining access to large markets for their products."Dumping" is an oft used but overlooked clause.

OBOR. China that leads in a synchronized Military - Industry push across most of Asia in Pakistan,Sri Lanka,Nepal,Maldives,Kazakhasthan have already seen the negative consequences of too much debt owed to Chinese companies that are backed by the Chines authorities. No where across the world is a ruling clique so involved in furthering their own interests and the single minded devotion to the task and the long term planning is frightening in its intensity.

Yet,China has been allowed to grow so vast and their shipping and trade tentacles reach almost every corner of the globe and any attempt to streamline trade or take punitive action will lead to the World undergoing upto a 10% de growth in major economies especially those in Europe that are bracing of Brexit.

Having written a whole paragraph,I am unable to comprehend the magnitude of the consequences or how and where the actual issues will arise.

Hopefully after having made his point President trump will settle for a gradual reduction in trade deficit and some tariffs without hurting Chinese egos.

De - Growth⇓

We in India are witnessing a situation where growth has slipped dramatically but inflation has not grown to threaten the economy but it is very close to doing so. A good monsoon,that looks unlikely,might change things for the better as many initiatives of the previous authority has fallen flat and "Made in India' has to be pushed to succeed or the 8-10% GDP dreams of economists will not materialize.

Markets are close to highs and yet a closer reading shows that 90% of the listed stocks are listless as earnings expansion has failed to keep pace.
Production > Demand,be it cars or clothes is not a positive sign.It leaves open the chances of a strong correction in prices post the Budget in July 2019.

My reading is that sometimes in those months succeeding July will offer bargain hunters in stocks a very good chance to create a portfolio for the next Year or two.

Those who read my blog would remember  this space saying that pre Election results was a good opportunity and the Nifty has moved from 11100 to 12100 albeit mostly in the large cap space.

Post July 2019 will be window no 2.

Focus on Public Sector Undertakings➤

The last 5 years have shown that this government favours PSUs and is ready to push in capital and orders to ensure business.I am positive on the following:-

A. State Bank of India(current market price 340-45)
B. Bharat Electronics (CMP 109) - which is in the defence space
C. Container Corporation of India(CONCOR,CMP 536)

Over the last one year the market has been challenging for investors and I have always said that those who expect the volatility to subside post elections will be surprised.But then its such conditions that create opportunities to find the next multibagger.

🔺For feedback or any discussion one can contact the author at 9831554477 or on twitter @dzango71

Thursday, May 9, 2019

India:A Dance with Democracy or a Brush with Fascism?

The Political Game➥

The jamboree culminates on 23rd may 2019.On one side a diffused upper crust leadership battling hard to prove their relevance. The incumbent - brash,politically incorrect,banking on the faceless masses who feel a sudden uplift in their Hindu identity,wanting to brandish religion as a sword that gives votes.

Both sides are corrupt. It is only the degree to which the differential lies.I do not find any party having a coherent policy to create jobs,manufacturing,infrastructure so I am not very positive on post election outcomes.

If I was to predict I would say that the BJP would be back for another 5 year tenure but with allies.I am a bit wary if the high decibel media backed BJP campaign can overcome the rural angst and whether the village folk can be Harry Potterized into believing that another 5 years to this Government will let them achieve all the things they did not even come close to doing since 2014. 

Trump's Tweets➽

If ever the adage that "the pen is mightier than the sword" was true then Don Trump has brought it to fruition. A simple tweet and a few hundred billions get wiped off the market cap!All said and done he does have the Chinese over a barrel as they stand to lose more than the USA in this trade war.The trade deficit with China was approximately $ 470 billion in 2018 and the Chinese will be hard pressed to manage getting away without paying a penalty

Oil Falls➴

The precipitous fall in Oil from $75 to $60 although helpful for import dependent countries like India will be negated in the long run by Iran sanctions,Libyan war and Venezuela bankruptcy and a big fall is not expected.With the USA no longer dependent on outside supplies it can afford to utilize that advantage in political muscling of Iran

Our Markets🔺

On the risk to reward front I am a firm believer that traders should either wait out the event of sell short term holdings as I see a 5-7% upside if all goes as per expection but a steep 20-25% correction over a period of time if even the slightest unthinkable happens on the political front.

A succession of indicators - low auto sales,low GDP(even after window dressing),almost nil manufacturing growth added to the likelihood of another El Nino. India cannot afford a third successive uncertain monsoon.

The markets I think will surprise many investors as the volatility will last the entire year. I also feel that the Indian markets will give those who have the gumption to back themselves a massive opportunity in value buying in 2019.

Nasdaq and Dow🔀

The US markets have been super performers price wise over the last one year.This year will be sideways so do not be tempted into investing simply by looking at One to Three year returns.Do the research and if ever there was a time for value buying,it is now.

Getting stuck in good stocks at high prices is the surest way to average portfolio returns.Like every year this year too has its own unique challenges and many crocodiles lie in wait so tread the water carefully.

Monday, February 18, 2019

In Disturbed Times......Do Nothing

The past eight months have not been kind to the equity investor.In fact,one investor showed me returns from his SiP portfolio that he has been running for eighteen months and the returns are negative.

In times of turmoil,eighteen months or two years are but a blink in the eye for markets and it becomes puzzling for those who see no returns to start comparing with Bank Fixed Deposits where they would have still got 7%  pre tax.That mistake is called IMPATIENCE.It has a huge cost.

Churning the portfolio is easy when the investor pressurizes his advisor to show action.Warren Buffet said that investing is like watching paint dry.But does the modern everyday investor care?They want returns and they want 'em every day!!

Hold on.Take a deep breath.Better yet,avoid looking at your stocks or Mutual Funds or whatever.Take a walk,go for a vacation,anything but brood over the red ink dripping all over your well crafted portfolio.As the saying goes its in bad times that we know our friends.

The current situation with the unfortunate attack on CRPF in Kashmir and war talk and Trump in fighting and China trade wars and the mother of all Election battles in India is a fantastic time to build an all weather portfolio.Do not look at returns for the next six months but focus on picking stocks and deploying the Systematic Investment Plan methodology for direct equity as well.

Expect the fruit over the next two years and it will be high alpha.Oil will vacillate between $ 50-70 and commodities will remain depressed on China demand pessimism.

As the years pass I become more and more convinced that success in equity markets is determined more by our emotional quotient(EQ) rather than Intelligence quotient(IQ).Loosing patience,chasing overnight success stories that never fructify,hearsay,rumours.It is far better to invest in low quality stocks(with the caveat that they should be backed by actual business) and to hold on for the long term than to expect 10 baggers in a year!

Contrary to what many think this is the best time to invest.No one will stop eating or going for entertainment be there a war or not.Having a billion strong population helps with the consumerism.These are but small pointers to where you should look to find your next Multibagger.

Let your advisor be a relatioship manager and NOT a sales manager.

Monday, December 24, 2018

Have The Communists won and all that...

President Trump's surrender to Vladimir Putin will rank as one of the greatest victories of the ex communist regime,off course nowadays all wear the 'free market' garb.Leaving Syria and Afghanistan bereft of US presence when the IS and taliban are yet to be completely defeated smacks of recklessness by the Americans and bodes ill for the future security of the west.

Russia,Iran and Turkey now form an axis that becomes a third front in the game played by Taliban/Islamic State - Saudi Arabia/UAE sunni front - Iran/Syria Shia front.I do not think these conflicts will get better in 2019.If anything they will get worse.

Oil has been such a surprise.From predictions of $100 per barrel to sub $60 was precipitate.India would celebrate if not for those in power focussing on power of a different kind.Lord Ram might win elections but it does not have the power to repair an economy facing lack of jobs,trouble in the agriculture sector,religious issues etc

Despite losing local elections 5-0,the Indian markets have been resilient.The next six months I fear are going to be a nightmare for traders but astute investors will find huge opportunity to build a portfolio that will generate above average returns over the next Three years.

PSU Banks will undergo consolidation and not all of them will come out smelling of roses.I do not understand so I will not go there.Information Tech is at the whims and fancies of The Donald and hence difficult to predict as is pharma.

The villians of 2018 - small and mid cap companies with a strong product suite and cash/risk management will spring to life(and their stock prices) and hold the best hopes of creating a good return on investment.

My theme for 2019 remains:-
Return of Capital instead of returns on Capital.

Liquidity is still tight.Businesses face their biggest challenge accessing capital.NBFCs will find space in the banking genre but their risk management has to be extraordinary.There are a couple.

I also feel the Real Estate sector,especially the affordable housing space will boom in 2019 in a lot of states.

Interesting to wait for Elections,for China - US trade standoff,wars in the middle east,oil,capital....many factors that were there last year except euphoria.

Tuesday, November 20, 2018

India Wakes To The 'Gig' Economy

U is for Uber
O for Ola
F for Flipkart
 and
A is for Amazon

Once upon a time  a chaffeur  was paid Rs 3000 per month.Today its Rs 18,000.A quantum jump and this once upon a time was not in the previous century but just 4 or 5 years back.Almost unthinkable,now businessmen are rushing to buy 'luxury' cabs and register themselves for a commercial driving license.

One young man who used to work as an accountant in a sedate machinery & equipment manufacturing company now drives a can for Uber.

But after a 3 year honeymoon the startups that are now on their way to expanding their business have tightened the returns they offer and it being India there is a surfeit of people willing to jump in even with meager profits.

The frightening possibility is that this government with such a strong mandate for change has all but frittered it away in the 4 years with frivolous and sometimes downright stupid moves like DEMONETIZATION.This is the main reason for so much social unrest in the country, It is here to stay as the same power brokers who talked of progress,change, industry, are now bent on diverting public attention and wasting resources on building tall statues and temples!

Crude oil has given a respite but I do not see emerging markets being able to recapture the dynamic results of 2017.Traders need to become investors, Entrepreneurs need to sell 'pakoras'.

Where are we headed as a country. Lofty goals on paper in in vain speeches. All the sectors are in doldrums. Rupee depreciation versus US $ has not resulted in comensurate increase in exports because here again the issues are systemic.Bangladesh and Vietnam are moving ahead in textiles and food processing. Kenya is producing more tea.

Press freedom and critics are being silenced.Yet we are told on television that we the nation are making tremendous progress. Statistics can be interpreted any which way.

Yet again  Indians will have to find a way without any political leadership to find new industries to grow exports, create jobs for the millions pouring out of colleges yearly.car sales will be down, consumption down and profits down. Good businesses will survive.

Stock prices will stay flat. It is important to not expect big price changes in the short term from markets and from government policies....and thy shalt not be disappointed.

Apologies for the lecture!!