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Tuesday, December 30, 2014

2015...Another Year For Indian Stocks

Another Year gone by.Targets.Volumes.Rises.Falls.Thankfully no crashes!

As always what is most important is how much returns you made from the market(or did not make?).If you read my year end posts of 2013 you will realise that I was bullish when everyone was bearish and I asked my clients to use the SiP route into Mutual Funds if they were confused about investing directly.2014 was beyond my expectations.

Carrying on from 2014 I feel surprised that the Energy sector is being neglected so much by investment advisors.After all most of our gadgets(and some cars) run on electricity!99% of transport still uses oil - petrol or diesel,and will continue to do so in the forseeable future.Companies that do exploration,marketing,refining will still be in demand for their products and If you the investor can manage to buy them at lower valuations then all for the better...!!

The consensus earnings growth estimates for FY 16-17 are 15% and with likely premium valuations at 16 times One year estimated PE Ratio leads to a year end target of 9500 for the Nifty.Inflation expected between 5-5 - 6% and 10 Year Government bond Yields at 6.5% compared to 8.2% at present.

The biggest factor is yet again Reforms.Surprisingly,because we all expected some big ones to have been dealt with already after the new government came to power with such a huge majority.

The risk too is the frittering away of the positive sentiments by diverting energy to build temples or these fringe religio-social groups jumping on the government bandwagon to push their own agendas.

If Napoleon demanded 'luck' in his generals,this BJP government certainly has its own.Look how crude prices have fallen from above $110 to below $60.

Some outstanding bets for 2015 are:-
a) Ashok Leyland
b)Finolex cables
c)RPG Life
d)Century Ply

Global pain in the form of the war in Iraq-Syria-Libya looks set to continue.Greece faces political instability.Entire Eurozone growth looks dodgy and the USA looks to be the strongest economy in the world again with growth not expected to be slowed by any rate hikes undertaken by the Fed.

So the final takeaways if you are an investor betting on india would be domestically oriented companies and also the banking and financial services sector as rates are expected to be brought down by the Reserve bank of India some time in 2015.

So  wish you Happy investing and a prosperous 2015 to You...!!




Tuesday, December 23, 2014

Fear Is The Third Derivative

I have been reading the brilliantly lyrical Running Money by Andy Kessler,listening to Reshma sing 'Challa' while looking at the green and red ticks on the NSE - BSE terminal.

The First Derivative is Speed.The Second Derivative is acceleration.
- Andy Kessler

The mighty economies of the west are a shadow of their ersatz glory.The Bengalurus and Mumbais are creating wealth.Moving away from the  barrier broker by the Industrial Revolution.When a Facebook's valuation is almost equivalent of the Top 5 Fortune 500.


From huge machinery led fabrication units called factories to diode lasers and packet switches that help speed up the internet traffic and leading to the increasing networth of companies whyou have never heard of!

Is creating wealth in this century easy?Could I take my Harley out for a spin across a continent or two a la Jim Rogers and find investment opportunities?Oil hunters in Russia?Or find a product to sell to C K Prahlad's 'bottom of the pyramind'who earn less than $4 an hour?

With expectations from the Indian markets high on new political equations,isn't it the time to ask ourselves where the next great investment opportunities will come from?An Indian Tobacco Co(ITC) that has 70% of its balance sheet revenue from things other than tobacco products!

Businesses have become complex organizations with different products.

And FEAR(sorry to disappoint cause it aint an acronym for anything just Fear....fright...!!)

Fear drives innovation.Fear of other competitors,fear of market share,fear of becoming irrelevant.

And the biggest fear of all.....Off not being able to predict the future.But then who really has?

Are the real innovators,innovators?Or Historians?

The Harappan civilization,5000 years before the birth of Christ had a working knowledge of trigonometry and engineering.Go to Dholavira in Gujarat and see for yourself if you do not believe me!So who can claim inheritance to discovering the sciences.

We take a thing,we mould it,put it to a different use and voila.....a new product!Is Uber and Ola....taxi services or aggregators?

"An exception does not prove the rule.It breaks a generalization".

Yet so much still happens by accident,partners meeting on a suburban train and building a Fortune 500 company.Forgetting about a stock in your portfolio for 15 years and finding that its become a mega multibagger due more to happenstance and less to 'intelligent investing'.

In violence was Earth created and that remains in our genes.90% of the brands of our childhood have vanished.The typewriter,the mouse,the landline telephone are obsolete.But do things really change or do they come back in a new form.The Mathematician has his own theories and the Economist his own.

Everything changes.Nothing lasts in the same form.

CHANGE is certainly the third Derivative.

Tuesday, December 2, 2014

The falling Crude Conundrum

The Oil Producing and Exporting Countries decided not to cut back on production despite the fall in brent crude from $100+ to $67 over the past Five months at the meeting in Vienna on 27th November 2014.


Something unusual as they have resorted to this time tested measure whenever there has been even a hint of fall in prices,leaving aside the subprime meltdown in 2008.

Essentially that means a price war between OPEC and the United States.A really risky strategy that blithely assumes that by keeping the rates crude down,explorers and extractors in the US will shut down the shale gas drilling wells due to them becoming unprofitable below $80.

The risk to most OPEC countries is that they need higher oil prices to balance their budgets.Iran for one has been feeling the pinch.This is the other side of the story.


In early 2000s when the explosive and sudden growth in China led to huge demand,the oil companies found that for many years no major discoveries had taken place and not much investment had been made in exploration infra.Result.Crude traded between $100-115 during 2011-14.

Many firms in this field suddenly found it profitable to extract difficult to drill Oil.'Fracking'(incidentally which led to a rally in guarseed prices in India)and 'horizontal drilling in US and Canada led to an addition of almost 5 million barrels of fresh crude to world supplies.

What kept prices low was the civil war in Libya,Iraq and sanctions against Iran that took 3 million barrels per day off the global supply.Iran and Venezuela did try to pressurize the Saudis to cut back production but as happened in the 1980s when prices declined and the Saudis cut production yet crude prices kept falling anyways resulting in Saudi Arabia losing market share.

In the short terms signals emanating out of Saudi Government sources suggests that they can,in the short term,live with prices around $80 as they have built up massive foreign exchange reserves.


This looks like a battle between pumping oil cheaply out of Qatar,Kuwait and Saudi Arabia versus costly extraction from Texas,North Dakota.Reports suggest that the Bakken formation in Dakota can still be profitable as long as prices are above $50.

Conpiracy theorists might feel that this is an attempt by US interests to unsettle the Russian economy for interfering in Ukraine.I for one feel that its a straight out battle between the United States and OPEC.

Oil prices are still higher than a decade ago when crude was trading at an average $40,so with time we will see if OPEC can drive US,Canadian drillers into bankruptcy or themselves lose their nerve and cut production.

Investors in Russia and Iran will certainly be tested in the coming Year.

Tuesday, November 11, 2014

Global Economy - House of Cards ?

Despite the Fed's Janet Yellen announcing a tapering of QE and assurances that the American as well as the global economy has strengthened enough to bear the withdrawal of liquidity.Doubts remain.

The biggest anomaly is that the question remains whether QE has actually been withdrawn.I see QE being shifted from the Fed to the ECB and Bank of Japan.Its now being executed by private Bankers of other countries.


Secondly,only cheap money and artificial inflation make it seem healthy.Governments across the world make it seem that making the cost of printed money zero has had had positive impact on the population.That is a chimera.An illusion to say the least.

Thirdly,the inequity in the system in the form of labour force,inflation,reforms remain a major sticking point,at least in India.

In a small example US banks have added $185.8 billion of US treasuries to their book.This sell by the Fed and buy by Banks began when the withdrawal of QE was first announced.Funnily just 7 banks comprised for all the addition.

The banks offer near zero deposit rates to retail clients,courtesy the Fed.Now by parking this money in US treasuries they stand to make a cool 2.3% in 10 year securities.So is it still a you-scratch-my-back blah blah that led to the 2008 meltdown?

These stories are being repeated across the globe by Bankers and Administrations desperate to show some semblance of growth and prosperity.


This Political - Financial systems risk going from dysfunctional to being an outright failure.If and when this whole sham fails the stock markets will implode,liquidity will die and the World economy will plunge into a worst depression than the one in 1920s.

Right now I do not think these economist-banker cabal has any answers beyond fat commissions for their respective organisations.

The World waits for another catastrophe.


Thursday, October 9, 2014

Darwin's Theory of Evolution For Stock Investing

"Buying  a Solid Business below intrinsic Value"

If ever there is an oxymoron then its the above statement.

At least for newbie investors.When Warren Buffett says it,it means a world of difference but for a regular investor without access to tigabytes of data,a chance to talk to the management,knowledge about vendors and especially how the products will fare in the future are a major grey area.

I keep reading articles and talking to so called analysts who make it sound so simple to buy equity of a firm and holding for 5 or so years and turn it into a multibagger.

Once upon a time 'value investing' was the last resort of those who had lost on short term reccomendations and wanted an exit option by hanging their investors on the anvil of 'long term'.

In an earlier post I had mentioned that luck is an important part of whether the firm in which you hold stock does really well over  a 5-10 year period or fades away simply because technology,environment as well as consumer tastes are changing at an average of 6 months from an earlier window of 1.5-2 years in the 1990s.


"It is not the strongest of the species that survives,nor the most intelligent
But the One most responsive to change"

Charles Darwin

Although Darwin meant it to explain evolution,this holds true for corporates as well.Another well known management guru said something similar:-

CHANGE BEFORE YOU HAVE TO.Jack Welch

Are the companies you are buying responsive to change?Indian Tobacco Co(ITC) started with cigarettes as its name denotes but over the last 35 years its product range includes paper,food articles,clothes.

I am sure  a library near you or even 'google' can show you how a firm has responded over the years in adding or reducing its product chain,demand-supply dynamics.

I do not think I am competent to judge intrinsic value of a Facebook or Google or Himachal Futuristic with the minimal data I possess without some serious maths.

So forget about finding out discount to intrinsic value or Book Value(BV) or forward PE which at most can give a statistical valuation.If you use a product and have used the same one for 5 years,look behind the label and buy stock of that firm.You may or may not make millions from that but you certainly won't lose your shirt...!!


Sunday, September 7, 2014

Al Qaida And The Rise of Fundamentalism:Why Islam wants another Salahaddin!

The World was supposed to be a more mature,peaceful place but any 'time traveller' from the 11th Century visiting in 2014 might make the mistake that people were still in the 'Dark Ages'.In many ways things seem much worse.

Civilization on its long journey has turned an old page into anarchy,war and distrust.Fishermen who lost their fishing grounds to Japanese and Korean hi-tech trawlers turned to piracy until it has become a billion dollar industry of the coast of Somalia.The very independent country in Africa apptly named Liberia is fighting an internicine war,so is Rwanda,Ethiopia,Congo,Burundi.The Sarahan people are rebelling,the Boko Haram in northern Nigeria is out of control.

Artificial boundaries drawn by a departing British Raj are crumbling in Iraq,Syria,Jordan and Lebanon/Israel.Egypt has this uneasy quiet.

From an Arab Spring that swept away most dictators in North Africa to the Middle East it is slowly but surely turning into an 'Islamic Winter'.


The myriad politicians who used the crutch of religion to rein in a hungry,powerless population will pay the price as the generations with nothing but their religious pride try to take new territory.Historically,Islam has been propagated at the point of the sword ever since its rise from the sands of Arabia.Hindus,Buddhists who converted in the 9th Century in south Asia still carry remnants of their pre-islamic roots in a lot of cultural traditions and after more than a 1000 years the style of preaching it remains unchanged.

We may be in the 21st Century but the strategy remains the same-just see the example of poor Yazidizis in Iraq.Forced conversion to Hindus in Pakistan.The ban by Chinese authorities in Uigher province.

What the West forgets is that Islam remains a warlike religion that has no respect for secularism or democracy.That is where the real disconnect with Democratic Nations lies.No amount of aid or support can change that.The Afghan peshmerga took American support to oust Russians then turned the American provided SAMs on their backers.

So President Obama's hesitation is beyond comprehension.Is he waiting for another 9/11?Or is public opinion so important that they do not feel compelled to attack the Islamic State(IS) until the US or UK is attacked.I see so much similarity to this Western apathy with the rise of Hitler.Not until Hitler's panzer divisions rolled over Poland,Austria and almost reach Belgium did the Allies come out with a coherent battle plan.

With America's "Cautioner-in-Chief" dithering,the IS is rolling over poorly trained and poorly equipped armies of Iraq and Syria.They might be at the shores of the Dead Sea soon!

The markets flush with liquidity and strong Manufacting data from the US are at their life highs from the S&P Index to the Nifty.The prospect of oil production issues from Iraq and Libya seem far away,yet there will come a time to see what happens when China begins to expand again some time in FY 15-16.

Militant Wahhabism is a major threat.between Bagdadi,the self declared "Caliph",Al-Zawahiri,successor to Bin Laden and the Haqqanis,its a real toss up as to who wants to be the new Salahaddin.Spectacular attacks on the streets of London,Rome,Chicago a la Mumbai are on the cards.

Jihad is the newest billion-dollar industry.They use social media with intelligence and a focussed purpose that shows a deeper professionalism never before glimpsed in any terrorist group.Like it or not the 21st century is going to remain a violent place.

Tuesday, August 19, 2014

Value Investing:Will Grahamandodd Please Stand Up?

Value investing ...the Holy Grail of investment philosophy pioneered by Benjamin Graham and  David Dodd with their most famous disciple Warren Buffett.

There are many variations to the philosophy but the basic remains that if the stock price of a company is lower than its intrinsic value by 25-30% then the company is worth investing in with the believe that in future the price discovery due to valuations will catapult the stock price to at par if not above the 'true'valuation.

Another basic premise is to find 'Growth' companies in sectors that have high entry barriers(Moat investing) with honest managements that will provide YoY upsides in earnings.

The most successful Mutual Fund,Peter Lynch's Magellan Fund generated 29% YoY return for 20 years between the years 1977-1990

So it would seem that the Value Investing philosophy has stood the test of time to deliver exceptional returns to its followers.

TECHNOLOGY DISRUPTION.

“When I took office, only high energy physicists
had ever heard of what is called the World Wide
Web... Now even my cat has it's own page.”
- Bill Clinton




Now everyone wants to be connected.Everyone wants to be in on the latest gossip,everyone wants to be or is hardwired to the Internet.Our interactions with people around us usually takes 3 forms -
Creating
Consuming
Communicating

To this purpose we use or used many products and services and interacted with many others.Now all this can be done via the internet digitally.
To give an example,instead of watching TV you can catch shows on Hulu.You read ibooks or twitter.To listen to music you download Spotify app on your mobile.To watch a move you go to Netflix.And you pay for all this with ipayments through your Mobile phone again!


Companies need to adapt to this lateral shift which strange as it may seem has just begun.Those familiar with Everett Rogers thesis on the Diffusion of Innovation can relate to this theory that says Technology adoption follows a bell curve and early adopters gain majority advantage.

Even here the word 'technology' is a misnomer.A Flipkart has raced ahead of TCS,Wipro,Infosys in market cap even those these bluebloods of Indian IT have been around for more than a decade.

Its the new way of doing things that is leading to such valuations.Facebook offcourse is the byword in this new genre.

How do you value such ventures ? How can you predict the technology for the next decade when its almost impossible to predict the next six months...!!

Then comes user interfaces,buyer psychology,age of the population...a host of questions.

Marc Andreessen wrote a piece in 2011 tittled,"Why is Software Eating The World".That happened after Amazon downed Barnes&Noble and Netflix competed with Blockbuster and HBO.

When was the last time you wrote a letter?Took notes in shorthand?Used a landline phone?

I admit.Over a decade ago!!

There happen to be just too many options and more in the pipeline.I feel it was far easier to judge the brick and mortar businesses that had a predictive life cycle and a product cycle that grew in yearly mode.

So a new challenge for Grahamandodd arises...


Tuesday, July 22, 2014

G E M S

Global Emerging markets have been on a roll despite the best efforts of ISIS in Iraq,the Pro-Russians in Ukraine,the Israel-Gaza brouhaha.

From 7.5% in 2006 to 5% post 2008 Subprime crisis the share of GEMS in weightage is currently 10%.Despite a timid Budget which was long on rhetoric and short on specifics the Indian markets have kept their upward trend alive.

The market becomes illogical at the top(and bottom) and sometimes runs ahead of the earnings.From an average 15-17% last financial year,we should see healthy revisions(upwards) in corporate earnings and the attempts at paring debt may also lead to substantial re-ratings for firms especially in the infrastructure space.

I keep talking of China as a pressure cooker which if it bursts might cause huge global problems.They have managed to keep a lid on internal issues with strict censorship and managed control of both social as well as main media.Yet a 251% Debt-GDP ratio is problematic even though the debt is mostly internal.Using debt to grow is a double edged sword,combined with rampant corruption,environment destructive policies and a restive Uigher region with growing Muslim-jihadist issues.

As we speak the monsoon deficiency in July has reduced to 27% down from 43% and Australian Scientists talking of a smaller El Nino shadow.

Technically I feel Nifty will face resistance around 8000 levels and there is plenty of cash on the sidelines that every dip will be bought into.A major correction should not have below 8200-8500 on the Nifty.

The stocks reccomended in this blog have reached and in most cases exceeded short term targets....IDFC,TataGlobal,HCC,ILFS Trans.

Tuesday, July 8, 2014

Great Expectations...Budget 2014

No,it aint anything to do with Charles Dickens and his eponymous novel.This is about the new NDA Government and Narendrabhai Modi's first Budget.

So what is the Indian Budget ?

Its an annual statement of the Government's revenue and expense.

So what is different this time?

After a decade of the Congress Party's subsidies,quotas for all and sundry and big pronouncements,the hope in 2014 isir  of a more realistic statement,not of accounts,but of intent.In many ways it will show the path that the new dispensation at the Centre will follow.How many realities do they understand or will they keep an eye on Maharasthra elections and come up with the same populistic,parochial sops?

Food inflation has moved up 500% in a decade.Vegetables costing INR 15/Kg  are now INR 80/Kg.The best produce of India gets exported.A prime example for Two years running,prawns getting sold in retail markets after shipments rejected in the USA in 2012-13,Alponso mangoes seen in retail/roadside vendors displays due to EU ban on pesticide issue.

Onions costing INR 12-14/kg in wholesale and INR 40/Kg at retail distributors.Well in this country everyone is looking to make a fast buck any which way.

It also shows the systemic issue that plague us.Our founding fathers coined the term GARIBI HATAO and Indira Gandhi and the Congress has won myriad elections based on this theme.Yet a controversial Economic Report released this month says 30% of India is poor.I would add another 30% of middle class India is poor but refuse to show it.Another 30% just gets by.Just 10% of the Indian population does not need to worry about its financial future.Shocking statistics after 60+ years of Independence.

Yet the politicians make the right noises,the bureacrats pretend to make things work and each retire to their privileged,exclusive clubs for a peg or two in the evening.

All these experts talking of a 'golden decade' for India seem to have crawled back out of the woodwork post elections.These very same people,who shall remain nameless,were talking of monumental issues,unsolvable for the economy.Yet in a couple of months they have dusted of their positive masks and are back preaching 'good days...!'

As a citizen of India and a resident I do hope that the bad roads,high fuel costs,dodgy monsoon this year,distribution/supply side bottlenecks get swept away and India can attain the 6+ growth rate it requires to meet expectations.

Yet a humanitarian approach to economic decisions is a MUST!If this Government goes by logic alone then it reminds me of Sanjay Gandhi's controversial sterilization policy in the late 1970s.....was it not a logical decision then as overpopulation was and remains the biggest drain on natural resources.Will this band of Ministers too use only their heads when it comes to decision making...??

Looking at the tea leaves,this time round Infrastucture development seems to be really the central theme.At dips like today.....BHEL,SAIL,Larsen&Toubro

Banks will be central to reviving demand......HDFC and ICICI Bank as well as Axis Bank(PSU Banks have too many NPA issues)

IDFC.In Agrriculture-another theme that is good for the longterm - Agro Tech,Jain Irrigation

And yes it certainly looks like the equity market will give mid to high double digit returns in FY15.Keep investing and more importantly STAY INVESTED.

Thursday, June 12, 2014

In Which Direction Will India Walk For The Next Five Years...

What is more important....Strategy or Innovation?

Strategy shows ways in which to manage resources to achieve maximum productivity,achieve end user results,cutting down the spread between what is required and what gets achieved.

However.

Without Innovation,from ancient to modern,is what has and what will drive Societies through new products,more efficient products that reduce greenhouse gases,saves our forests,controls ozone and a thousand other critical fillups.The oftquoted invention of the Wheel,engines,electricity...

Management can teach strategy but not innovation.Sometimes no learning is the best learning.My angst against the various IIMs is simply that I see kids taking huge amounts of tuition for entry because simply the tag of being an IIM MBA ensures an easy life.The focus should be on the IITs or similar institutions.

Heartening to hear the Prime Minister's speech in Parliament,though a bit long in hyperbole,it was impressive to note the stress on "Skill Development".A much misused term,almost every Government has at some time or the other made positive noises but none has had a plan in place to actually make it happen.

Rather than "quotas","reservations" and other retrograde thinking,it would certainly tranform India if most could sharpen or access inherent skills or at least come within striking distance of achieving it.

Like it or not,the Indian education system is very big on theory and less importance is placed on practicals.I went to school many decades back but what littel I see of my daughter at school shows me that not much has changed.

So to quote another hugely overused management term-OUT OF THE BOX THINKING,if this team of Ministers can seriously focus and make some forward movement then it will surely be a paradigm shift as whole systems that have worked since Britania ruled the waves....will be forced to think and maybe a Nation that has plenty of quantity will also have the same of Quality.

To be truly competitive on a global scale - quality education and entreprenuers who are not afraid to fail are a nation's treasure!

Thursday, May 15, 2014

Historic Mandate to Govern by the People of India

Today when I stood on the trading floor at 8:30AM there was an electricity around the office.An anticipation.A buzz.A fear.

Coalition or 3rd front or would a single mandate for One party?

And how have the people of India answered the deluge of scams,scandals and sheer brazen impunity which which corruption was carried on.Today is a historic day.A day of hope.But also a day when a huge amount of responsibility has fallen on a single Leader of a singular party.Will he be man enough to claw back the growth?Push back the inflation?sweep corruption from public office?

When at 9AM the results started trickling in and all those who had bought anticipating an NDA majority started booking profits,those too timid to risk it yesterday began to try and make some gains of the moment,the noise rose to a crescendo and with a clear picture emerging and Markets settling into their life highs a gradual simmering of emotions and tense nerves loosening.It feels like the passing of a tornado...!!

Narendra Modi has done what even the great Atal Behari Vajpayee could not.In India's first televised,packaged and MBA grade marketed elections,the BJP has shown the power of 'social media' and the lengths to which planning and preparation with a high level of attention to perceptions of the people on the ground has paid off.Regional areas like Uttar Pradesh as well as the deep South have surprisingly voted the saffron party.

Is is the coming of age of the Indian voter?Will he or she look at governance and the bigger picture rather than look out for freebies or simple jingoistic rants...?Certainly its too early to say but it does look so.Media -both print,television and social has raised awareness about issues,about the need to vote to such levels that the FB generation felt shamed not to be seen with the indelible ink on their finger!

Now let us hope that the majority party that is to form the Government understand what is in store.Simple economics and making sure that the country have enough food,water,jobs and public services.

A good begining,but a long road to go...Amen

Thursday, May 8, 2014

Auslander Raus and Nifty 7K...?

What is the similarity between a slogan used by Neo Nazis in post Hitlerian Germany and the Indian Elections?

In an acrimonious,often hyperbolic confrontation between the leading indian parties,namely BJP and Congress - the issue of foreign birth,caste and social levels has come to play a major role.A lot of the top Congress leadership has stayed away from the battle quoting medical and other problems.It is a problem of incumbency,a lethargy that set in towards the last 2-3 years of the present government.

Dr Manmohan Singh,yes him of the innumerable innuendos and jokes on whatzapp,has not shown himself on behalf of the Congress in this entire campaign.Is that his way of showing his irritation at being used as a proxy?Who knows...as he is too much of a gentleman to express his opinion in public(or private?).

Two decisions of leadership in my mind are responsible for the mess that the Congress as well as the nation finds itself in.

Pranab Mukherjee as Finance Minister
Montek Singh Ahluwalia as Deputy Chairman of Planning Commission and trusted Singh aide de camp

If we go by Sanjay Baru's book the former was fostered on Dr Singh by Mrs Gandhi and the latter by himself.Both looked tired and directionless in their policy making.

The social media savy campaign and the directness of Mr Modi I think will appeal to Indian voters across segments and especially in Metros,Tier-I,II cities where people want better amenities and not just freebies and platitudes...!

As far as predictions go...post 16th May it certainly looks like a strong Government at the centre led by Narendra Modi will take centrestage.

  • Not removing Raghu Rajan as RBI Governor 
  •  The position of 'thought leaders' of the calibre of Prof Bhagwati will show the intentions clearly.


Stockwise there is an air of expectancy around Infrastructure stocks as well as PSUs which need new business ideas ASAP.

Will the Nifty break out further from current levels and cross 7000 is open to conjecture.Inflation and a looming Russo-Ukraine conflict are immediate threats especially if the 60% chance of El Nino comes true in July.I reccomend a 7000 Nifty May Ce and a 6000 Pe to hedge your portfolio.

Remain on the sidelines if not sure,its not worth the risk.Luckily we will get a small preview with exit polls on 13th May....but exit polls historically have been way of the charts most of the time so it will serve well not to put too much faith in them!

Quiet flows the Hooghly till then...

  INDIAN ELECTIONS 2014  
   
  Expected Seats  
BJP+NDA 286  
Congress+Allies  <100  
Others 50    

Thursday, April 24, 2014

Creating Wealth...?

I have been reading the brilliantly lyrical Running Money by Andy Kessler,listening to Reshma sing 'Challa' while looking at the green and red ticks on the NSE-BSE terminal.

The First Derivative is Speed.The second derivative is acceleration.
- Andy Kessler

The mighty Economies of the west are a shadow of their ersatz glory.The Bengalurus and Mumbais are creating wealth.Moving away from the  barrier broker by the Industrial Revolution.When a Facebook's valuation is almost equivalent of the Top 5 Fortune 500 without a real product.

From huge machinery led fabrication units called factories to diode lasers and packet switches that help speed up the internet traffic and leading to the increasing networth of companies whyou have never heard of!

Is creating wealth in this century easy?Could I take my harley out for a spin across a continent or two a la Jim Rogers and find investment opportunities?Oil hunters in Russia?Or find a product to sell to C K Prahlad's 'bottom of the pyramind'who earn less than $4 an hour?

With expectations from the Indian markets high on new political equations,isn't it the time to ask ourselves where the next great investment opportunities will come from?An Indian Tobacco Co(ITC) that has 70% of its balance sheet revenue from things other than tobacco products!

Businesses have become complex organizations with different products.The analyst with Gann theory feels he has the best tools,the Fibonnaci nos man says the same.Some look at growth,others at Book Value,Debt,Credit nos,good managements,star CEOs....well enough theories to last seven lifetimes.Long term,short term.Buy only.Bull baiter and Bear beaters!!

Portfolio diversification experts and Mutual Fund backers.

Unless there is armageddon the expectation that in Life as well as in business,things keep growing.Index funds will give you a low cost option with a market lined return.I in all these years I have seen a gamut of strategies but the one critical fulcrum in this mix is the psychology of the Investor.Reason for loss in 90% of the case is chasing exceptional return.Penny stocks even for those investors who have a limited capacity for loss.

So with the Election coming to a conclusion on 16th May all those who have a view must keep a conservative approach as far as putting money where your mouth is!(I love these americanisms).With post inflation returns of 7-8% being fair....its important not to lose sight that you might make or lose money in the short term but Investing is a long term game...


Wednesday, March 19, 2014

Tsarist Ambitions...Seeds of Cold War II

Trust Vladimir Putin to define the Russian version of 'Cowboy'.Words like annexation,acts like taking over of parliament by Russian supporters etc sound anachronistic in the 21st Century.The Tsars must finally be finding some common ground with a communist after lying in the graves for more than a century.

But read your history of the last 150 odd years and somehow it does not seem surprising at all.The old wars are being fought under new aliases is all.

The graveyard of Empires continues to be so.Afghanistan.

The British,Russians and now the American coalition driven out by a bunch of fanatic tribesmen.Simple tech or firepower sometimes does not work along expected lines.


The adventures in Ukraine,Crimea signifies a new order where a powerful nation state can steamroll legitimate countries,usurp territory,browbeat the politics into submission as long as it has the natural resources to take on the World.A Russia full of natural gas,oil and gold reserves has silenced Europe for no Prime Minister worth his political salt would have the gas tap turned off or see an unprecedented increase in prices sudden enough to upset all calculations.

A stifled President Obama and non existent United Nations is guilty of simply standing by.Will China take this as an opportunity to annex spratly islands from Vietnam,Phillipines,Japan?Will it launch a raid to capture Ladakh,Sikkim and Arunachal from India.That after having completely swallowed Tibet.

A decade after the American led forces dismembered former Yugoslavia to form Serbia,Bosnia,Montenegro,Kosovo etc ad the USSR dismembered itself,the World is set for another round of geographic battles.

Rather than a cooperative ambience across the globe to battle hunger,greenhouse gases,shrinking wildlife habitats......we are back to taking the planet to the brink of another armageddon.As if sundry uprisings in Syria,Libya,the simmering palestine issue and a generally unsettled Asia weren't enough!

It seems that the Russia-China axis will take on Nato led sanctions,more frightening is the emergence of a National policy that allows a military-economic power to impose its will on weaker neighbours.The destruction of an indigenous culture may take many decades but often enough the recovery takes many centuries.

India-still to emerge from the british indigo tax and the prohibition in manufacturing has yet to regain its basic industrial shape six decades after indepence.More countries will slip under the shadow of a dominant neighbour.Multi national companies that held sway finally have a competitor in the form of one Super-president.Will there be more...?

Tuesday, March 4, 2014

Early 2014 Themes...

This is going to be a short post but something I really feel needs to be said...

Indian Elections:The crux or fulcrum so to say on which the outlook for the entire economy depends.Mr Modi wishing to turn every state into Gujarat(hope he doesnt intend to turn it into the Kutch desert!),Prince Rahul wants to learn how to give more sops to the poor,AAP just bothered about bringing out lists naming corrupt politicians,businessmen,bureaucrats and sundry.Conviction -  Null.

Stock Markets:Lacklustre,in wait and watch mode till the new financial year.The fiasco with United Bank of India(UBI),highlights the inherent faults in PSU firms-used as pin cushion for various bureacrats,ministers.The PSU banks need recapitalization to bring them upto par with Basel III norms.

Global News Factor:The Russian shadow on Ukraine will not go away quickly or quietly.President Putin in his desire to leave a legacy that will make Russians proud of him.He controls the natural gas supplies to Europe but the brutal plummet in Bond prices on the rumoured Russian invasion shows that the economy faces huge headwinds.
The quiet rise in terrorism related incidents in China are spreading from Uighur province to neighbouring areas as well.Pakistan and China use it as strategic policy and shows that some amount of blowback is happening.Although small and controlled at present it could give security forces a huge headache in the future.

US:With a new head Fed(pun unintended!)its upto Janet Yellen to bring up the US economy to speed.Jobs,manufacturing are still nascent and will take time to turn around.Important to see if she still feels like rolling back the liquidity tap as per schedule.

Fashion Sells:In the Indian context the amazing sales of the 'Bullet' motorbike by Eicher Motors show how an old brand can be revitalized by competition.In my travel across major metro and non metro cities I found so many new 'Bullets',a once has been with limited fuel efficiency and strained maneuverability on narrow Indian roads.BUT the entry of Harley Davidson and the return of 'machismo'has resulted in aspirational buys.Eicher looks like a good investment.

Somewhere in mid 2014 all these factors will come together to either propel or retard the Indian growth story.The "Fragile 5" and all that makes good copy but as seen through the decades,India endures.There are enough resources and (I hope)enough sensible leaders to ensure that the country can keep the Manmohanomics story going.......

Qui Desideret Pacem
Praeparet Bellum
                                - Flavius Renatus
<Let him who desires peace,prepare for War>

Monday, February 3, 2014

2014 Budget Expectations...or Non-expectations!

The reaction of Markets to the RBI policy was mild to say the least with the longer end of the yield curve trending upwards by 10 bps.The future policy is dependent on the inflationary trend and the measures are date bound.

The adoption of CPI as new benchmark of inflation needs to be watched closely.

Come February and every market participant,investor,trader begin to focus on the Budget even though the past couple of years it has been almost a 'non-event'.In an election year with the UPA coalition rife with internecine troubles of sundry graft charges,a resurgent opposition and a 'dark horse' party,the thinking will be populist but how much?

The CAD seems reasonably under control,will one action by the Government throw logic out of the window?

No reforms expected.Some infrastructure projects to be cleared.Amidst the uncertainty I feel it is prudent to focus on the fundamentals of the economy as well as individual companies and it calls for a bottoms-up approach.

Another thing to note is the recent 25 bps hike by the RBI in the repo rate to 8% will leave a lot of debt laden India firms breathless.

Coupled with the tapering by the Fed and a stronger than expected recovery in the US means that export oriented bussineses should be the focus.The USDINR remains in the 62-65 band and has shown remarkable lack of volatility in the last Quarter.


The Expectations from various lobbies and sectors are :-

* Affordable Housing sector seeks Infrastructure status
*Mutual Funds ask for lower tax on Debt Funds
*India Inc seeks growth focussed themes
*hospitality and Infra firms want low cost funds

Yet a report released by Citibank and Goldman Sachs says Emerging Market countries have a lower real interest rate compared to Inflation which translates to a possibility of interest rates inching higher.All those who are rushing to buy income Funds or Bonds should still wait for TWO more quarters before deciding.

Global news,Chinese PMI,Europe job figs have all become critical in the rapidly integrated economy that reacts to all kinds of events.I would still look at those companies that make quality products,have a stable market share,not over-leveraged.My Picks for february remain:-

a.Bharti Airtel
b.ICICI Bank
c.Reliance Industries
d.Sun Pharma
e.Larsen&Toubro
f.Tech Mahindra
g.Zee Entertainment
h.SBI

Happy Investing in these times of glorious uncertainty.Its in your moment of decision that your destiny is decided...!!

Monday, January 20, 2014

The Great Indian Political Circus...

Is it a horse race?A circus?A wrestling dojo?

Its all of the above.Its open season for India's political class even before an election date is finalized!For Sixty plus years the usual jargon,mundane slogans and catchphrases make a comeback.Year after election year.Crisp white kurtas,pyajamas and Gandhi topis.Similar to blue and white collar workers with overalls,ties and suits,our politicians have created a distinct fashion statement.

The corruption,naivity and zeal in promoting cronism has made them forget the meaning of the colour white.It has become so shameless that in the public space its almost transparent which business house or news channel is backing which party.Is it being done out of goodwill...??

I await the day when Mr Modi will unveil his vision for the Nation.Will he raise taxes to compensate for doing away with subsidies?Will the Middleclass which is TDSed(tax deduction at Source for the uninformed!)to kingdom come again be the beast of burden?Who will broaden the tax base by bringing in the small to middle level businessman who is rarely bothered to pay tax,little enough that may be.Not likely.

Food prices are so high,India is urbanising at a pace unseen in previous ten years.The peasant starves as he has for centuries so where is the incentive to grow more?The middleman eats the cream and is he not the main base of the BJP?Will the party take on their supporters?Not likely.

The Congress mind sees India as a map divided by caste,religion,forward and backward races and many other things that I do not care to mention.By bringing in reservation will the poor masses be uplifted?Can you give a dole to half a billion people...??Will you have a so called 'OBC' pilot your aircraft knowing he or she became one due to reservation and not through talent or merit?Will any congress leader put their life at stake?Not likely.

Kejriwal and his AAP are still wet behind the ears.The top five or six people take the decisions and the desire to include the hoi polloi means they have their own take on issues.At least they talk of education,of common issues that affect the day to day living.

By building the tallest statue in the world of Sardar Patel what is Narendra Modi trying to prove?Could we not have better roads?better infrastructure?irrigation schemes?in the amount of money it would take,unless Mr Modi is using his own funds?Not likely.

Whoever is the new Prime Minister should have the fear of god in him that they will be accountable immediately for their actions.Thos who know the Heckman equation will agree that in some parts the Developed and Developing worlds have the same needs.

The Heckman Equation(from Prof James Heckman,Noble Prize winning University of Chicago Economics Professor)

+

Invest

Invest in educational and development resources for disadvantaged families to provide equal access to successful early human development.

+

Develop

Nurture early development of cognitive and social skills in children from birth to age five.

+

Sustain

Sustain early development with effective education through to adulthood.

=

Gain

Gain a more capable, productive and valuable workforce that pays dividends to America for generations to come.

Where are you Atal behari Vajpayee,Lal Bahadur Shastri or even a Manmohan Singh of the 1990s...!!Never has the Nation that is India faced such a dearth of Leaders and have a surfeit of opportunists.



Saturday, January 11, 2014

Et tu Brutus...eh Anna?

The hand that rocks the cradle?

An amazing number of  so called 'experts' are emerging out of the woodwork to predict what the Indian political scenario will look like in 2014.

An even higher number of those who underestimated the Aam Aadmi Party and scoffed at everything from the AAP 'topi' to the broom symbol have suddenly begun overestimating its potential providing immediate work for myriad psephologists,analysts,poll surveyors etc

All well and good when employment is generated for the country.What a revelation these last few months have been!What started as a social movement morphed into a political wave that swept Delhi.Having been a Delhite for some years I well know the cynisicm and business minded nature and to troop out in such numbers and vote a party which had only one campaign plank - remove Corruption,speaks volumes of the Nation's frustration with mealy mouthed politicials promising the moon at election time...!!

I do not know whether this wave will reach the shore or sweep the nation clean.Already the jostling,pushing and shoving has begun in right earnest.Personally I am not shocked that a certain 'Big Brother'(Anna) who started all this anti-corruption bit and shied away from taking the step taken by Kejriwal and now feeling left out and out of the glare of the cameras feels drawn to a particular party that had its chief involved in corrupt business practises.If not corrupt then shady to say the least.

Just shows that being a 'Gandhian' and a simple person is no guarantor of the lure of power.Disappointing.There are many grand old men in India clinging to power.Sharad Power.Virbhadra Singh.Mulayam Singh.Their machievallian tactics just as relevant in 2014.Their claim of doing goodness,their tribal loyalties.

Is this what India wants?

If I discount the surveys that predict 40%+ voters going for the new party and accept 20-25% as a more realistic figure,it still is enough to roil figures.

Narendra bhai Modi has run such a defensive campaign so far.....just taking on the lightweight Gandhi without elucidating what he can do for the Country.

Afterall India does not simply comprise of Gujarat...!

Businessmen must be worried or they may be confident of their financial muscle managing to keep them afloat whatever the dispensation.

The betrayal of Anna hurts.The opaqueness of BJP is surprising.Anything less than a full majority for BJP will be negative.

As the sloganeering begins....

Modi toh majboori hai
Kejriwal Zaroori hai.

Modi is the choice as there is no alternative.
Its Kejriwal thatz necessary!

pardon the literal translation.