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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.