Tuesday, June 19, 2012

Growth or Austerity?

The IMF is trying to enforce an idea that is going out of fashion rapidly.....AUSTERITY!The current generation brought up on an excess of consumption cannot grasp it and there is also no denying the pain of joblessness,hunger and the helplessness it engenders in all and sundry as seen on the streets of Athens and other cities in Greece and Spain.

I belong to the Nouriel Roubini school of thought that says that GROWTH is the way forward.Create investments,create jobs,create consumption.That will take care of the violence on the streets,provide an alternative to the youth and create a cycle of fulfillment in the citizens.In the Indian context I may add that its not a secret that inflation in India is more a result of supply side imparity than anything else.Gone are the days of cyclical inflation that rose and subsided with the monsoon.

I do not think that the average joe is too worried about Fitch downgrades or S&P warnings....its the cost of food,transport and business sales that shows whether the country is in trouble.By that yardstick the Indian is in a lot of pain.

A government that supposedly looksout more for the 'common man' on the streets has not had the time.The ambition of the current Finance Minister to be a Prime Minister or hold high office is well known and now that he has got his wish we hope that the focus of the Government will shift back to the economic front and rise above personal ambitions?

The gut feeling though says that the political circus will continue,even after 60 years of independence our politicians will show immaturity and the country will keep slipping into the mire.What is worth mentioning is that it needs little initiative to turn around the environment and with base commodity prices slipping it will help the capital goods sector bring down prices and have a macro affect on core inflation.The continued prudence at the private sector and most PSU banks will also help,as the average CAR of Indian banks is 8%+
For investors,infrastructure stocks and banking stocks have seen positive valuation emerge and look a good bet.After the short sellers had their funlast week the Bulls seem poised to keep the nifty above 5000 levels for a week or so.Grexit may still happen.Spain and Italy may slip further as seen with the rising cost of Spanish debt sales and which Euro nation is next on the list?No guesses...

Sunday, June 10, 2012

The New Imperialists...

Sometimes it seems that imperialism never ended, just that new players disguised it in a different more disingenous form.An article in the newspapers recently caught my eye stating the wide disparity in social wealth in China and how the rich can never sleep in peace if the have-nots do not have enough to survive properly!

I have been saying the same thing in my blog as well as interaction with the entrepreneurs and other sundry business who have been to China and been dazzled by the broad highways and steel and concrete highrises.Many eons ago I saw the glitzy side of Shanghai and also the old city with its warren of filthy streets,subsistence quality of life and crime.Yet,most travellers who are shown the newer infrastructure believe that is the true China.The one party rule ensures right publicity but that is getting more difficult by the day.
Even if the US Pacific Command puts in more warships in the Indian Ocean it will not help China as the US administration has a record of never doing the right thing at the right time and the Chinese might browbeat them into not interceding in case of a conflict.With its nuke subs operating in the Bay of Bengal and bases at Hambantota,Sri Lanka and a new one in Myanmar they already have an axis ready.They beat their wardrums to keep everyone out of the Spratly isles and the South China Sea.

The sad massacres in Syria and Yemen is a reminder that there may not have been any world wars in six decades yet the violence is only increasing and the World remains a volatile,bloody battlefield.

More QE might exacerbate the Lehmannish problems yet its better to do something rather than nothing...!!The mollycodldling of its population by these welfare states has left them near-bankrupt,its driven them to ban emigrants and putting up walls will leave them isolated from the fresh energy and ideas they might otherwise have used.

For investors in India I would ike to quote Rothschild,"The time to buy is when there is blood in the streets".Businesses in europe are quoting at record lows,so is real estate.My only fear is that if assets in the US or Europe get any cheaper then funds will flow out of the country and we do need FDI to pull up the infrastructure here.

Weekly time interval chart formed strongest Bull candle which engulfed price action of past three weeks. This is a potential trend reversal signal from technical perspective as lows of the week at 4770 levels remains a major support from medium term perspective.
 Going ahead challenge for Nifty remains at 5135-5160 range which is seen as major hurdle being: lower range of the March-April consolidation (5160) and 200 day exponential moving average that is present at 5135. Pullback in prices from this resistance is expected to garner buying support in the 4960-5020 range
 In the month of June (till June 7, 2012) , FIIs were net sellers to the tune of 594 crore while DIIs were the net buyers to the tune of 1903 crore
 Key data to watch globally would be US Advanced retail sales, Consumer price inflation and Initial jobless claims and Euro Zone CPI. In India, data to watch would be IIP numbers and monthly wholesale price index

Let the short sellers and options writers enjoy till then.

Friday, June 1, 2012

GREXIT...and other Worries

After the not so merry month of May we head into June in further turmoil.Life as a stockbroker,equities/commodities trader and even an investor is not easy at most times but these past two years have been excruciating even by the normal yardstick.

The global and Indian markets have bled every month and the issues just keep piling up while the powers that be decide whether its austerity thats required or even more stimulus to keep main street thriving.How many of us have willingly taken bitter medicine,even while knowing that it would make us better?

The muddle in Indian politics just gets more tangled with the Bengal chief minister seeming in the NDA camp as I saw the strike in Kolkata and the administration took a softline even when the BJP leadership does not know who to listen to!The Finance Minister is more interested in taking long walks in the Presidential Palace and the Prime Minister's cheif economic advisor keeps making some noises about policy action to change the laissez faire.

What effect the probable Greek exit or Spanish banking trouble will have on india I cannot predict but I do know that the valuations of a lot of firms in consumption,textiles,maufacturing and banking is going to be 'mouth-watering' at some point in June-July.The slowdown in GDP does not come as a surprise although corporate profits on average have grown at 15-18% YoY and I do not not have to be an oracle to predict that it will take a couple of quarters for the corporate results to catch up with the GDP.

Cooling of Oil and base metal prices augurs well for Indian manufacturers.We are facing a litmus test and in the months ahead there will be plenty of talk about deficient infrastructure,redtape,access to cheap funds being net negative for India and maybe a few downgrades.But if you are an INVESTOR(not trader)then good times are round the corner for you.JUST BELIEVE in the India story.

P.S.A country growing at 5% is still the second fastest growth market in the world.And the exit of Greece...or Spain...or Portugal or Ireland is not the end of the world.Greece contributes just 2% of the Eurozone GDP!