Tuesday, February 12, 2013

Waiting for the Budget Blues...

That time of the year when all people who talk money in India await the promises coming out of the Finance Minister's briefcase.In many ways its the same this year,in many ways different.
The Growth is at the lowest ebb in a decade.Negative.Yet India continues to grow close to 5% YoY.Still amoung the fastest growing in the World.Positive.Inflation is holding lower and seems in the 6-7% band.
How will the global currency war affect India,assuming we do have a currency war?The most important politician in the world is Taro Aso the Japanese Zaimu-daijin(Minister of Finance) and how he incentivizes the Japanese economy.Will the Yen weaken further?
The Group of 20 Nations is not in favour of devaluing currency - the weak trend of Gold is testimony to that fact and for this year I do not forsee a big percentage upmove.Copper,silver is a better hedge.Crude remains at high levels and not without reason.The unrest in the entire middle east shows no sign of easing,production is down and Saudi Arabia is under no pressure to up the supply.If America grows above 2% then demand from the world's biggest consumer will rise.China GDP figs have remained high.
Coming back to the domestic situation the one clear pointer is to avoid companies with highly leveraged balance sheets.The red lights should start flashing when you read the percentage of ownership pledged with financial institutions!HDIL has demonstrated this fact.
Pure play economics where companies with cash on their books borrowed huge amounts at low interest(internally and internationally)to invest in unrelated sectors viz.DLF,a real estate firm investing in leisure resorts.Suzlon buying REpower at a huge premium and now they are unable to meet ECB comitments.
Stick with the large caps that have shown consistent Sales Growth-ITC,HUL,Godrej.
Stick with Indian Banks,the asset quality is still good,NPAs on average below 2% - Axis,ICICI Bank,SBI,PNB,IDBI Bank
Pharma and cement have seen a healthly correction - Lupin,ACC
As I have mentioned in interactions with many of you who are in touch,this year is the year of the trader,small profits and quick entry and exits.Long term valuations of very few stocks are at comfortable buy levels.Europe needs to settle,the US growth needs to get consistent.Critically we need to get over the 2014 election.
I buy where I see a short term value and either exit or take a stop loss when my strategy does not work.My hopes from the budget are non-existential...!!

Live or die.If you want to do neither then stay out of the markets until a definitive trend emerges.