Thursday, June 28, 2018

The System is Failing

After my previous post(Leap of Faith),I am coming round to the view that the deep systemic issues in India cannot be papered over through various PR pronouncements and chest thumping on work accomplished.

Its a simple fact that this government has wasted Four years of a historic mandate running offshoot reforms like de-monetization etc and reworking social schemes launched by the previous party in power.

Nothing highlights this more than what is happening in Banking.Public sector Banks have lost almost 30% of their capitalization through non performing assets,bungling,conniving managements passing on the buck to the taxpayer.

What is more worrying is the rot seen in ICICI Bank which continues to face complaints of 'evergreening' loans i.e. giving fresh loans to payback older loans...ta da da.Was it peer pressure to come up with the quarterly numbers? or something deeper and darker?

Coming on the back of the famous Nirav Modi scam where just one branch of the bank crashed valuations by 50% is a pointer to shocking procedural and system lapses.Forget about stock value,it begets the question on how safe is investor money?

With president Trump playing games on the trade front,oil prices bubbling and some tar to the charisma of PM Modi....the rest of 2018 is set to be very interesting.

Will we see some value buying?

Is it time to shift from equities?

Which asset class will do better?

Gold is passe`.With interest rates turning(which I had predicted 1 year ago),long term Bonds are not looking investible.I think for the risk averse it is time to look at Liquid Funds for the next 6 months .

I am also concerned by the huge amounts of capital being raised by DHFL(Dewan Housing).With real estate still cold and higher rates,deploying such capital even in affordable housing will be difficult.

I  would caution investors to stay away from Corporate deposits,NCDs that I see advertised daily.Pick good sectors and invest with the leaders or a large cap fund and let the Fund Managers work for you!!