Thought for
the day
“Apparently there is nothing that cannot happen today”
-
Mark Twain (American, 1835-1910)
Word of the
day
Pinion (n)
A gear with small number of teeth.
(Source: Dictionary.com)
Shri Nārada Uvāca
Naming Ex Coal Secretary Parekh in Coalgate is to save PM’s
skins or first step in process of implicating him?
The caged parrot perhaps is taking its revenge in Godfather
like manner.
Remember "Revenge is a dish that tastes best when it
is cold".
Prefer low beta to domestic growth
The result season has started on the expected lines. So far,
the exporters, Infosys, TCS, HCL Tech, RIL and Bajaj Auto, etc. have exceeded
the expectations on account of weaker currency as well as better external
demand environment. Financials HDFC Bank and, AXIS Bank have indicated weaker
domestic demand environment, rising stress on asset quality and margin
pressure. Deposit growth may further suffer if PSUs are forced to shell out
special dividends (as some reports are suggesting) out of their Rs2.8lakh crore
cash chest.
The latest RBI data on credit and deposit growth and
industrial growth number for 2QFY14 have not been encouraging and point to
continuous poor investment demand conditions. The factors like withdrawal of
RFQ for Chhattisgarh UMPP, abandoning of projects by POSCO and ArcelorMittal
and poor execution of NHAI projects continue to cloud the sentiment and outlook
for investment growth.
The details emerging out of the latest episode in Coal Block
Allocation controversy, suggest that the Cabinet Committee on Investment (CCI)
may after all not be as effective as the Finance Minister is trying to suggest
at various press briefings and investors meets.
With L&T announcing the 2QFY14 results today, the real
picture about the domestic investment environment will begin to unfold.
The government, economists, analysts and market participants
are all seems to be betting too much on rise in consumption due to better than
average monsoon rains. In our view this has created scope for disappointment.
A quick fact finding survey conducted by us suggests that
Eastern part of the country where the consumption propensity is relatively
higher due to demographic (more youth population) and economic (more poor)
reasons have not benefitted from the monsoon. These regions have suffered from
erratic rains and flash floods. Late rains have affected vegetable crops across
north and east India. Moreover, floods in UP, MP and Bihar have affected
logistics severely leading to crop losses.
Rural indebtedness is apparently high due to last year’s
drought and higher input prices. The interest rates in informal money market
have prevailed at highest level in a decade, impacting profitability of smaller
and marginal farmers. Bumper crop and thus lower prices may actually lead to
losses for many of these farmers. The tight fiscal situation does not augur
well for any pre-election loan waiver etc.
Moreover, social sector spending including MNREGA have
fallen significantly this year.
Historically, elections have led to higher consumption
demand. However, due to likely lower number of candidates due to latest Supreme
Court ruling on people with criminal record contesting elections, and more
vigilant Election Commission strictly watching the election expense, we might
see the overall election spending to come down too.
We are increasingly growing more confident about our high
quality, higher global exposure, and low beta to domestic economic growth model portfolio.
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