Thought for the day
”The woods are lovely, dark and deep. But I have promises to keep,
and miles to go before I sleep."
-
Robert Frost (American, 1874-1963)
Word for the day
Malversation (n)
Misconduct, corruption, or extortion in public office.
(Source:
Dictionary.com)
Teaser for the day
After telecom licenses, coal blocks, should SC look at
cases of large land allotment also?
New jargon on the street
I had the most uneventful visit to India's financial capital
early this week. I met some large investors, business consultants, equity
analysts, wealth managers and businessmen.
Despite a stupendous run in the stock market on the back of
stable macros, political stability not seen in past three decades, improving US
economy, huge foreign flows, return of domestic risk appetite after six long
years, super success of couple of IPOs, I found the mood on the street rather
underwhelming. The Euphoria seen during the interactions early this summer had
given way to suspicion and confusion.
Though hope still survives and there is no major disbelief, the certainty of "Good Times" in immediate term is widely doubted.
I learned some latest jargon on the street, i.e.,
"Quality Bubble", "Power Consumer" and "I of the
BRICS".
Few things in particular I find pertinent to share with my
readers.
·
Quality bubble is a popular term for the crowded
trade in high quality stocks that has led the valuations to cross over to
bubble territory. This is probably first time that Indian equity markets are
witnessing beginning of an economic and therefore market cycle beginning with
such high valuations in quality stocks. Usually this happens at much later
stage in the bull market.
The worrisome part is that nobody is showing any willingness to
go down on the quality ladder and look at the relatively cheaper peers.
·
There appears to be a consensus that
availability of electricity is going to improve substantially in next 2-3years.
The power industry consultant I met confirmed that while PLF at thermal plants
may substantially improve in next 12-15months, and substantial wind and solar
capacities will likely become operational in next 24-48 months. The market has
sensed this trend. Most electrical appliance manufacturers have seen their
market value rising 2-4x in past few months. No one is yet betting on power
producers or capital equipment suppliers.
·
In past one year India has decoupled from its
BRICS peers in terms of macro improvement. With EU, Japan and most of Asia not
looking great, India is becoming a center of hope (outside USA) for investors.
·
The cyclical rally that was expected to gain
momentum after unexpected election results in May'14 has completely
fizzled out. With industry leaders like DLF, BHEL, JP Associates, SBI, and
L&T etc. giving away all the gains seen in past few months. The exporters
(IT, Pharma and Auto) and consumers have led the rally so far. They now appear
tired.
·
The derivative traders are frustrated by record
low implied volatility.
The market participants and observers are therefore perplexed
about the next market move. I will share my take on this tomorrow.
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