Thought for the day
"I begin with an idea and then it becomes something else."
-
Pablo Picasso (Spanish, 1881-1973)
Word for the day
Intenerate (v)
To make soft or tender; soften.
(Source: Dictionary.com)
Malice towards none
Why the conscience of the studio experts is shaken only when a crime
- rape, suicide, murder, etc. - occurs in Delhi?
Beyond the view of sky scrappers
India, one of the best performing markets in 2014, is doing badly
in 2015. Sensex is flat on YTD basis. This is despite Rs528bn net foreign
portfolio investment flow into equities (upto 25th April). The YTD returns in
Indian equities compares with China (36%), Russia (33%) and Brazil (11%).
The following news in last week's newspaper adequately summarize
the reason for India's underperformance:
*
Foreign investors upset over retroactive tax
demand
*
IMD predicts sub-normal monsoon for 2015
*
A farmer allegedly commits suicide at a
political rally in Central Delhi
*
Government faces stiff resistance from
opposition over key legislative business like Land Acquisition Bill and
Constitution Amendment Bill to introduce GST
*
Earnings season continue to be disappointing.
Infosys fails to meet its own guidance.
Translating the above news headlines into economic and market
context, we get the following:
*
The promise of consistency in taxation policy
has been misunderstood to mean safe passage for all tax avoidance tactics.
*
The slowdown in rural economy that started last
summer may extend to this summer, seriously impacting the consumption demand.
*
The distress and anguish is rising to ominous
proportion at the bottom of the society.
*
There is little chance of any consensus emerging
amongst political class over serious issues of economic importance. Anti BJPism
has replaced Anti Congressism thus paving the way for strong partisan
obstruction to most government business.
*
The weak global and domestic demand is hurting
businesses across sectors. The premium valuations for "quality
stocks" may not sustain.
Cleaning toilets is wonderful, but much more needs to be done
The recent interview
of famous commodity investor Jim Rogers, published in MINT, highlights the
unrest amongst foreign investors.
I may not agree with the Roger's criticism of the incumbent
government, but I could correlate to his frustration.
There are many investors and traders who sincerely hoped that PM
Modi is secretly carrying a magic wand, which he will use to get India rid of
all her problems as soon as he assumes the office of prime minister. No
surprise these people are disappointed.
The disappointment of Jim Rogers perhaps comes from the fact
that he barely knows India beyond Mumbai and Delhi. He assumed that stock
market would be a top priority of the government as soon as it assumes office.
Unfortunately, it is true for many of us. We tend to evaluate
the government performance by the return on our investments. We tend to
overlook the fact that not more than 2.5% of India's population is concerned
with stock markets, and not more than 25% is bothered about the rate of
interest offered by banks on deposits or repo rate of RBI. The picture outside
RBI and Stock Exchanges is much bigger.
Anyways, coming back to my groove, I share the frustration of
all investors, including Jim Roger. My investments are also not performing
well. The performance is likely to worsen further in coming months. In this
context the following quotes from the said interview would come handy to
boast - "I knew it. I could see it
coming".
"I had bought shares in India—it
was one of the few times I’ve done that in my life, and it was because of the
new government. So far, the new government has done nothing but talk, and it is
a shame because Modi had experience; he said he knew what needs to be done. He
campaigned for many months saying he knows how to fix India, but he has done
very little. Cleaning toilets is wonderful, but as far as building the economy
or changing India (goes), he has not done very much. I still own Indian shares,
and I wonder if I should continue holding, because, after a year of no action,
you begin to wonder if anything is going to happen. One might say he is getting
ready to act, but Modi had run a provincial government for a long time and he
knows what to do. So what is all this talk about? I am getting disillusioned
about India, but I’ve not acted yet."
"I have always been negative on
India, because it is an impossible place. But Modi has a very large majority,
he has experience, he has the contacts, and if anybody could do something, it
has to be him. If he can’t do it, then I don’t want to remain invested in
India. If he can’t save India, no one else can. So I would want to sell."
"Modi tells a good story. He is
doing all the right things, but so far there has been no real action. I hope I
am early—I am beginning to wonder if he is for real. I hope I am the first to
see if he is for real. If he is not for real, I hope to get out early—I don’t
want to get out of India after everyone else has done it. Modi has done a few
small things, but these small reforms have had very little impact on India’s
economy. Toilets are good for people, but Modi has not done much to improve the
overall economic standard of living, or done much for investors."
"Russia has been one of the
strongest and most attractive stock markets in the world this year. Russia has
vast natural resources, it is not a debtor nation and, unlike India, it doesn’t
have exchange controls. If anybody should have changed that, it should have
been Modi; but he is not doing anything about exchange controls. There are many
things going right with Russia. The price of oil has collapsed, which is
hurting Russia badly, but that has already happened—it is old news and it will
not have much of an impact in the future. Russia is perhaps the most hated
stock market in the world even though it is among the best performing. That is
because most people’s reaction is, why would you invest in Russia? There are
good things happening in Russia that are attracting me as an investor."
"China and Russia are much more
attractive than India to my mind. Chinese and Russian markets are very big. Indonesia
might be more attractive than India currently. Japan is attractive. I am not
sure how long global investors will be patient with India, but I am beginning
to lose patience. If investors are still positive, that is good news for me,
because I want to be out before them. Modi is a popular guy and he has not done
anything wrong so far—inaction is the only wrong he has done so far. He has not
done anything foolish that will make investors say, “Oh my God—let us get out
of here.” His is a sin of omission."
Jim Rogers comes from the land of opportunity and liberty. USA
and American supposedly value the liberty and democracy more than anything
else. These are the values that have made USA what it is today.
If he, and other traders like him, feel that they can trade off
these values for money ( just a few basis points not a whole lot of it) good
luck to them.
I would rather continue to have strong belief in these values
and the story of India that is shaping up fast and nice beyond the view of the
sky scrapers of Delhi and Mumbai.
More on this later.
Interesting reads:
Trivia
By trekking 16kms to the holy shrine of Baba Kedarnath, Rahul
Gandhi, and through him the Congress Party, apparently seeks to achieve the
following immediate goals:
(a) Set aside the
scandalous debate on his religious affiliation and orientation;
(b) Demolish secularism
as the fulcrum of anti BJP politics;
(c) Demolish
anti-Hindu image of Congress;
(d) Create a rift in
Sant Samaj, an important traditional support group of BJP, over the issue of
unquestionable support to BJP and RSS;
(e) Preparing ground
for a viable third front in Bihar election - NDA, Janta Privar and UPA.
How much the idea will succeed, only time will tell.
Nonetheless, it is clear that Congress is opening to new ideas
and willing to take risk in experimentation.
Digvijay Singh is emerging as the Chanakya to Rahul Gandhi. And
this is a matter of concern.
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