Thought for the day
"You have no enemy except for yourself."
-
Francis of Assisi (Italian, 1182-1226)
Word for the day
Assisi (Italian, 1182-1226)
Word for the day
Allegiant (adj)
Loyal; faithful.
(Source: Dictionary.com)
Malice
towards none
The prerequisite for rectifying a mistake fully is honest
admission of such mistake.
Have various authorities honestly admitted what went wrong
in the case of Vyapam?
Planning the move from Macro to Micro
Continuing from yesterday,
I believe that the macro trade that has mostly driven the returns in Indian
equities in past one year shall gradually yield way to a cyclical micro trade
over next 6-12months.
The cyclical micro trade may be driven by the following five
primary factors:
(1) Improved execution led by clearance of stalled and
incomplete projects. Prompt clearances and removal of administrative hurdles
could unlock a huge amount of capital blocked in these projects.
Industry feedback suggests
that there are some positive developments in this direction that should bear
fruits in next 6-12months.
Increase in supply of coal and
gas likely in next6-12 months shall boost power generation and lead to improved
capacity utilization in many industries.
(2) Improved liquidity due to higher government
spending on investment and social activities.
The government spending has been
limited by the fiscal constraints, especially in past three years. Higher
energy, farm and food subsidies have constricted the public investment as well
as consumption. With energy price reforms in place and robust indirect tax
collections (primarily due to higher service tax and excise duty on
transportation fuel) shall enable government to resume investment in social and
physical infrastructure, especially roads, energy and transportation.
(3) Improved profitability as the benefit of lower
global commodity prices kicks in and inventory levels rationalize.
The export demand may not
pick up in hurry given the trends in EU and China. The US could however see
decent gains.
The key would however be the
domestic private consumption and investment demand.
(4) Bottoming of credit cycle. The credit demand has
slipped to multi decade lows in recent months, along with worsening credit
quality. Given the inflation trajectory and credit demand, the rate cycle is
certainly turning down with likely uptick in savings.
Next 12-15 months may see
bottoming of credit cycle with NPAs peaking and credit growth and savings rate
bottoming. The corporate leverage may see material correction either through
asset sale or conversion to equity.
(5) With Bihar elections out of way, the government
will have a window of 6-9 months (before the next cycle of states elections
kicks in) to pursue key legislative measures like GST and other tax reforms.
This could encourage investments
The key would be to orient the equity portfolio to this shift from
macro trade to cyclical Micro trade. More on this next week.
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