"You pay a certain penalty for
going your own way. A lot of people think you're nuts, and you're not as
popular with girls as you should be."
-Ray Bradbury (American, 1920-2012)
Word for the day
Quiddity (n)
The quality that makes a
thing what it is; the essential nature of a thing.
(Source: Dictionary.com)
Malice towards
none
BJP minister says we never
promised good times during elections.
Technically he might be
right (or may be not).
But why make life so
technical.
Hope is a good thing; gambling is not
Taking cue from famous Amir Khan flick, both the finance ministers
and the finance secretary were seen singing "All is Well" as the
equity prices and INR get hit hard. Many analysts, money managers and market
commentators have also echoed their sentiment, highlighting how India is better
placed to withstand the onslaught on emerging markets.
The underlying assumption appears that the markets are
overreacting to the global events, whereas apparently there is nothing wrong in
India. Saving of US$60bn on fuel import bill shall boost consumption and
investment.
Driven by her strong macro fundamentals and commodity price
tailwinds, India may continue to be the fastest growing economy globally when
most part of the developed world slithers into recession.
A few adventurous one have also invoked TINA (there is no
alternative) in favor of their argument.
The headline opinions about "all is well" are not
bothering me. These are rather comforting. However, the devil lies in details.
Analyzing various arguments in favor of Indian economy and equities I find them
incoherent, inadequate and incomplete. Too much reliance is placed on erratic
monthly economic data. Still worst, most of these argument are predicated on
the proper functioning of the government.
Many arguments are self-contradictory, e.g., these fail to
recognize that something that is good for economy may be bad for the market in
the short to medium term. and vice versa. For example, precipitous fall in
commodity prices is bad news for most commodity stocks and consequently for
their lenders. Companies exporting to "commodity economies",
particularly service exporters, are also vulnerable. A 10% cut in workforce in
gulf region could seriously impact remittances and hence current account.
The fiscal correction has occurred due to (a) subsidy
rationalization, (b) higher taxes, (c) lower public spending. Lower growth may
need stimulus from government in form of tax concessions and higher public
spending. The government may not be able to postpone food security for long. In
poor market conditions disinvestment target may not be achieved. Pay commission
report is due. So fiscal comfort and faster economic growth may not walk
together in the short to midterm.
Plans like Digital India, Smart Cities, Dedicated Freight Corridor,
Make in India are feasible only if global players and capital is allowed to
play a much larger role. This could be bad news for local players who are not
exactly globally competitive. Solar cities could be a bad news for private
power producers, still struggling to get fuel linkages, and their lenders.
Some experts have spoken about "short term pain for long term
gains". I do not understand this. Many governments have been made and
unmade by onion prices in past five decades. Even then every five years we see
a crisis. This is true for floods, draught, and oil prices also. How a small
investor like me could trust the government for "long term". Hope is
a good thing. But betting my hard earned money on charity of Indian politicians
may not exactly be an act out of hope. To me it passes as an act of gambling.
.....more on this tomorrow.
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