"We sometimes
congratulate ourselves at the moment of waking from a troubled dream."
—Nathaniel Hawthorne (American,
1804-1864)
Word for the day
Schmuck (n)
An obnoxious or contemptible
person.
(Source: Dictionary.com)
Malice towards none
Imagine the bedlam (intolerance) that would ensue if some Indian male
politician uses Trump's language for a female politician!
First random thought this morning
The indignation over release of the juvenile culprit in infamous Nirbhaya
rape case if baffling. The unmindful social media 'forwards' imply that the
public is manifestly agitated and anguished. It is not only challenging the
primary tenets of classical jurisprudence but also holding a distinct
preference for the savage "eye for an eye" law.
The moot point is that if we completely reject the reformative
aspect of punishment, we may need to isolate (or eliminate) all sentenced
criminals for whole life, irrespective of the severity of their crime. And what
about those who could not be sentenced due to poor evidence or inefficiency of
prosecution.
Investment Strategy 2016 - 6: Corporate earnings & valuations
The Indian businesses are passing through interesting times, and
there is nothing to suggest that the conditions will change in next couple of
quarters at the least.
A multitude of challenges and opportunities present for Indian
businesses makes the task of forecasting a trend in earnings extremely
difficult. In particular, the following factors appear to be creating material
uncertainty for Indian businesses:
(a) The policy environment
is in state of flux. Ideally, the direction will be towards further opening of
the economy to global capital, technology and competition. Save for a total
failure of political establishment (not likely), we may see more and more
global players dominating the Indian industrial space in near future. Influx of
foreign competition in services sector may be rather gradual and partial. This
may make many large Indian corporates operationally uncompetitive, financially
unviable and technologically redundant. On the other hand many smaller niche
businesses that can potentially play a supporting role to global players can
see substantial growth in their businesses.
(b) The global competition
may materially impact the margins of domestic businesses, for example due to
(a) erosion of pricing power; (b) higher investment in technology and therefore
lower ROCE; and (c) higher compliance cost due to adoption of best global
business practices.
(c) If the rout in global
commodities continues, the earnings of many businesses would be impacted, at
least in nominal terms. Moreover, economic turbulence in commodity economies,
which incidentally happen to be largest export destinations for Indian
businesses, may impact the export demand also.
On the positive side, the structural reforms initiated by the
government may lead to lower cost for many businesses. For example, the success
of Jan Dhan and DBT schemes could materially lower cost of funds for banks.
Easier FDI and ease of doing business norms could bring in
unprecedented capital and intellectual property igniting a virtuous cycle of
economic growth that would be much stronger and sustainable than the easier
credit led growth cycle of 2000's.
For limited purpose of ST (one year) investment strategy, I would
assume 10-12% earnings growth for CY2016, and believe most of it will be
back-ended.
At this point in time there is little argument for re-rating of
Indian equities, as these still enjoy premium (deservedly so) over EM peers.
However, the premium may grow larger in later part of the year if execution
improves and domestic demand pick up post a good monsoon.
Also Read
No comments:
Post a Comment