"In general, pride is
at the bottom of all great mistakes."
—John Ruskin (English,
1819-1900)
Word for the day
Hibernian (Adj)
Irish
(Source: Dictionary.com)
Malice towards none
Reportedly about 4000 uber
rich people have moved overseas from India in 2015.
This has been a trend for
past few years.
What could be the primary
motivation behind this?
First random thought this morning
A recent visit to Uttrakhand was quite revealing. We could not
find a restaurant in Dehradun, Mussoorie and Uttarkashi serving local food,
while there were three in Mussoorie alone that served "authentic"
Tibetan food. Despite a statewide ban on polythene, we saw most shops
delivering goods in polythene bags. It was common to find heaps of plastic
waste in Mussoorie.
The local people were completely passive to the political upheaval
in the state. The extant Chief Minister does not seem to be enjoying popular
support at all.
Strategy for the detour
As I mentioned yesterday (see
here), instead of taking the Classical path to economic cycle recovery, the
Indian economy is apparently taking a detour. This makes the task of
formulating an appropriate investment strategy very complex. Investors' need to
take this challenge and make necessary adjustment in their investment strategy.
The market trend of past few months is indicating a clear shift
from non-cyclical pharma, FMCG, and IT to cyclical banking, infrastructure,
industrial etc. This shift, in my view, is following the classical economic
recovery fashion and therefore per se might not be appropriate to the
circumstances.
I strongly feel that instead of taking a conventional cyclical vs.
non-cyclical approach, investors should follow a pure bottom up approach in
selecting individual investment instruments, be it equity, fixed asset, real
estate or any other asset class.
The following factors in particular be helpful in selecting
stocks.
(a) Consumption demand of
services is rising much faster than the demand for consumer products. Demand
for services like telecom, transportation & logistics, health, education,
organized retailing, entertainment, banking etc. is growing much faster than
the demand for food and clothing.
(b) Foreign capital &
competition are essential to the cyclical recovery. Though the stated policy is
to encourage local manufacturing, it could only be achieved if larger and
efficient global firms are allowed to operate rather freely in the country.
This shall particularly cause serious disturbance in the domestic
industrial space. The inefficient and inadequately capitalized players will
definitely get eliminated in due course. In my view, they will not get much
opportunity to reinvent themselves as the destruction may occur at an
unprecedented speed and scale.
(c) Middlemen who have so
far played a key role in the conduct of trade & commerce in the country are
being replaced by technology. Besides, the trend in regulatory evolution is
also palpably anti-middlemen.
This is resulting in lower cost of selling and distribution for
the producers. The benefits of this lower cost are being enjoyed by a wider
section of the society, including consumers (lower prices), workers (better
employment terms), and government (improved revenue collection).
(e) Wider redistribution
of wealth and material rise in purchasing power at in the lower half of the
demographic pyramid is the foundation of the recovery.
(d) Technology is also at
the core of economic recovery.
...to continue next week
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