"Immaturity is the
incapacity to use one's intelligence without the guidance of another."
—Immanuel Kant (German,
1724-1804)
Word for the day
Hypnagogic (adj)
Of or relating to
drowsiness.
Malice towards none
Pakistan is getting
increasingly isolated in the global community.
While BJP may be right in
claiming some credit for this, it is largely doing of Pakistan administration
and Army.
In desperation our neighbor
may try some misadventure. Are we fully prepared this time?
First random thought this morning
The people clamoring for a second term for Governor Rajan, have conveniently
forgotten that he was appointed by P. Chidambaram, the then finance minister.
It was a collaborative effort (GAAR deferment, gold import restrictions, FCNR
deposits, USD swap for OMCs, etc.) that stemmed INR rout and led to dramatic
improvement in current account.
The point is why did these people not clamor for second term to
PC. They rather celebrated his exit!
In serach of leadership - 1
As I mentioned in my post on Monday (see
here) that on technical parameters the latest bull market in Indian
equities is confirmed. In strict technical sense, we may see Nifty gaining 100%
from the 6987 closing on 29 February 2016.
Usually all new bull markets begin with new leadership with
leaders of previous bull markets taking a back seat.
For example, late 1980’s bull market was led by commodities like
cement, steel and energy. Then commodities had a bad decade in 1990s. Late
1990’s bull market was driven by new economy businesses like IT, media and
communication. For next many years most of these businesses did not do well.
The big bull market (2003-2007) was driven by credit and investment theme.
Large projects (power, roads, ports, real estate development etc.) their
financiers, developers, builders, equipment suppliers and service providers led
the charge. The subsequent years have seen decimation of these businesses. The
last bull market (2012-2014) was clearly led by domestic consumption and
services exports (IT & pharma)
The interesting part is that in most cases financials have
travelled the complete boom and bust cycle.
This time the leaders of 2012-2014 bull run have underperformed,
but so far no clear leaders has emerged. Financials, midcaps, infra, metals
have all moved at similar trajectory. Real Estate is a notable outperformer,
but from a very low base. Similarly, other small sub-sectors like sugar, paper,
farm chemicals have also done well. But these are too small to lead a US$1.5trn
market up by 100%.
The challenge presently therefore is to hazard a guess which sector
or businesses will lead the current bull charge. As always, I would like to
begin the process with setting the assumptions and deducing what may likely not
do well.
1. US economy continues to
grow at a feeble pace; China does not hard land and Europe just muddles along.
2. The government
continues to maintain strict fiscal discipline and continue to encourage
foreign capital and businesses to invest in India.
3. Government raises
substantial resources through aggressive assets’ sale to recapitalize struggling
public sector banks.
4. GST and Real Estate
Regulator become a realty by FY18.
5. Over next two years, US
Fed raises rates gradually with the Fed fund rates peaking at 1.5-1.75%; EU and
Japan rates stay negative.
6. USD does not strengthen
materially from here and China need not effect a major devaluation of its
currency.
I have expressed my opinion in many earlier posts also, that the
bull market in Indian equities will commence mostly due to domestic reasons.
The global factors, primarily liquidity may provide some extra impetus......to
continue
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