"The art of medicine
consists in amusing the patient while nature cures the disease."
—Voltaire (French 1694-1778)
Word for the day
Oceanicity (n)
The degree to which the
climate of a place is influenced by the sea.
Malice towards none
Could Trump do to Kim what
Bush Jr. did to Saddam?
First random thought this morning
It is surprising to see that investors who were bullish on Indian
equities due to "strong macro" fundamentals, seem even more bullish
at the prospects of fiscal profligacy in the form of fiscal stimulus (now that government
has finally admitted to the deterioration in economic health of the country).
The current account has already joined the weak spots of the economy category.
Despite a "no show" for four long years (FY13-FY17),
there are many who still feel earnings will present a gala show this year and
the next. May the wolf come soon, while villagers are still listening to the
shepherd boy!
Whose history is it anyways - 4
I have received a large amount of hate mail for my views expressed
in past three days. I am grateful to all those who took pain to write. This
fully corroborates what I have been observing during my travels and trying to
highlight here.
I do not want to engage in any political debate. I am certainly
not concerned about the knowledge of our politicians about history and economics
of India. I also do not wish to sermonize anyone or judge any party or
organization by their recent activities, iterations, and ideologies, or lack of
it for that matter.
I would like to limit myself to my economic interests and in my
view, the rising insolence and cynicism in a society can never be a good news
for its economy.
Many people would agree with me on my assessment that the
incumbent government has introduced a fair degree of unpredictability in policy
making in the country. The policy paralysis that was widely believed to be the
hallmark mark of the previous government has been replaced by the elements of
unpredictability and radicalism. Though not worrisome per se, this
tendency has unwittingly put the administration and the people impacted by the
fiscal policies on path of confrontation. Consequently—
(a) Suspicious of future
policy direction; unconvinced of government promises, and uncertain about the
stability of current policy regime - people are deferring both investment and
discretionary consumption decisions. One may argue that the growth in sales of
automobile and white goods is not indicating much slowdown in discretionary
consumption demand. To this I must reply that the growth trajectory of it has
certainly moved down and lower return on recent capex (and any incremental
capex) may make it conspicuous.
(b) Confidence in broader
India growth story supported well by global enthusiasm, juxtaposed to
skepticism raised by unpredictability & instability of policy and general
social distress, is creating a deal of cognitive dissonance impacting the
decision making as well as disposition of businesses.
(c) The economy faces a
potential threat of getting pushed into a vicious cycle of lower growth-lower
employment-lower income-lower consumption-lower investment-lower growth, if
immediate steps are not taken to improve business and consumer confidence.
The dilemma however would be that it may challenge the fiscal
discipline, which had been one of the most important rallying point for investors'
confidence. An unmindful fiscal stimulus at this stage could disturb the
inflation-growth equilibrium by pushing prices and rates higher.
I shall therefore continue to maintain an extremely cautious
stance on Indian equities for next 12-18months. At the risk of facing ridicule
from my peers, I would go underweight on NBFCs, capital goods, and lower middle
class consumption, in particular.
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