"Youth cannot know how
age thinks and feels. But old men are guilty if they forget what it was to be
young."
—J. K. Rowling (English,
1965-)
Word for the day
Hearth (n)
Home, Fireside
The floor of a fireplace,
usually of stone, brick, etc., often extending a short distance into a room.
Malice towards none
Controversy over Padmavati
is not yet settled and an MLA and former minister in Bihar, hs threatens the
Deputy CM, and the Deputy CM had to shift the venue of his Son's wedding.
"Law & Order"—
is anyone bothered?
First random thought this morning
Last week I had the opportunity to interact with school children
of a government school in a small town of UP. While I was sharing my
experiences and thoughts with intermediate students, a young teacher raised a question.
She asked, "why do we celebrate achievements of Indians living abroad,
like Satya Nadella, Sundar Pichai et. al. These individuals indubitably have
done very well for themselves. But what have they done for the country. And for
that matter why are we celebrating an Indian girl winning Miss World title. The
girls who won this title in past, have not really done anything for the country
or countrymen to feel proud about, unless you want to feel proud over Priyanka
Chopra playing a role in an English TV serial?"
As the question was fired out of blue, I could not answer this
young lady. But I do want to satisfy her inquisition. May I seek your help!
Bull markets are all same, or are they?
In my view, most human being are naturally inclined towards
positivity, progress, and prosperity. The cynics and skeptics are usually in
abysmal minority. Celebrating rise in asset prices causing increase in wealth
hence is a natural human reaction.
Bull markets are therefore usually welcome. The up cycles in real
asset prices are mostly celebrated uniformly. However, the bull market in
financial assets are fiercely contested, almost always. The current instance is
no different. The reasons could be varied and justified. But that is not the
point I want to discuss here. My point is limited to analyze the current bull market
in India to optimize my returns on my investment portfolio.
In my view, though most bull markets in equities look the same
from 35k feet, a closer look would reveal a different set of drivers in each
case. It is important to note because it is the fatigue of these driver that
eventually causes the reversal in price trends.
For example, the key driver of previous bull market in Indian
equities (2003-2007) was the surge in credit. An unprecedented investment cycle
was unleashed by easy credit.
Asian Financial crisis and successive poor monsoon resulted in
economic growth plummeting in 1997-2003 to an average of 5.4 per cent. Economic
sanctions post 1998 nuclear tests also played their role. The government
responded with fiscal compromises and massive economic reforms. The government
gave away its control over key sectors like roads, coal, energy, telecom,
ports, airports and opened multiple areas for FDI. Implementation of VAT at
state levels and expansion of Service Tax augmented the revenue considerably.
Consequently, fiscal discipline was restored after FY03, with the
next five years up to FY08 witnessing a major reduction in the combined fiscal
deficit from 9.3% of GDP in FY03 to a then record low of 4.7% in FY08. Lower
fiscal deficits led to materially lower interest rates, which promoted higher
investment and growth, which, in turn, increased revenues and thus further
reduced deficits. Economic growth soared to record highs to average 8.7% during
2003-08.
The equity market celebrated its best bull market in history with
Nifty rising from a low of 920 in April 2003 to a high of 6357 in January 2008
a 7x rise in less than five years, regardless of the most popular PM losing
elections.
The market faltered when fiscal discipline was set aside in FY09 (combined
deficit @ 10.6%) and the easy credit (rates begin to rise and NPA begin to
build up) and freedom to operate to infra developers (scams in telecom, coal,
real estate, roads) that drove the market started to falter. Global financial
crisis pushed the markets deeper into abyss. The house of cards collapsed, with
an unusually large number of infra builders losing over 80% of their market
value and lenders left to collect the debris....to continue tomorrow
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