"It is our choices...
that show what we truly are, far more than our abilities."
—J. K. Rowling (English,
1965-)
Word for the day
Complicit (adj)
Choosing to be involved in
an illegal or questionable act, especially with others; having complicity.
Malice towards none
There is no Punjabi pride
working for Virat Kohli. Who will root for a Bharat Ratna for him?
First random thought this morning
Nothing could be more unfortunate that the fact that after 70yrs
of independence from alien rule, we are still debating who, how, when and where
should sing the National Anthem.
The courts of law, already saddled with millions of pending cases,
are busy hearing these mostly frivolous cases and passing some ridiculous
orders. State administrations have to force students, and even older citizens
to sing the Anthem, and stand up when singing.
Don't you think, this is one of the three major failures of our
political establishment in post independence era, besides failure to eradicate
manual scavenging and prevent female infanticide.
Driver of rally suffer from fatigue
The current bull market in Indian equities, that started in August
2013, is mostly driven by macroeconomic improvements and political changes.
The twin deficit situation improved materially. Interest rates
fell over 200bps. RBI successfully targeted inflation and tamed it effectively.
INR decline was arrested and forex reserves improved significantly. Change in
political leadership led to improvement in sentiments and confidence. Some key
pending economic reforms like GST, regulator for real estate sector, modern
bankruptcy law, have been implemented.
The upmove has been strongly supported by abundant liquidity in
the global financial system, declining domestic investment demand and poor real
estate market.
The corporate earnings though have not shown any encouraging trend
in past four years.
All these driver of the current bull market in India appear
fatigued now. For example—
(a) The current account
deficit improvement that started with drastic steps taken by the then new RBI
governor and the then Finance Minister working in tandem, has peaked at 0.7% of
GDP a few months back and is forecast to deteriorate to 1.75% by 2020. Higher
energy import bill and lower export growth are primary reasons for the
deterioration.
(b) The gross fiscal
deficit of the central government is peaking in range of 3-3.5% of GDP. It is
highly unlikely to improve any further from here. To the contrary there is a
strong case for it to deteriorate in next couple of years as we approach the
next general election.
(c) Inflation expectations
are rising.
(d) The chances of any
further cut in interest rates appear dim. Bond yields have risen sharply over
past few weeks. INRUSD also likely bottomed close to Rs64/USD.
(e) The global flow look
uncertain as central bankers in the developed world look to contract their
respective balance sheets.
(f) The popularity of
political leadership is at the peak. The improvement in sentiment and
confidence of businesses and consumer seems to be peaking close to decade high
level.
(g) Investment demand
continues to struggle.
(h) The impact of wage hike
post implementation of 7th pay commission and OROP has been mostly factored.
The implementation by PSUs and state governments may occur over next 12months.
(i) Earning downgrades
continue, though at a slower pace. But given that the consensus is estimating a
25-30% earnings growth over next one and a half year, the disappointment is
more likely there.
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