Little hope for a religious renaissance

Thought for the day

"Bureaucracy, the rule of no one, has become the modern form of despotism."

—Mary McCarthy (American, 1912-1989)

Word for the day

Scupper (n)

Any opening in the side of a building, as in a parapet, for draining off rain water.

Malice towards none

By accepting his family, BJP and RSS have pardoned late Sanjay Gandhi, their chief persecutor during emergency days!

Or they haven't?

First random thought this morning

The biggest socio-economic priorities in India at this point in time should be:

(a)   Providing a tap carrying potable water to every household.

(b)   Taking school education out of government control and leaving it to students and teachers.

(c)    Government getting totally out of industrial and banking businesses and focusing all energies and resources on agriculture, just as it did for industry and banking in 1950s and 1960s

(d)   Making ROI of public offices (elected or appointed) negative.

Little hope for a religious renaissance

Continuing from yesterday.

Another headline that that I found disconcerting was UP Chief Minister ridiculing the Congress President for his much publicized temple run. 

In the related news item CM Yogi Adityanath said, "The Congress president remembers temples only during the elections. Four generations of Rahul's family have never worn a 'janeu' (sacred thread worn by Hindus), but at the time of elections, he shows his janeu." "The four generations of Rahul Gandhi have never moved a step towards a temple. One should visit a temple with a feeling of devotion and not for politics or to show off," the chief minister added. It's actually been a common theme in most BJP speeches since Gujarat elections.

My anecdotal experience gained from numerous travels across breadth and width of the country suggests that the traditional Indian religions have been degenerating since past many decades. It is absolutely critical since religion still forms the very core of the Indian socio-economic structure.

Superstitions, fears, desires, frivolous rituals and ostentatious celebrations now dominate the sense of religiousness, rather than selfless prayers for general social well being, efforts to immerse into the Nature, creating a path towards attainment of spiritual goals, & self-elevation as a human being.

Our politicians, particularly the right wing parties, have done almost nothing to stem the rot that is plaguing our religions and cultural traditions. Instead, they have encouraged the distortions to further their vested interests. This could be one of the primary reasons for lot of malice prevalent (and growing) in Indian society.

I am afraid, religion is forcing its way deep into Indian politics; empowering the politically ambitious priests and preachers. The shallowness of religious belief of politicians has become the benchmark for the society. For example, could CM Yogi explain why going to temple during the time of need is bad. Isn't it what millions of common Indian do as matter of routine? And why politicians' (including PM and BJP President) visit to temples need to be telecast live on TV?

In my experience, the unprecedented rush to temples, to a large extent, highlights the rising economic distress in the society and not any strengthening of faith in traditions and culture. It should therefore be a matter of deep concern for the State.

In the current socio-political milieu, there is little hope for a religious renaissance, that would take us back to our glorious past where temples and mutts motivated youth to learn, seek and elevate themselves. Let's admit many of us go to temple to find an ATM, where we could withdraw money by presenting a unsecured promissory note!

(Note: Temple herein means a place of worship, regardless of religion)

It's definitely not development

Thought for the day

"If someone tells you he is going to make a 'realistic decision', you immediately understand that he has resolved to do something bad.

—Mary McCarthy (American, 1912-1989)

Word for the day

Edentate (adj)

Toothless

Malice towards none

Are all armed forces' officers absolutely beyond any doubt?

 

First random thought this morning

Sushma Swaraj and Venkaiah Naidu have emerged as favorite BJP leaders of many opposition parties in recent times. Even Congress leaders have expressed their liking for both of them.

This could be a strategy to create friction within BJP top ranks and make Modi-Shah little insecure and incite them to make some mistakes.

The possibility is that opposition parties are preparing for a Plan B, if BJP gets ~180-200 seats in 2019 and needs their help to form a government.

 

It's definitely not development

Three headlines that appeared in media in past 3days are particularly disconcerting. These news items aptly highlights some of the malice that have percolated deep down our socio-political consciousness'.

The first headline proudly claimed "Under PM Modi's watch, Amarnath and Chardham Yatras may see highest footfall"

The related news claims that this year more than 2lac people may visit the holy Amarnath shrine in Kashmir during the month of Sharavan (July-August). Another 2million are likely to undertake Char Dham Yatra in Gharwal hills of Uttrakhand during five month period between May-November. More than 70% of these 2mn visitors will be visiting the holy shrines of Badrinath, Kedarnath, Gangotri and Yamunotri in 2months, with most visiting Badrinath and Kedarnath only.

As someone who had been visiting these holy shrines since childhood, I know for sure that these places are in no position to handle so many people visiting in a short span of one month for Amarnath and 2months for Char Dham. The ecology of Haridwar (Base camp for Char Dham Yatra) Uttarkashi (Gangotri and Yamunotri) and Chamoli (Badrinath and Kedarnath) districts has been damaged severely in past one decade.

The politicians have blinded the local populace with the lure of higher income and employment opportunity from rising pilgrim tourism. Unmindful construction and unpardonable exploitation of natural resources is not only endangering the ecology of the region, it is also jeopardizing the sustainability of all future generation. For, this region is the source of water to more than 250million Indians.

The government, and especially PM himself, ought to be deeply concerned over the number of visitor to holy shrines. He must immediately appoint an empowered commission to regulate the flow of people and vehicles to the region, rather than boasting about the crowds and traffic jams in the hills.

I have the following suggestions to offer:

1.    Completely ban private vehicles in 100km radius of these sacred temples.

2.    Allow only disabled and senior citizens to travel by public buses to the temples.

3.    Develop the traditional pedestrian route to the temples. Encourage youth to trek upto the temples. Provide tented accommodation with bio-toilets along the way.

4.    Ration the number of pilgrims visiting these temples, and make it compulsory for all pilgrims to plant one tree each and pay for its maintenance for one year.

5.    Ban plastic totally in the hills.

...to continue

Investment is an art

Thought for the day

"Nobody speaks the truth when there is something they must have."

—Elizabeth Bowen (Irish, 1899-1973)

Word for the day

Antigodlin (adj)

Lopsided or at an angle; out of alignment.

Malice towards none

What do the number of twitter followers for a person imply?

First random thought this morning

Politicians of various hues have been raising demand for full statehood for Delhi since many decades. All these politicians have got a fair chance to rule the city state in this interim. There have been long phases when the same party had governments in Delhi and the Center. There is nothing to suggest that any progress has been made in the direction of affording full statehood to Delhi. It could therefore be reasonably deduced from this that this demand is a pure political rhetoric and means a little to anyone.

Strangely, no one has even casually suggested an alternative plan to improve the state of affairs of NCT of Delhi.

An Investor's Diary

Many readers have questioned my line of study in analyzing the character of the current market cycle that in my view started in August 2013 when the RBI and the then Government began the process of fiscal and monetary corrections in right earnest with some effective measures.

The current market cycle started after correction of the excesses of 2008-09 market collapse between March 2009 and September 2009 and a long four years consolidation phase between September 2009 and August 2013.

The market cycle has seen a sub phase between May 2014 and February 2016, mostly dominated by the Euphoria created by the change in the political regime in May 2014, and subsequent normalization of the sentiments.

On macro front, the improvements that started from summer of 2013, mostly peaked in early 2016 and has started deteriorating in past few months.

I thought it appropriate to make a comparative analysis of the current market cycle with that of 1998-99, because both markets cycles have (a) overwhelming participation of the domestic household investors; (b) the real capacity (asset) addition has been poor in both the cycle; (c) valuations of mid and small cap companies saw massive, inexplicable and mostly unsustainable jump; and (d) poor return on alternatives (primarily debt, gold and real estate) was a major reason for money moving  into equities.

The key difference between two market cycles is that while 1998-99 cycle was totally driven by global dotcom Euphoria, and the new business model in which people were investing was totally unknown and untested; whereas the current cycle witnessed a variety of triggers. For example, (1) China crackdown on polluting industries provided a massive growth opportunity for Indian chemical, metals industries; (2) Public sector banks facing capital constraints due to large NPA build up, providing opportunity for well capitalized private banks and NBFCs; (3) Fiscal incentives like pay commission award, loan waivers, interest rate subvention for affordable housing, higher MSP etc, augmented the purchasing power of consumers.

In this sense, this cycle may not be akin to 1998-99 market cycle, or even 2004-2007 credit driven market cycle. I am not considering the earlier market cycles because at that time Indian markets were shallow with insignificant global participation.

The analysis of bull phase of market cycle is important because it helps in assessing the potential downside in the bear phase. In the extant episode. we would perhaps know the true character of the market cycle only with the benefit of hindsight. Nonetheless, I am inclined to work with 1998-99 estimates and seek protection accordingly.

Those who strongly disagree with me, may not be wrong at all. Investment after all is an art and not a science, in my view.

Has 2013-2018 mostly been a "Hope" trade? - Part 2

Thought for the day

"It is not helpful to help a friend by putting coins in his pockets when he has got holes in his pockets."

—Elizabeth Bowen (Irish, 1899-1973)

Word for the day

Blamestorming (n)

A discussion or meeting for the purpose of assigning blame.

Malice towards none

Ain't the Z+ security cover already assumes the highest conceivable level of threat to the person being covered?

 

First random thought this morning

The government has apparently decided to allow lateral entry of experienced professionals into civil services at Joint Secretary level. The idea is welcome, inasmuch as it aims at bringing wider experience and diverging thoughts into the administration.

A complementary idea would be to allow IAS officers with more than 10yr service, to work in private or social sector for 3-5year (without losing their seniority and other tenure related benefits) to gain wider and deeper experience and assimilate the needs of businesses and society from a non-administrative perspective.

An Investor's Diary

The corporate earnings picture of past 4years, indicates that the market rally in India has so far been driven more by "Hope" rather than delivery of results.

To quote a recent research report by Edelweiss "Q4FY18 was another disappointing quarter with profits for our coverage universe contracting 19% YoY (versus our forecast of +13% YoY). While corporate banks and commodities were big disappointments, even after excluding them profit growth was muted at 8% (versus Q3FY18 growth of 10% YoY) despite a low base....Nifty’s FY19 EPS consensus/Edelweiss forecast is 25%/30% growth (versus 0% in FY18)."

As per a recent CRISIL India Outlook report, though the revenue growth for NSE listed companies (ex financials and oil companies) has shown some signs of recovery in FY18, the EBIDTA growth has been the worst in more than a decade.

Despite major disappointment in past four years, the market is assuming more than 22-25% EPS growth in FY19, though rising input prices, wages and finance costs are clearly indicating the low probability of this kind of profit growth.

The capex has been collapsing ever since 2014, with the share of private sector capex consistently declining. As per CRISIL, FY18 saw capex growth of just 1%, out of which 76% was contributed by the government.

The sharp recovery in Capex projected in FY19 is mostly expected to be driven by the government. However considering the risk of government focusing on social schemes in an election year, rather than asset creation cannot be ignored.

Moreover, as the said CRISIL reports note, there are early signs of GST pushing the industries into consolidation. The large companies (mostly listed) are gaining market share in respected spheres at the expense of smaller companies.

So even if the aggressive projections of `22-25% earnings growth comes true, this will not be a true reflection of the stress in the economy that must get reflected in consumption at some point in time.

...to continue tomorrow

Greed still dominating the market sentiments

Thought for the day

"If the Confederacy fails, there should be written on its tombstone: Died of a Theory."

—Jefferson Davis (American, 2909-1889)

Word for the day

Disneyfy (v)

To create or alter in a simplified, sentimentalized, or contrived form or manner.

Malice towards none

Nothing comes out of nothing, and nothing ever could.

 

First random thought this morning

A visit to a summer cricket coaching camp in south west Delhi was encouraging and shocking.

Encouraging because 60odd children aged between 12-17, all attired in proper white cricketing gears were slogging in 42°C temperature. Some parents were also waiting on the sidelines. Most of these aspiring cricketers were from lower middle families. Their parents could hardly afford the cost of proper gears and coaching fee.

Speaking to some of these children, it was discovered that playing IPL and make tons of money, is latest dream career for many children these days. The shocking part was that none of these appeared to have a Plan B in place.

 

Greed still dominating the market sentiments

Historically, one of the most successful, though intuitive indicator of the greed dominating the fear in market is outperformance of small cap stocks over large cap stocks. The outperformance peak often marks the peak of a market cycle. Subsequent correction in the outperformance of broader markets coincides with the bottoming process.

A strong cycle bottom is formed when the fear begins to dominate and benchmark indices begin to outperform the broader markets materially.

In past, an outperformance level of 25-35%, in a given period has marked the cycle peak for the market. The correction thereafter have been sharp, painful and very broad based. In one year post peaking, the broader market corrected much more sharply as compared the benchmark indices.

In last instance (2006-2009), the outperformance peaked in January 2008 and broader markets corrected sharply thereafter.

During July 2006 and January 2008, BSE Sensex gained 106%, while BSE Small Cap (187%) and BSE Midcap (150%) sharply outperformed the Sensex. IN Next one year till the market cycle bottomed in March 2009, Sensex had lost 18% (from July 2006 level), while Small Cap (41%) and Midcap (36%) lost much more than the Sensex.

On that parameter, the current market cycle might have peaked in January 2018. In the Cycle that began from august 2013, Sensex gained 98%, while Small cap 267% and Midcap 233% sharply outperformed. That outperformance has corrected somewhat in past 5 months. However, it may still be far away from the likely market bottom, that could be reached by March 2019.

There is an argument that the market cycle that began in August 2013 had already ended in February 2016. And the current market cycle is a new one.

I personally do not agree with this viewpoint, as none of my parameters for market bottoming were satisfied in February 2016.

Nonetheless, even if we consider the cycle that started in August 2013, to have completed in February 2016, still the broader market outperformance is material. The market cycle therefore may not be anywhere close to the likely bottom.