"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.
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.
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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.
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(Source: Edelweiss Research)
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.
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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
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