"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.
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.
 |
Also Read
No comments:
Post a Comment