Some food for thought
"Give me good digestion, Lord, And also something to
digest; but where and how that something comes I leave to Thee, who knoweth
best."
—Mary Webb (English Novelist, 1881-1927)
Word for the day
Optics (n)
The way a situation, action, event, etc., is perceived by the
public or by a particular group of people.
First thought this morning
Taking the Rythu Bandhu Scheme of Telangana government and
PM-Kisan scheme of central government forward, the Congress Party has issued a
sketch of the all encompassing minimum income guarantee (MIG) or universal basic
income (UBI) scheme for the country.
Like MNREGA that was started on a pilot basis in few district
and extended to cover the entire country in few years, this MIG is also
proposed to be implemented in a phased manner over several years. Apparently, when
fully implemented, the scheme proposes to guarantee minimum Rs6000/month income
to the bottom 20% (appx 50mn) households, regardless of their region, religion,
caste or occupation.
The Congress party may have proposed the scheme with a motive to
take advantage in the forthcoming elections. But that does not take away the
importance and necessity of MIG in Indian context, where number of workers are
likely to far exceed the number of jobs available in foreseeable future and
socio-economic income inequality have already reached alarming proportion.
Unfortunately, the government, ruling party, many economists
& analysts sympathizing with them, have decided to out rightly dismiss the
idea and even ridiculed the proposal. Many have chosen to criticize the proposal
on the basis of fiscal implausibility. The others have dismissed it doubting
the intentions of the proposer.
It may be pertinent to note that the proposer has only provided
the headline for media. There are virtually no details available to make any
comment on the proposal, leave alone an intelligent comment.
But the political bickering apart, I guess it is time that we
debate pertinent issues, e.g., the following:
(a) Whether the time
is ripe for India to introduce a MIG scheme that is all encompassing and not
just limited to the land owing farmers?
(b) Since We the
People of India are committed to building a "Socialist, Secular,
Democratic Republic" through our Constitution, should we resist any
transparent wealth redistribution plan that reduces the unjust socio-economic
inequalities and ensures a dignified life for the underprivileged?
(c) If someone has
made a proposal that in principle is found to be in wider public interest,
would it not be proper for the government to invite the proposer for a presentation
and explore the possibilities of implementing with whatever
changes/improvements rather than ridiculing it or dismissing it with sheer
contempt? After all in spite all its inefficiencies, MNREGA has worked for a
decade and changed many lives!
Strategy update
I had reviewed my investment strategy last month (see
here), and ascertained no need for any change. It is not usual to review
the investment strategy at short interval of one month. However, the change in
the global growth outlook and monetary policy stance of central bankers, I
found it pertinent to review the strategy. Especially, in light of the likely
monetary easing and fading of risk from a full-fledged Sino-US trade war. There
are indications of change in direction of global flows towards emerging
markets.
In domestic context, there is virtually no improvement in the
earnings visibility and fiscal conditions. The consensus on election outcome
appears to be favoring a NDA government with BJP likely falling well short of
272 mark.
I had expected most of these conditions in my December strategy
note (see
here). However, lower yields happening much earlier than expected, higher
visibility of monetary easing and change in direction of FPI flows towards high
yielding emerging markets are changes that warrant some changes in strategy.
Upon reviewing my strategy in this light, I have made few
changes, which are highlighted below.
(a) Continue to
maintain 15% allocation to gold.
(b) Cut debt
allocation to 10% from 15% earlier and reduce the threshold for investing in
duration products to 7.7% from 8% earlier.
(c) Increase equity
allocation to 75% from 70% earlier. Out of this 75%, keep 60% invested in mix
of quality large and midcap. Keep the balance 15% for active trading rather
than invest in strategic portfolio as planned earlier.
(d) Continue to
prefer PSU banks, pharma companies with domestic focus, construction companies
with stretched balance sheets, which are most likely to survive, and real
estate and ancillaries like cement, tiles, sanitary, plywood, electric fittings
etc.
(e) I am mindful of
the possibility of a significant global market correction and consequent major
correction in Indian equities. I would like to hedge against this possibility
through quality of stocks in portfolio rather than buying a put. In view of the
higher risk, I am hiking my expected return from equities to 22-25% against
18-22% earlier.
(f) I shall be
trading actively in at least 50% of my portfolio, against 25% planned earlier,
to take advantage of higher volatility.
I would like to reiterate that I am not at all worried about the
post election political situation in May 2019. Any major correction in market
due the election outcome would be a great trading opportunity in my view. I
would not be averse to using leverage to take advantage of this trading
opportunity, if it does present itself.
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