Some food for thought
"When one is narrating a story in the first person, one
must be that person."
—Daphne du Maurier (English Novelist, 1907-1989)
Word for the day
Jomo (n)
A feeling of contentment with one’s own pursuits and activities,
without worrying over the possibility of missing out on what others may be
doing.
(Acronym for "Joy of Missing Out")
First thought this morning
The term of 16th Lok Sabha is drawing to a close. A long drawn
acrimonious contest to elect 17th Lok Sabha shall also end in 5 days. Though
the election outcome is still unclear, a variety of surveys, opinion polls, analyses
and opinions have indicated that BJP might not reach the midway 272 mark this
time. Especially in the key state of Uttar Pradesh, BJP is seen losing a
significant base (in 2014 it got 71/80 seats). BJP has recently lost elections
in MP and Chhattisgarh where it was in power for 15yrs. It also lost in
Rajasthan. General Election reverses in UP might also reflect on the state
assembly polls scheduled in 2022.
It would therefore be reasonable to assume that the kind of
massive majority at center and states, may not be seen in near future.
I feel, BJP must have utilized its massive mandate to implement
at least the following:
(a) All NDA ruled
states should have adopted CBSE syllabus, dismantling their respective state
boards.
(b) All NDA ruled
states should have signed comprehensive binding water treaties, including river
linking, water sharing, sewage & industrial effluent flow in rivers, etc.
(c) All NDA ruled
states should have signed comprehensive interstate labor immigration rules,
explicitly defining rights and obligations of migrant labors, contractors etc.
The agreement must have provided for provision of basic human facilities like
safe shelter, sanitation, drinking water, electricity, child education and
primary health services to all interstate immigrant labors.
(d) All NDA rules
states must have signed an agreement to share State Administrative Officers, so
as to gain from their experiences, and checking cases of corruption.
(e) All NDA ruled
states should have agreed to hold simultaneous polls to LS, State assembly and
local bodies.
(f) All NDA states
should have devolved all powers to Panchayati Raj institutions as envisaged in
73rd Amendment.
Chart of the day
Caught in perfect storm of sorts
The markets are witnessing a perfect storm of sorts.
(1) Sino-US trade
conflict is rattling global markets as growth outlook gets clouded.
(2) The debt market
is jittery with a spate of downgrades raising possibilities of further defaults
and a fresh round of slippages.
(3) Poor auto sales,
NHAI warning over growth in road construction activity, contraction in
manufacturing growth, class action suit for price manipulation over pharma
companies, rise in H1B VISA cost and other restriction impacting IT companies,
and cautious volume growth commentaries by leading consumers firms, fall in
global metal prices and continued poor performance of telecom companies may
lead to significant broader earnings downgrades.
(4) Many southern
states have witnessed very poor rain fall in past 4months. Unusually dry season
has created acute water shortages in many areas, hampering construction and
farming activities. Fruit and vegetable prices have surged. Some agencies are
forecasting a below par monsoon rain this year. Official forecast also
suggested impact of El Nino till July.
(5) Foreign investors
have resumed selling in May. Domestic equity flows have also moderated
considerably. In April, net of SIP, both equity and debt funds witnessed
outflows.
(6) Substantial write
down of debt fund portfolios has eroded confidence of investors, as yields on
savings have eroded sharply.
(7) Despite OMO and
USD swap by RBI, liquidity conditions have not improved significantly.
(8) Implied
volatility has shot up by almost 100% in past two months. Sensing the trouble
brewing in markets, regulators have increased margin requirements materially,
raising overall cost of transaction for traders.
(9) 4QFY19 earnings
declared so far have been mixed. Only a few stocks have beaten the already
moderated estimates, while a large number of stocks have either just met or
missed the estimates.
(10) Uncertainty about
pre poll NDA reaching 272 mark on 23rd May is also adding to the nervousness of
investors.
Consequently, in past few trading sessions stock prices have
corrected sharply, especially in broader markets and momentum stocks.
The market internals suggest that traders and investors might be
on the verge of capitulation. They appear willing to sell in panic and run
away. Anecdotal evidence suggests that unlike previous market corrections in
Nov-Dec 2016, Jan-Mar 2018, Aug-Oct 2018, this time not many people seem to be
looking for buying the declines. Perhaps, they are waiting for election results,
or may be thaw in Sino-US relations.
Regardless, it is important to assess whether the ongoing
correction in stock prices an opportunity worth availing or one should just let
it pass.
I shall be sharing my assessment about the situation over next few
days.
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