Do it yourself

In our view, it is important to understand what a regime change at the center would mean for the Indian economy, especially if the change leads to Mr. Narendra Modi becoming prime minister. As suggested earlier, not many people we spoke to were clear about the economic policies, programs and agenda of BJP in general and Mr. Narendra Modi in particular. In our view, presently India is struggling with the limitations of the Nehruvian model of economic development that we have followed since independence. Even BJP, when it came to power, decided to leave the alternative model “integrated humanism” proposed by its ideologue Mr. Deendayal Upadhyaya and followed a variant of Nehruvian model terming it “Gandhian Socialism”. The current variant of the Nehruvian model is largely a distortion of the classical Keynesian model that advocates a larger role for the private enterprise with active state intervention during extremities of business cycle and argues against higher savings ...

Almost all opinion polls conducted in past one month have suggested that Narendra Modi is the most popular PMship candidate, especially in the states going to polls this winter. No national or regional leader is coming even close to him. Incumbent prime minister and Rahul Gandhi have scored much less on the popularity scale as compared to Mr. Modi. Others like Nitish Kumar, Mulayam Singh, Sushma Swaraj, L.K. Advani etc. also seem to have marginal support. Mr. Modi is ostensibly preferred as someone who could instantly bring India back on faster and sustainable economic growth path, besides ensuring a clean, transparent, responsive and accountable administration. However, the interesting part is that none of the people we spoke to (certainly a tiny and unscientific sample) appeared to have any clue about his economic policies & programs, and development agenda. Everyone repeated the much publicized media headlines that under his rule Gujarat has made tremen...

The coronation of Mr. Narendra Modi as PMship candidate of BJP has caught the imagination of people worldwide. Some unconfirmed reports suggest that Modi might have even beaten US president Obama as the most searched person on a single day. No other Indian politician from India may have raised so much inquisition since Rajiv Gandhi. It would therefore not be prudent to dismiss Mr. Modi just as media hype, in our view. What does it mean for Indian politics?   In the immediate term, Mr. Modi’s leadership provides a strong, decisive, and marketable face to the BJP’s campaign that was missing in post Vajpayee period. This has certainly lifted the sagging spirits of BJP cadre and made the floating voters thoughtful. This should certainly help BJP in state assembly elections to be held in next 2months. As most recent opinion polls have suggested, confirming the findings of our “Discover India” trip this summer (see side bar), BJP is likely to win at least three...

After announcement of Narendra Modi as official PMship candidate of BJP, the popular debate in the country has heated up further. The Congress Party publically appeared dismissive in its response, while the response of other parties has been mixed. The traditional rivals like communists & RJD and recently divorced JDU have been expectedly extremely critical; whereas many non-aligned parties like AIDMK, BJD, BSP, TMC and SP have either refused to comment or were guarded in their response. The response of media and political observers has also been mixed at best. The electronic media has mostly focused on how arithmetically it is improbable for Mr. Modi to achieve the goal. The intra party debate and dissention over his appointment has also been highlighted. The observers and commentators both in print and electronic media have so far appeared mostly prejudiced by their political inclinations. In our view, should the campaign of Mr. Modi be successful and he eventua...

  We expect continuation of RBI’s existing tight money policy stance with some stringent import curbs, more export incentives and USD mobilization drive, should tapering   begin forthwith. The most keenly awaited FOMC meet would conclude today night. By midnight (India time) we would perhaps know the likely US monetary policy stance in near term. A near consensus has emerged globally that the US Federal Reserve (the Fed) may chose to moderate the current US$85bn bond buying program. The debate is however limited to the pace of moderation. The most popular view seems to be that Fed may begin with US$10bn moderation and move cautiously after watching the market reaction. Anything more aggressive (least likely in our view) might spook the markets and result in a massive risk trade unwinding. We have maintained that rather than focusing too much on what the Fed does or Bernanke says in the post FOMC briefing, we should be carefully watching how th...

Yesterday Sensex crossed 20k mark for the sixth time in past six years. Five out of these six crossovers have occurred in past three years. On each of the previous occasions it has corrected at least 10% from the top. The mute questions are: (a)    Whether this time it will be any different? (b)    Will Sensex make a sustainable up move from here thus improving the investors’ sentiments and making conditions favorable for capital raising? or (c)    The past trend will sustain and Sensex will move lower in the days to come? In our view, the conditions are different this time but the outcome may be the same. Global economy, including Europe, is much more stable as compared to previous occasions and therefore liquidity conditions may likely tighten going forward; whereas on all previous occasion EU was in serious trouble and liquidity was easing. Back home, on all previous occasions inflation and fiscal deficit were the prim...

A spell of seemingly positive news flow in past two weeks has provided much needed relief to the struggling stock markets. The ‘taper’ talk has been tapered. The plan to attack Syria appears to have bombed out. RBI appears and sounds decisive after a long time. INR bears are seen scurrying for shelter. Recent data on industrial production surprised on the upside after a long. Consumer prices appear cooling down. And most critically, FIIs exodus reversed and Indian equities saw some good inflows after what seems like a long time. We indubitably like the Zephyr and welcome the optimism in the markets. However, it would be inappropriate to answer the calls on investment strategy just on the basis of news paper headline of the day. The recent news flow, policy measures and global positive data does strengthen our belief of “no collapse”. However, it provides no more clues to suggest that Indian economy and therefore Indian businesses have completed the corr...

The data released yesterday reveals that the industrial growth in India rebounded majorly in July, growing 2.6% (versus consensus – 0.8%). This should usually provide some more legs to the ongoing market rally. However, given that the market has already rallied hard in past one week and the next week is expected to be heavy in terms of news flow, the immediate reaction might be little muted. We would not like to reject the data as unreliable, given that it had been consistent in its inconsistency. We still feel there is nothing to suggest in the broader context that in near future liquidity pressure will ease, rates will fall dramatically, inflation pressure will ease substantially, currency will strengthen or investment will pick up in any notable way. This essentially means that in near term the Indian equity market will continue to gyrate in tandem with the FII mood swings. Insofar as the action drama that inaugurated on 4 September 2013 with regime change at RB...