"When
a woman isn't beautiful, people always say, 'You have lovely eyes, you have
lovely hair.'"
Anton Chekhov
(Russian, 1860-1904)
(Russian, 1860-1904)
Word for the day
Diaphanous (adj)
Very
sheer and light; almost completely transparent or translucent.
(Source: Dictionary.com)
Malice towards none
After
Paris Attacks, Europe may not change the way USA did post 9/11 WTC attacks -
because here the malice lies within.
First random thought this morning
Narendra Modi is perhaps the
only post independence Indian leader that has divided Indian populace in two
vertical camps - pro-Modi and anti Modi, leaving no one neutral. During 1970s
we witnessed deeply divided opinions about late Mrs. Indira Gandhi, but
neutrality was still an option then. Many exempted Mrs. Gandhi by blaming her
son Sanjay Gandhi for the governance lapses and atrocities.
To some it may sound ironical,
but the truth remains that Mahatma Gandhi is the only other leader that still
divides the Indians in two camps - those who venerate Gandhi and those who hate
him.
At least not yet
The recently concluded result season was a disappointing one,
though not unexpectedly. Belying the government data of GDP growth of over 7%
and the confidence to grow over 7.3%, the corporate data was bleak and
unpromising.
·
The new order flows did not match the claims of
various government ministries, especially roads and railways. The guidance of
larger players like L&T and Thermax etc. simply does not match the
government projection.
·
The balance sheets of Indian corporates look as
stressed as ever, despite optical deleveraging through asset sale and equity
dilution. The new money raised by Indian corporates may not equal to fresh
interest accrual to the stressed assets.
·
The asset quality remains poor. The claims of
asset quality bottoming would be put to a rigorous test if commodity prices
travel few miles more towards south. It might open a whole new segment of
stressed assets, i.e., MSME.
·
The trend in household consumption, especially
rural and non-metros, is seen discouraging by major players like HUL and Dabur.
·
The results clearly indicate that so far the
companies have managed to retain a part of the raw material decline advantage.
A stronger INR due to RBI rate cuts and better CAD might have also helped
bottom lines of many indebted corporates.
However, these advantages are not sustainable. The lower demand,
as evidenced by persistent disinflation of producers' prices and poor revenue
growth, will force companies to pass on larger share of raw material cost
advantage. A likely rate hike by US Fed will inevitably lead to a weaker INR -
increasing the debt repayment and interest outgo on forex debt for many Indian
corporates.
·
There is little evidence on the ground of any
structural improvement on the supply side. The recent episodes of astronomical
rise in prices of certain food items suggests that food inflation is not an
entirely cyclical issue in India and will continue to haunt the policymakers
for much longer than presently expected.
Moreover, in next few quarters, the global commodity prices may
find their respective bottoms. This accompanied with weaker INR and higher
inventory carrying cost, will put an end to disinflationary trends in
manufacturers' prices. Failure to improve supply side in next couple of years
may materially constrict the expected cyclical recovery. Remember, unlike in
past cycles, the policy rate in India do not have much scope to fall from the
current levels.
In my view, the policy rate movement in next two years could be
-1.00% to +0.50. Yes, I am building a small rate hike probability, should INR
weaken materially due to Fed hike.
In my view, the growth in car sales may not be extrapolated to a
general improvement in consumer sentiment; nor should CV sales growth be
equated to industrial recovery. At least not yet.
