Thursday, June 21, 2018

Mandate 2019 - 3

"Passion is needed for any great work, and for the revolution, passion and audacity are required in big doses."
— Che Guevara (Argentinian, 1928-1967)
Word for the day
Thigmotropism (n)
Oriented growth of an organism in response to mechanical contact, as a plant tendril coiling around a string support.
Malice towards none
US has reportedly withdrawn from UNHRC.
Should India follow, given UNHRC biased role in Kashmir?
And why not close the door on Amnesty International also?
 
First random thought this morning
In recent past multiple agencies have warned about the looming water crisis in the national capital city of Delhi. NITI Ayog is the latest to join the club.
Anecdotal evidence suggests that millions of Delhi residents are facing serious water crisis. Inadequate and contaminated water are common complaints. Many areas go without regular water supply for days. People rely on tankers for minimum water supply. Quarrels and violence over water are "normal".
The revolutionary Delhi CM, who wants to control everything in Delhi, has totally failed in managing water resources, which are mostly under his control. PM, who famously boasted his daily yoga regime in a 10acre lush green lawn (where he lives all alone) has also failed in inspiring people to conserve water.
Mandate 2019 - 3
As I begin my journey to assess the mood of the nation ahead of the general elections due in less than 10months, I find the sentiment in NCR (Delhi and surrounding areas) rather disappointing.
Most of the people I spoke to (youth, retired, students, professionals, bankers, government employees, shop keepers, traders, home makers and sundry politicians) have mostly TINA argument to support PM Modi's case.
Unlike 2013-14, when a certain section of the voters was found to be intimidated by the image of PM Modi and termed PM Modi as persona non grata, this time no such sentiment is evident.
At the same time the "large than life" image of PM Modi appears to have diminished. The count of people who believed him to be Taranhaar (the Rescuer), the one who will rid India from all ills and evils in 2014, also appears to have shrunk materially.
Initially, most people I met, blabbed the viral ballads about PM's personal conduct and achievements on social media (mostly unsubstantiated and lacking in credible evidence). However a slight probe, made them admit that TINA (There Is No Alternative) may be the only thing driving their support for PM Modi.
The popular perception about Congress president and the primary challenger remains skeptical. His lack of administrative experience, negative style of campaigning, lack of spontaneity, and random ideas, make him unacceptable to urban middle classes, in particular.
People also dread the thought of someone like BSP supremo Mayawati, TMC Chief Mamta Banerjee, or SP leader Mulayam Singh becoming consensus opposition candidate for PMship.
Unfortunately, it's all perception, and none of the people, especially youth and professionals, could offer any credible argument to support their fears about visible alternatives. Most of their arguments, opinions and view were based on social media posts with questionable authenticity.
Surprisingly, the residents of Delhi did not appear too annoyed with AAP leader Arvind Kejriwal. The maverick leader who had lost the support of middle classes is staging a decent comeback. Though none see a potential national leader in him, the positive acceptance for him may again be creeping in amongst middle classes. In the city of Delhi therefore he remains a formidable challenge to both BJP and Congress.
NCR sends a total of 22 member to the Lok Sabha - 7 each from Delhi and Haryana, 6 from UP and 2 from Rajasthan. In 2014 BJP won 21 out of 22 Lok Sabha seats in NCR, Rohtak in Haryana being the only seat won by INC.
In my assessment it is extremely unlikely for BJP to repeat the 2014 performance in this region. INLD, RLD, BSP, AAP, SP and INC all may gain at BJP expense....to continue tomorrow
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Wednesday, June 20, 2018

Mandate 2019 - 2

"I have a wish. It as a fear as well - that in my end will be my beginning."
— Che Guevara (Argentinian, 1928-1967)
Word for the day
Turophile (n)
A connoisseur or lover of cheese.
Malice towards none
Has Delhi CM been successful in drawing attention of all concerned to the issue he wanted to raise?
By the way what is the issue he is trying to draw attention towards!!!
First random thought this morning
“Politics is the study of ideal social organization (it is not, as one ·might suppose, the 'art and science of capturing and keeping office); monarchy, aristocracy, democracy, socialism, anarchism, feminism - these are the dramatis personae of political philosophy. —Story of Philosophy by Will Durant
Politicians of the day seek to turn politics into a science of capturing and keeping office. BJP President Amit Shah is obvious champion of the game. He claims to have successfully created a system to "manage" voters at house level.
The moot point remains, how politics would become people centric, from being purely power centric!

Mandate 2019 - 2

The prime minister Narendra Modi led NDA incumbent government was elected in 2014 on three primary planks (a) corruption free administration; (b) faster and sustainable development; and (c) inclusive growth encompassing all sections of the society and all regions of the country.
Many voters, who had traditionally never supported BJP, did vote for PM Modi in 2014. This included voters belonging to minority communities and socially backward classes. The traditional BJP voters (urban middle class, upper caste, traders, small businessmen) very enthusiastically canvassed for PM Modi.
Four years later, while jury is still out to judge whether the PM Modi led government has delivered on its key promises, the voters do not appear as enthusiastic about PM Modi as they were in 2014.
Recent interactions with people from cross section of society, indicate that—
(a)   A sizeable number of voters from minority community and socially backward sections of the society, who voted for BJP in 2014, still remain aligned with PM Modi. Though many of them might have returned to their previous allegiances.
(b)   BJP has failed in meaningfully enlarging its support base after astounding 2014 victory; though it has gained sizeable foothold in north eastern states.
(c)    The traditional voter of BJP is annoyed and disappointed. There is strong perception that (a) the government has failed in creating jobs; (b) MSME businesses are distressed due to implementation of GST and demonetization; and (c) BJP has ignored the core RSS agenda of Swadeshi, Uniform Civil Code, Ram Temple, supremacy of Hindutva etc. to appease minorities, poor, farmers and socially backward.
Though TINA is still holding this block of voters at ransom, there are indications that many of them may abstain from voting in 2019, thus reducing positive vote for BJP.
(d)   Congress is still a loser in the game of perception. Voters find Its leadership rather uninspiring. Under the circumstances, the chances are that any erosion in BJP's 2014 tally will add to regional parties, and we might end up with 1996 type situation.
Please note that this view is totally based on interactions with a small number of people, and may not necessarily reflect the mood of voters at large. Also, we still have almost 10months before voting begins (assuming it to be on regular schedule). The situation may change, albeit not dramatically, according to the events taking place in the interim.
The point to be pondered about is whether TINA should be allowed to determine the fate of 1.30bn Indians, or we need to have a positive reason to support PM Modi.......to continue
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Tuesday, June 19, 2018

Mandate 2019


"Cruel leaders are replaced only to have new leaders turn cruel."
— Che Guevara (Argentinian, 1928-1967)
Word for the day
Day-tripper (n)
A person who goes on a trip, especially an excursion, lasting all or part of a day but not overnight.
Malice towards none
Democracy after all is the conspiracy of mediocre majority to frustrate the brilliance.
 
First random thought this morning
The protagonist in Bollywood blockbuster Om Shanti Om, claims "if you desire something earnestly, the entire universe conspires to fulfill your wish". The dialogue became one of the most popular dialogues of all time amongst Bollywood fans.
In practice, however, a antithesis is often witnessed.
If the State wants to implement a reform, change or correction, the entire populace conspires to frustrate the State's intent.
Tom & Jerry obviously is our most favorite game!

Mandate 2019

We are less than one year away from the next general elections. Like every other general election, this election will also be keenly contested and watched. We will also have many state assembly elections also in next one year. The nation shall remain engrossed in random frivolous debates as rhetoric and shenanigans overwhelm the real issues.
New alliances will get formed and old alliances will get broken. Friends will become opponents and opponents will become friends.
Hard bargains over allotment of constituencies will fill the ambiance with idiosyncratic exuberance, as various claimants mobilize their supporters for "show of strength" demonstrations.
Streets will soon begin to bear a distinct festive look with colorful flags and posters all around; people dancing at drumbeats and chanting innovative slogans; processions of open jeeps & SUVs carrying white clad people decorated with heaps of marigold and roses, claiming to be selfless social workers, true well wishers of people, champions of development, patriots & nationalists and truly deserving to be elected.
Newspaper advertisements, posters, radio messages and social media posts by ruling parties will inform people what all the incumbent governments has achieved in their tenure. The opposition parties' will highlight what the ruling governments have miserably failed in achieving.
All parties will announce largesse for the electorate. People will be promised:
  • Free—ration, laptops, school bags, mobile phones, color televisions, bicycles, houses, toilets, etc.;
  • New—scholarships, schools & collages, factories, roads, rail lines, stations, rail stoppage schedules, will be promised/announced;
  • Uninterrupted water & electricity, sanitation, clean rivers, temple, mosques, etc.
  • Subsidized insurance, enhanced pensions, higher crop prices for farmers, lower interest for home buyers, ease of doing business for entrepreneurs, etc.
Gifts in the form of new currency notes, alcohol, blankets, sarees, school bags, tricycle for physically challenged, free health check up, etc. shall be distributed to keep the electorate happy and engaged.
In the meantime, useless things like truth, honesty, ethics, propriety, statesmanship, compassion, and other similar traits shall be carefully wrapped in a piece of white khadi cloth and stored safely in some dark corner of the closets.
Like last time (see here) InvesTrekk shall be doing an extensive coverage of the elections, from an Investors' viewpoint, over next few months. Keep watching this space for more.
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Friday, June 15, 2018

Sector rotation a trading opportunity



"The innocent are so few that two of them seldom meet - when they do meet, their victims lie strewn all round."
—Elizabeth Bowen (Irish, 1899-1973)
Word for the day
Semaphore (n)
An apparatus for conveying information by means of visual signals, as a light whose position may be changed.
Malice towards none
To a common man, who grows with stories of the valor of James Bond (more recently Tiger) and strongly believes in infallibility of MI6, CIA, KGB, Mossad, RAW etc., the recent news flow regarding Nirav Modi comes as an unpleasant shock.
 
First random thought this morning
Like in Greek mythology, all Indian politicians are Demigods. They never make mistakes. All their decisions and actions are totally dedicated to the welfare of common people and they are incapable of doing anything wrong or something that is prejudicial to the public interest.
At least I have not seen anyone admitting to, or apologizing for, a wrong decision or deed that may have hurt people. Arvind Kejriwal once admitted that his resignation from CM office in 2014 was a mistake. But he was perhaps referring to the interests of his party and not common people.
And then we have the audacity to claim ourselves followers of Mahatma Gandhi, or critics of Mahatma Gandhi, who had enough courage to admit even his most personal failings and weaknesses publicly.

Sector rotation a trading opportunity

Considering that the subject is attracting too many arguments and becoming too time consuming, I would like to close the discussion with the following final comments.
1.    I believe that the market cycle that started on 28 August 2013 (Nifty closing 5285) has already peaked on 29 January 2018 (Nifty closing 11130). The process of bottoming of the cycle has started, and may last many months. In this process, Nifty may or may not record a level higher than 11130. The bottom however shall occur in the 8250-8500 range.
2.    The mid and small cap indices may fall 20-25% more than Nifty in the process, thus erasing most of their outperformance in past five years.
3.    We may see massive rotation of sectors and size in the bottoming process, e.g., from over owned financials & commodities towards under owned Pharma, and from mid and small caps towards large cap etc. But this rotation might not be indicative of the leadership for the next market cycle. The rotation in that sense might only be a trading or defensive strategy.
4.    I shall inter alia keep a close watch on the following data points for tracking the progress of the bottoming process:
(a)   RBI panicking – watch for couple of unscheduled announcement.
(b)   Collapse in G-Sec yields below 7%. This could be preceded by a sharp spike in yields and major unexpected spike in NPA provisioning.
(c)    Crude prices falling sharply.
(d)   Nifty trading 5% or more below 200EDMA for a week.
(e)    Nobody talks about stocks at social gatherings you attend, and you get a strong urge to sell the stock you have been holding for more than 5years.
(f)    There are few large daily moves, ideally over 2% on closing basis, in Nifty.
(g)    S&P500 in USA falls below 2500 and US 10yr yields breach 2.5%.
(h)   USDINR trades above Rs70 for a week.
(i)    BJP losses both Rajasthan and MP assembly elections.
(j)    The Nifty earnings revision ration falls below 0.7.
(k)   INVIX trades above 30 for a week or so.
(l)    Advance Decline ratio falls below 0.65 for two consecutive months.
(m)  Domestic MF net flows are less than Rs5000cr for two consecutive months.
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Thursday, June 14, 2018

Investment is an art

"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.
An Investor's Diary
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.

1-Nifty 50.png



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