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Friday, 22 September 2017

Thursday, 21 September 2017

THE GREAT INDIAN EXPECTATIONS STORY – SIP BY SIP

Nifty touched its lifetime high of 10171 on 18th September to the delight of our domestic institutional investors. Our MFs are driving the party. Plowing in some Rs. 15000 crore in August when FPIs sold equivalent cache from Indian markets was commendable. Now why FIIs are selling is no mystery at all, thanks to the now more expressive, humble & transparent US FED under Madame Yellen. But how long our MFs would charge taking out their “Make In India” weaponry as “kings in shining armor” of the so called overheated or over- valued market. Are we really over-valued? Investors who are busy thinking that and waiting for a correction might miss out the burgeoning bull rally. In the absence of earnings recovery hit by GST & Demonetization, NPA woes and lack luster private investment, burgeoning stock market indices seems to be a scary phenomenon moving in just one direction. Is it because of the inundating monthly inflows received by the Mutual Fund industry or the GREAT EXPECTATIONS theory resulting in an inflated bubble? I think it’s Both.
  

Tata Steel jumped 1% in early trade as the company announced 50/50 joint venture of its European operations with ThyssenKrupp of Germany. The joint venture is expected to benefit through cost synergies, higher quality and technology up-gradation. The agreement between both the companies is also expected to result in job cuts of about 4000. But who is worried about that till earnings visibility looks promising. Now if one stock can jump 1% on higher expected earnings in the near future, can anyone estimate the bouncing spree of the Indian stock markets after roll out of GST or the undergoing digital revolution in every sphere of our economy? Informed investors are able to estimate the benefit accruing to the economy with parallel cash economy coming under formalized or legal tax net. Not only that the organized established players will benefit further with unorganized sector losing its cost advantage. Sectors from FMCG, to Auto to Footwear have been rallying after the GST rollout. Sectors like logistics are getting benefited as transit time has been trimmed down aggressively. Transit time between Kolkata & Mumbai has come down by one day and transporters are able to commute from Chennai to Gurgoan in 72 hours. This feat could be achieved by dismantling check posts in every state after implementing GST. All this cannot appear in immediate quarterly numbers but are going to be a major game changer for the economy as a whole. Not to mention the input credit advantage, Good & Service Tax is a long term benefit and is therefore expected to increase the GDP beyond 8% which in the current quarter stands at 5.7%. Coming back to the expectation theory which is also playing out in the Financials space moving northwards even as NPA woes and Bankruptcy code plays out. Even with lower corporate credit growth, investors are betting on retail and housing incentives given by the government. Public sector Banks are expected to get back to their feet by the end of the next financial year nudged by government policy and prodded by RBI. Private sector banking has always been a happy space for investors fulfilling their long term expectations. In addition to all of this, sectors like cement & auto considered as proxies of economic growth are consolidating. So is this just a BUBBLE. No it’s not, as this run up is not fueled by hot foreign money but by patient domestic investors who have waited for these economic reforms for decades. As for retail investors, information & analysis would be the key for investment in this bull market. And don’t miss out on Fundamentals as Fundamentals Create Wealth. 
BALKRISHNA INDUSTRIES LTD - RESEARCH REPORT Q1 FY18

Friday, 25 August 2017

Thursday, 17 August 2017


 MUTUAL FUNDS, MIDDLE CLASS, & MODI DRIVING THE INDIAN EUPHORIA

On the eve of our Independence day, I read a very interesting article by one of my favorite analysts, whom I have been following over the last few years. But for once, after going through his discourse on our Indian economy, I disagreed. The bone of contention is that whether Indian economy’s performance since 2014 has been motivated or driven by our new found political stability. My revered peer stated that our economy would move at the current rate irrespective of whoever is at the driver’s seat in Delhi in front of the control panel. May be we all have been so much soaked in our new found Reforming Digital & Un-Scandalous India that we have completely forgotten the era of Policy Paralysis, when India was functioning only on five pillars of our democracy, RBI, SEBI, LIC, SBI and our Judiciary. Oh, May be this is something like, “Eternal Sunshine of a Spotless Mind”, blotting past painful memories not to influence the future. If this is the case we should immediately update the Britons who would like to go through similar treatment to blot 23rd June 2016. 

Is our soaring stock markets touching lifetime highs and crossing psychological barriers completely disconnected from who is there at Delhi. No, they cannot afford to be disconnected. The stock market on every day basis discounts and prices in future estimated growth rates of every sector and industry. It is not possible to disconnect economics from politics in any country, even if it is India which in the past has been swayed emotionally in general elections.  Now coming back to our stock markets, so who is responsible for this ever surging tide of liquidity? They are not just the FPIs hungry for yields and arbitrage profits. These are the people repairing their own roofs and fencing their homes to fight anything from flood or earthquake or unforeseen illness or tax structure or even unwanted personal expenditure which just knocks the door like a neighbor asking for anything which you don’t want to give. Yes you guessed it right. It’s US the MIDDLE CLASS, responsible for these stock market jumps making headlines every morning. Now how did this happen, the central government has very shrewdly reduced the interest rates of various small savings options available and with gold and real estate out of reach for many of us, Mutual Funds became our saviors. With SIPs and various other balanced, debt and equity schemes, the Indian middle class has at-last gathered enough courage to invest in the stock markets. The figures are amazing. With about Rs. 4600 crore coming in through equity mutual funds every month, stock markets are bound to make the so called higher highs and higher lows. Scams, scandals, political slander is no more dominating the precious dinner table talk any more. It has been replaced by interest rates movements, digital apps, demonetization, GST, stock market updates, PAN – Aadhaar link up, Aadhaar Mobile link up, foreign policy etc etc etc….. the list can go on because every day there is some movement somewhere in our otherwise obnoxious administrative machinery.

Now coming back to Indian growth rate, we are moving at a respectable rate taking into consideration our NPA woes, low credit take off and poor private sector investment. Inspite of all of this, the government is moving head on with its capex and a number of private sector companies are surviving on government public expenditure plans. In addition to that governments initiatives like ‘Go electric by 2030’ is a catalyst for Indian corporate which have already started moving towards making Indian roads free of pollution and smog.  According to Marc Faber, India will outperform US markets in the next five -ten years. Now this is with respect to the economic reforms and political stability in India. So for this undaunted goal to achieve, Sir ji, I think we need an able driver at New Delhi.