Tuesday, 10 May 2016

GLOBAL ECONOMIC UNCERTAINTY & BAHUBALI 2

Certainty is extinct like dodo in the present global financial system. It seems as if uncertainty has become an important component of air which we breathe mixing in our blood becoming an important part of our ecosystem. Everyone from Clintons to Merkel to Abe to Khans of Bollywood and of course oil and reality czars all over the world have succumbed to this new high beta environment. But what does it mean for common people like us as we go through our daily routine. Well uncertainty of the elite is a source of enlightenment, information and of course entertainment, entertainment and entertainment.  

It all started with the so called 2008 crises and then European Union & Greece face off, and the rest of the world enjoying thoroughly with higher capital inflows especially emerging markets. As swachhata abhiyaan started in both US and Europe, we had our own share of scams and environment of policy paralysis making India a Trishanku among the BRICS. Almost 7 years later as things started settling down, China through its transformation process from being an export led to consumption oriented economy roiled commodity markets and we all had what George Soros branded as, the Hard Landing.  

For us the landing has been softer as we always exported less, imported and consumed more. Our corporate sector trimmed non-core assets, improved operating margins and in the process strengthened their balance sheets and PEs. Banking sector on the other hand faced the major brunt with stuck projects and will-full defaulters, but with North block and RBI’s sincere efforts through asset quality review, the pain would be over in the next 2-3 quarters. Consequently, the Green Shoot theory is actualizing in reality as fourth quarter results are being announced. Revenue growth is around 6% YOY in a sample of about 250 companies excluding banks, finance companies and oil & gas. In addition to all of this, central government's efforts with respect to fiscal deficit, prudent outlay of planned expenditure, growing bank credit growth, benign oil prices and restrained inflation has dispelled fears of uncertainty at least for India. We know we have moved on from just being a BRIC to a beacon of hope and certainty.

Now that even the weather forecasters have given positive pronouncement, financial analysts and economists are worrying about the renewal of RBI governor’s term. Though this uncertainty will be over by August, there is still something that has transcended across age, gender, caste, creed, religion and there stands a united India panting in anticipation - “Why did Kattappa kill Bahubali”. In one the recent interviews, Mr. KV Vijayendra Prasad, movie’s writer further added fuel to fire by suggesting that, ‘Bahubali might actually be alive’. Now this is height of uncertainty.  


Monday, 2 May 2016

WHO WILL BLINK FIRST, YELLEN OR KURODA

Being a central banker is the toughest job in any country, there would be so many people vouching for it. On a lighter note, may be that's why the British have a Canadian as their central bank governor. For the rest of us, national pride stalls mobility of labour for this esteemed job profile. Of course we Indians have always been self sufficient and lucky when it comes to our central bank governors but others, especially our developed counterparts may need some help. I mean, the US, Europe and Japan, with similar economic issues of deflation, low growth, insufficient private investment and even common inflation target of 2%, can even go for rotational shift every six months. Well, if it didn't work in India in 1997, doesn't mean it won’t work anywhere else.  


All this might seem funny, but it is better to be funny than being precarious every time FED, ECB or BoJ announcement comes out. As for the Central Banks, it’s a wait and watch policy especially when the statement prescribes future decisions dependent on incoming data and uncertain global economic scenario. Though the rates are kept on hold, US economy with mixed signals might saunter into positive territory whereas Europe has a long way to go with its green shoots transforming into full-fledged flowering shrubs. For Japan, only strong political will can change its tumultuous economic progression. 

At the end of all of this, what does all of this mean for retail investors? Nothing much just be informed, I mean who is yawning or blinking or smiling.

As for stocks, fundamentalists don’t have to worry as even in the present uncertain turbulent economic times only fundamentals create wealth.