Strength of India at present time

Friends,

The markets in last 48 hrs have demonstrated that there would be no more movements in a similar way all over the world markets. There has been some weakness displayed in some like Russia and Japan particularly. Indian and US markets have displayed some strength. The European markets and rest of Asia have shown somewhat lesser degree of strength. I love India but it’s not out of this love that I say it would be performing best in the next two to three foreseeable years. This may continue till about a decade from now but who would venture to say this in the present day mercurial behaviour in all sections and sectors of economy around the world.

The reasons for what I said above are easy to see:

-Indian demographic make up is just right at the moment.

-Indian saving practices are ingrained.

-Indians have conservative outlook but the entrepreneurs here have flare,experience,wisdom and courage besides having organisational expertise.

-India has a large pool of managers and technicians who are better trained now and many of them have exposure to international practices.

-Indians are docile and moderate in behaviour. Some politically motivated undisciplined behaviour is noticed but that is a window for venting out the feelings as otherwise the suppression of the same would have far worse implications.

-Every political party , more or less, adopts a middle of the road approach in respect of economic policies and there is no serious difference in foreign policy approach.

-The democracy has become far deep rooted and the change of govt happens as matter routine.

-Nehru model of mixed economy has not been given a good-bye entirely and is some how maintaining a better balance while the entirely free economy of US has exposed its weaker links and USSR’s demise proved the fallacy of communism. China’s case is different, may be its sitting on some kind of political volcano.

-India has a reasonably sized domestic market and gives it a kind of stability that is a dream for smaller economies.

-The design and engineering talent here has proved that any product is possible to be indeginously produced.

-Our cost-effectiveness is now an established factor.

-Indian industry has shown to withstand the threat of so-called mass produced and cheap items from China. It has only expanded the market which is now more suitably being catered by local producers.

-Natural resources abound and the arable land is sufficient to take care of food needs.

-There is yet not fully tapped potential of harnessing cheap and clean power through hydro-power projects. Europe has done it beautifully and India has to emulate.

-Our weather conditions are such that there no need hold back productive activities, the year round.

-The economies of scale are such the any mass-transportation project is possible to be undertaken. Our density of population leaves us with need for far lower road network per capita outlay which is already a proven fact. On such strength only our railways offer cheapest fares.

-We are not too deeply in to consumerism and do not splurge on goodies out of borrowed funds.

-We have a possibility that the Indian sub-continent becomes a unified market like EU.

-Education is going to be universal in coming years.

-A large work force is added every year which is also expanding market for goods and services.

-Indian society is pretty stable on account of family orientation.

-India has weathered many a crises in the past and has come winner out of every crisis.

-Indian households have always have had the wisdom to keep enough of gold for emergency needs. Indians have also shown wisdom of not buying bullion at very high prices and even sold it when there has been a unreasonable manipulation (like when Hunt Bros created a speculative buble in 1979-80).

The present turbulence in markets is only a temporary phenomenon. The serious investors should have no reason to keep cash. There are some other ratios that have also to be kept in mind:

-The PE and BV ratio of Indian markes are almost under 12 and under 3 and historicaaly happen to be safe at this level.

-The real rate of interest is negative in respect of govt securities and therefore is positive for equity markets. 10 yr paper yield is just 7.7 pc and inflation is 11.44 for the latest week.

-The pressure on markets is due mainly to FII selling, it is more to do with their problem than the problems of Indian industry.

-The high crude prices are bad for India as it has to import more than 70 pc of its requirement but luckily its price post crisis in west is very nominal at 70 dollar/bbl. This is the cost of production for some of the world producers.

-The govt and RBI are easing the money supply and interest have been lowered else where in the world and would be lower here too. The previous bull run happened after the rates were lowered.

-The govt is going to raise FDI investment limit Insurance sector and would be taking such other reformist steps.

-NRIs would be more than happy to look towards India as the Western banks have given them gift of nightmarish times Chinese (non-residents) also had poured in inumerable dollars into China which made China progress faster.

-Infrastructure can not be ignored by any govt.

-The Indians take to virtual world like fish take to water also Indians have advantage of learning English.

-The average of Indians is increasing along with decreasing death rate and birth rate.

-The rural youth gets exposure through TV and willingly adopts modern methods of farming.

-India has moved beyond worrying for foods horticultural initiative has supplemented food availability.

-India is rightly placed on globe and has vast coast lines which enable it access markets of west and east with ease.

-Its in such a time zone that it can easily become hub of trading in future beginning the day with Japan’s late hours and ending the day with USA’s early hours.

-Cheap labour and cheap managerial talent keep it one of the most competitive places for business and industry.

-India has good international relations and is moving forward to ease tensions with neighbours.

-RBI hold forex reserves of over 260 billion after meeting demand of dollars for oil purchase and investment repatriation. India has blemish free record of meeting international obligations.

-India is exporting ever larger variety of goods and services and has also shown greater ability to value-add on imported raw-material and components.

-India is endowed with coal reserves and iron ore reserves and other mineral reserves.

-India has enough scope with solar,wind,bio,hydro,coal and atom based harnessing of energy.

-India also has embarked on program of commercial forestry.

-It has ability to produce all types of machinery and capital goods including ships and aeroplanes.

-India has world class space technology.

-Indian entertainment and tourist industry has an unlimited potential.

-India cares for intellectual property rights and has rule of law.

-India telecom network is on par with the best in the world.

-Indian road network is fast catching up and the Airports have already become modern.

-Indian bourses are well organised and with proper regulation as also its banking system.

-Ours is an ancient civilisation and we imbibe values automatically.

-Let’s not forget a dollar for 49 rupees is such a rate which benefits exporters enormously while shelters domestic industry from competition by other nations. Did China not achieve by keeping its currency pegged at lower exchange value, the other nations cribbed about it also were enjoying cheaply available goods from China (now they are having to pay for the cheap lunch). Ours is not manipulated exchange rate and hence will be without adverse out come.

Please let me know of the unlisted strengths which I have missed out to make it comprehensive list. You are also invited to point out the negative factors which I have either not found or considered some of them unworthy of mention. However, the delivery of justice is routinely delayed, the land holdings are small, the health services are insufficient and corruption is rampant. If these shortcomings are removed along with the terrorism, I think India would acquire a status which will be envied by one and all.

Would you not hail such an India.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – Advantage India

Friends,

The US President announced last day from the public platform and in no uncertain terms that the financial crisis will be set right, come what may. He meant to convey that the govt is besieged of the problem and has planned to take comprehensive action along with the G7 nations and also under consultation with G20 (India included). The G7 finance ministers have arrived in US, our FM has dropped plan to go there.

We have had trouble on our bourses due to portfolio investments by FIIs who have just one thing in mind and that is to get whatever they can for the stocks held as the need to meet obligation at home is over-riding (you may recall my warnings at the peaking market time last year that the FIIs exit is not normally done, it is done in a rush). When the exit is without evaluation of the item being sold, the panic naturally sets in. The settlements going smoothly in such scenario is for some to praise and the withstanding of the such windy times by the Indian banking and financial universe is going to make it a more preferred centre of financial exchange.

You may also recall that the shadow of the crisis was there last year itself and I had reported it while also admitting that the extent and the timing is difficult to judge. However, I maintain that troubling times in west will eventually have no bearing on India and if at all some thing happens it is going to be accelerating economic development of India and more particularly its being a nation worthy of absorbing the world’s saving surpluses which found no ‘safe parking places’ in developed nations of the world. The forced parking of such funds by the investment bankers is the root cause of trouble. When it will be analysed as to who got hurt the most, it will be noticed that while the investment banks got out of business and equity holders of the same institutions got nothing for their share-holding in some cases and got some pittance for the transfer of equity to the bailing out entity (govts included). The group suffering the most would be the ones who placed their money for management to these investment bankers who would get what ever is salvaged after making the borrowers (mortgage holders) some concessions and after suffering the loss on transfer of investment to new buyer (at current lower rates) after the market is established by the injection of funds by central bankers. These owners of funds under management kitty of the investment banker belonged to savers (the savings for future consumption). Such times came for the world order and did not allow the savers of yesteryear to have claim on future production of goods and services to the extent expected/desired or planned for (remember the adage ‘Laxmi is Chanchalaa’ ie riches are nimble footed). The greed to not only preserve value for the future consumption but also to grow it more on the strength of high interest albeit at high cost had to and did boomerang. The investment bankers created faulty atmosphere of optimism and all in the interest of earning hefty commission and fees by promising to increase wealth through sheer foolhardy and speculation.

The other cross current was that the world represented by two big ancient nations ie China and India had woken up to have their rightful share in world’s mineral wealth and and retaining their own for self use by increasing productivity of labour and capital and through benefits flowing on account of size of market domestically. Isn’t India ready to be the hub of export of vehicle of every size and use in a span of fifteen years. It is the result of optimum level of production achievable here. This advantage is not going to go away and would increase so the slow down fears are basically un-founded in India. However, China may go with some years of adjustments and pains due to the need to organise the markets more based on natural exchanges and make them more free. There is only a muted resentment for its controlled exchange regime which will be openly decried by USA and the rest. We Indians have therefore an edge over every body else. The shot in arm has come in the form if the Nuke freedom is used for peaceful uses. There is an immense scope for absorption of world’s saving as every unit of capital invested here in infrastructure projects (like railways, roadways, air-ports, dams, power projects,sea terminals and the tourist sites related) at nominal rate of interest (not high) which will be generating surplus to be shared by all the stake-holders. It is for this reason that FDI has not slowed down even in face of such crises, the world over. Indian markets for the goods and services are not going to shrink due to millions in villages. It is going to form the buyers’ universe as opposed to city centres based demand. There may be a slow down like in 1998 and 2001 but it will only be for creating some gap for breathing after running at high pitch. This would not be bad for a marathon running spree.

Now, visualise that the sellers in markets were coming perforce and were selling willy-nilly while the buyer was coming reluctantly due to the atmosphere confusing him. Has there ever been such a grand opportunity for making an entry. Haven’t you wondered that more than the real decline in earnings it is possibility of slower growth that is weighing heavily on minds of people. Further, the crisis at hand of the world economies has created an atmosphere of sudden impulsive growth due to increase in money stock. As the normalcy will return, the case of too much money chasing too few goods and investibles will follow suit. Again I would say that the inflation in India is working as friend of investor not otherwise. The welcome gesture finally to happen is the lowering of bench-mark interest rates by RBI. Didn’t you read earlier that increasing money supply is easiest of task for the govts, it is taxing every pocket without having to collect it effort fully. When this is may save economies why would they think twice, no body is going to blame them for this for it will be for a noble cause.

Now, one thing is clear that we have to have central bank of the world and a world currency which should have some controlled issuance and which should be currency for international trade and local currencies may have there own conversion rates under guidance from the local central bank. Why do we need to base international trade in currencies of countries who have fragile financial systems themselves.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Have a good night sleep today

Friends,

Emerging out of the cabinet meeting yesterday our FM said firmly that while India may suffer due to the world crisis, there is no dearth of instruments with RBI which may be used to do the necessary to impart required liquidity. There would be no shying away from the responsible proactive formulation of the financial policy.

He went to length of recounting the statistical numbers in the same breath. He said our banks have capital adequate ratios between 10 to 13.65 pc, well above the Basel norms. The indirect tax collections are over the target and growing by over 14 pc, the September custom collections are higher than average of Apr-Aug. Direct tax front shows personal income tax collections have grown by 23.4 pc and corporates have contributed 35.3 pc more, he added. The GDP numbers have not suffered too much loss of growth so far. The export performance is up 35.1 pc in apr-aug and the imports have kept pace at +37.7 pc. Railways have carried +9.4 pc revenue earning traffic. Liquidity is coming from many quarters. He has meant all is well here, the panic is misplaced. I think it may be by design of some in some ways.

The bear has had an edge but has not found opportunity to get out of his positions at profits so far, he will be a bigger bull by compulsion than the bull community.

Last day’s losses of US markets have been recovered in DOW Futures, Heng Seng has added 500 points to yesterday figure, the Nikkei was the biggest loser yesterday but today remains flattish, Kospi is up only slightly and Shanghai is confused in narrow range but Straits is straight up by 62 points while Taiwan is losing ground. We will have keenly watch the Euro zone performance today. The shallowness of trading in India should be making it oscillate in wider but positive territory.

The much awaited N-deal has been signed by Bush with fanfare, not out of love for India so much as out of necessity for the ailing US economy. If any thing, pseudoism is the main policy plank of America. Let us be magnanimous in our attitude after all the mantle will have to be borne by India eventually for at least the middle,south and far east Asia.

Would you now have a good night sleep today!

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Debt to GDP ratio in India and US & Europe

Friends,

The debt to GDP ration in USA,UK and European countries is in high range of 200 to 250 pc while in India it is just 60 pc. This makes us pretty immune to the crisis of similar nature that Western countries are facing. Further, the mortgage related debt to GDP is between 80 to 100 pc in USA and Europe while in India it is pretty less. this also is going to keep India from facing a similar crisis.

This is a kind of de-link which will keep India in good state. Another point in favour India is the increasing give and take between cities and rural areas. The companies are readily planning forays with the rural areas in mind.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Equilibrium may be deceptive

By krsna Khandelwal – A veteran market analyst

Friends,

The ‘bailout’ package has been accepted by the congress and house of representative may formally clear it today or tomorrow. It has many new provisions with single most important one being the guarantee for bank deposits up to 250000 dollar against 100000 dollars . It is a very good thing to do for return of confidence in banking system but basic work for really ensuring it will have to be done in all earnestness and speed. There has been a luke-warm response so far to the developments in terms of gain in indices in Asia and European markets so far in the day.

I had voiced concern about Indian authorities keeping at a time when they should communicate with public and luckily they are now doing so. The PM said that he does not expect the India remain unaffected by the cross currents of economic flows. I am surprised that why he does not find a solution towards the problem of high interest being paid by credit card holders and other loanees. The banks are happily increasing the family of such people who are likely to become their bonded labourers after some time. There would than be defaults and there would bank failures for after farmers,these people and than the industry business people and the house mortgage-wallahs would out of necessity or by design come in to default. We may harshly blame the people running the failing banks in USA but the slide in property price was rather too sharp and too soon and therefore boomerang. Had it been after some years later or slowly, these very people would have been praised for they did for there depositors and shareholders. We are not too much in US like position but we definitely are in a similar position. The trigger may come in a different way or differing intensity. Should a PM acknowledging it not be acting in good time capping the interest rates chargeable. If interest rates are capped banks would themselves be more choosy and not rope in any soul in body in their marketing enthusiasm.

Indian exports went up 27 p.c. And imports by 51 p.c. Leaving a deficit of 14 Bn dollars for the August month.The auto sales numbers have been reasonable good and speak volumes for our economy being in health at least if not pink of it.

For the record please not a few rates in INR:

Steel Ingot(GZB/NCDEX)Rs 30510/ton.

Silver 19159/kg

Gold 1324/gm

Sugar (DLH/NCDEX) 1850/qtl

Call Rate 14 pc

10 Gilt yield 8.46 pc

Re/Dollar 46.61

Crude 97/bbl

Note Some Ratios:

Nifty(3950) 16.66 PE

PCR 0.69

Nifty PCR 0.92

T/O at NSE 48K Crs (F and O)

T/O at NSE 11K Crs.(Cash)

Every thing seems to be in its normal state even when the biggest ever drama is being played out in financial arena. This equilibrium may be deceptive. The sudden moves may be in any direction. I hope in India it is more likely to have upward thrust. I say this because there have too much preaching about remaining out of stock market crossfire and too much discouragement has been directed at listeners by the channels particularly. Our behemoth insurer LIC has shown profits of over 10 pc during last year. Our herd like behaviour as investors may in fact leave the safe point well behind in the next surge.

Let’s watch with fingers crossed for the night.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Newer bailout plan to take care some concerns

By krsna Khandelwal – A veteran market analyst

Friends,

There is going to be a second vote for a newer plan which would take care of the concerns of those senators who cried foul the first time. The gravity of situation is such that no skeptic can really afford to be solely responsible to see the bailout effort stopped in track as no body has an idea as to what would happen if the plan is not approved. The ones pressing for it have told that it may work and without it the disaster is awaiting. If is really difficult to fathom the depth of crisis or rather it is fathomable but the analysis would reveal such ugly facts as would not be likable to any body. Who wants to know the gory detail of rape scene and what has happened is no less than a gang rape of the financial system in USA.

How far is India going to suffer supposing the administration of the concoction fails to help the ailing financial world. I think India will be impacted but not in terms of corporate performances. The sell off may destabilise the stock markets for some time but since there has been too much harping on this subject that the stability will soon revert.There is another point to consider. India still is not a high cost economy and USA is. USA has to be economical in living style and production systems. In the end the present and future pensioner will suffer more because the values of currencies has to be diluted to save the world borrowers . The lenders have to accept some lower value returned to them while the countable currency not may remain the same. As I told a long time back the excessive saving pool should have seen the interest rates almost negligible as it happen in Japan but the lenders pressed loans with a view to earn higher interest from anybody who seemed to be welcoming the loan. Now its them to be ready to receive less in value terms. The housing prices have to improve which is possible with injection of capital or say raising of money stock. It will not only the housing prices go up it will make price of every thing go up. You may have noticed gold prices going up before even this has been done. Is it not dilution of value of money named as dollar, rupee etc.

Indian market as also European markets have closed better by slight margin. DOW open low, went down lower and is not at par at this very hour. About a few minutes from now the congress will start debating the fresh ‘bailout’ plan and vote for it.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Hopeful Signs in the markets world over

By krsna Khandelwal – A veteran market analyst

Friends,

The DOW closed up nearly 500 points. There is a possibility that the rescue plan is okayed today itself. The world markets are saluting the developments in America. The gloom is giving way to bloom, Indian market which has seen triple bottom formation yesterday,is bound to be seen by the investors a better place than any other place in the world for investment. The FDI in last month has been the maximum. The FM the SEBI Chief have confirmed that there are no regulatory black holes here and RBI has endorsed the capital adequacy of ICICI Bank which was rumoured to have been affected due to American crisis directly. The freight rates are down and would give phillip to international trade and cheap transportation of bulk commodities. India imports in bulk coal and oil and exports in ores and other exportable. Sugar and food now form part of bulk commodities that are exported into and out of India as per the need. The USA is in process of loosing its clout in the economic and financial world while it may have retained its political clout for the time being after USSR demise. The China remains a mysterious state even after its rise in economic field, in financial field it is still in nascent stage. USA wants and has demonstrated that it wants to side with India against China in granting the second status in importance order. This may not have come as an open thing but is seen by the discerning eye. It is also a right thing to happen but India has to ready itself for it.It has to therefore take rapid strides in economic field. I hope the next govt is headed by a person of calibre of Vajpayee or Man Mohan. The small time politicians will remain but the country should have a balanced and non-partisan person as head of govt at least, the head of state here is not so important and may well reflect political remonstration.

I have to write all this for the feel of times while seeing this site recording economic and corporate history with share market in focus.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – US may eventually finalise the rescue package

By krsna Khandelwal – A veteran market analyst

Friends,

US senators may eventually finalise the rescue package before long. The dissenting parties have understood the need although they have their own ideas to put forth. It is remarkable that while the country is besieged of the problem, its politicians are not eager to put blame on any body in a hurry and are only more concerned with immediate remedial measures and are in process of finding the best solution. This is a hopeful sign for everybody connected with the financial markets, this way or that, the world over.

I think that we in India should be now initiating a plan on the lines of pooling a kitty by a charge on every kind of financial transaction by institutions and banks. For this purpose the STT levied by Mr Chidambaram may be now transferred to such kitty instead of its enriching the exchequer. This will also set right the disenchantment with this levy which is felt to be burdensome so far. The pooled fund should allowed to be used in future as per the recommendation of an standing committee consisting of eminent economists and parliamentarians and govt officials when they see a need for it to subside any turmoil in the financial markets. The member should hold office for no more than nine months and may come back after a lapse of eighteen months. The strength of the committee may vary between seven to eleven members.

The integration of world markets may put the financial system of any country to strain without much notice. It is also possible that there are problem due to deliberate acts/acts by design of some. There is therefore a need to have an enactment where the key management people pay back to respective failing companies/institutions what ever they have received by way of remuneration and incentive during the current and previous one year. Since there is no ceiling on pay packages, it may also be possible that some enrich themselves seeing the forthcoming financial tightness. An act on the lines suggested above would ensure some balance. It may also be useful to disallow the tax concession to companies on payment to one individual beyond a certain ceiling. This will ensure that only those who are indispensable and utterly important for a company are paid very handsomely.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Bankruptcy of Lehman Brothers

By krsna Khandelwal – A veteran market analyst

Friends,

You have been listening to my loud thinking showing incoherence in thought pattern. In fact some unknown big event was about to take place and I was sort of having an inkling. It turn out that Lehman Bros. have filed bankruptcy petition and Merrill Lynch is going to be taken over completely in all stocks deal by Bank of America and the world should feel relieved. Some smaller banks may still go down under. This made the market in rest of Asia unnerved in early morning and we did no better and at one stage Nifty was down more than 5 p.c. but recovered towards end to close lower by a good margin at 4070 still.

In the mean time the crude is trading at 97 dollar/bbl and rupee is almost 46 to a dollar. This has subsided the inflation fears to some extent. So now the balance sheet is with some more positives for the Indian markets but the scary scene in USA is not letting a stabilised atmosphere be established. The DOW is trading lower by more than 300 points and I have to think out of gut rather than mind. So follow your gut feeling and retain guts. My last post should be taken as guidance. In fact it conveyed much of the scene that was enacted today. In fact inflation has been a saviour of India for lack of it would have surely put our banking net-work under strain. Its not that there will be no tomorrow and keep in mind if winter comes can the spring be far behind.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – India : An economy with growth potential

By krsna Khandelwal – A veteran market analyst

Friends,

An economy with growth potential which has been growing at fast speed suddenly looses stream and slows down. Its productive assets get revalued and sell way too cheap. Would such an economy not see resurgence in demand and be back on fast track shortly ? It has to because an economy at lower rung of developmental stage opens for itself, after every mile stone crossed, a whole new set of vistas of opportunities and calls for investment. The productive assets then again intensively churn out goods and services for consumption and for creation of fresh productive assets in response to opportunities at hand. The growth cycle moves speedily again and the hick ups gone. The global events and also some local events make things look bleaker but usually don’t prove to be stumbling blocks in path of progress for the budding economy.The monetary flows shake up the economy but on net basis do not damage in any lasting manner.

The above is true for India. India today is seeing investment scope in the fields of hotels where more room have to be added then existing, a thousand railway stations have to be rebuilt, the metro rail is the crying need for a dozen cities, the facilities for sports have to grow ten fold, the schools have to be renovated and new schools have to made, the bridges on rivers require attention, railway freight corridors have to come up, the bullet trains are due for linking big cities, the irrigation and water resource management is another big field, the health services network requires attention, almost all tourist spots have need for more investment made than has so far been made and the list is endless. In this light should we not become a part of the productive whole of India by investing in it in these times of cheaper availability of assets.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market