Archive for the 'Economic News Analysis' Category

Market Matrix – Have a good night sleep today

October 9, 2008

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

Market Matrix – Welcome thing for the Indian economy

June 29, 2008

By krsna Khandelwal – A veteran market analyst

Friends,

The employee salary bill for the central govt. in India costs now 2% of GDP. It was higher at 3% in 2001.

This is a very welcome thing for the economy which has expanded a lot since then. The concern for the poor and the concern for defense are no less than in 2001. The terrorism also keeps the govt. on the toes. In this light the wage bill of govt. should have gone up but it is down. This may have happened for two reasons i.e. firstly the communication has become cost effective and secondly the improved job market has made the govt. jobs less attractive.The political leaders do not have pressures from the masses to have more openings in the govt. sector. We should feel that this situation is good for the markets.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Watch smart money, it will be seen getting in to stocks

June 2, 2008

By krsna Khandelwal – A veteran market analyst

Friends,

The present times have been most confusing in the Indian stock market place as well as in world’s other markets. The cross currents are very many and no two analysts are in agreement with each other. I am in fact looking at things in slightly different light. You may have noticed my bearish bias from later half of the year 2007 and you may be thinking as to why I have turned bullish in spite of the many matters that have been mostly seen as not very good for the markets. I give my reasons below:

Firstly, my idea about the market is bullish on account of the basic strength of companies in India which has grown in the last two to three years of high profitability and retained profits.

Secondly, the inflation that has made the entry for the new players rather costly.

Thirdly, the high oil price is a dampener but has lost its future impact for it has been there for far too long. If any thing changes in the oil sphere it may only change for better.

Fourthly, the real interest rates are very nominal in India because while the inflation has gone up interest rates have not been raised here in view of cheap money policy being pursued in USA.

Fifthly, the rate of saving is very robust in India . The FD interest offered by bank does not cover even the erosion in value of rupee and is taxable. No rational person would therefore be comfotable to keep funds with banks and would be happy taking slight risk of fall in market but would go for equity investment. This at least makes him owner of some concrete assets and gives some money back through dividends.

Sixthly, the markets have fallen and hence the dividend yield has become respectable and is tax free.

Seventh point is that the rupee weekness of late has made the Indian industry less prone to competition from out of India . This has also made the IT scrips far better placed now.

Eighth point is that govt. has relaxed the investment by foreign entities in debt paper and this would see funds flowing in to India.

Ninth point is that while there is choppiness at the surface, there is bullish current underneath. The markets have not broken to new lows in the last three months.

Tenth point is that the slow down expectations have receded over the last three months as the fourth quarter 08 has not given bad result on average. The first two month of the current quarter have so far passed peacefully in spite of every attempt by the politicians to upset the applecart.

Eleventh point is that the corporate taxes, personal taxes as well as the indirect taxes are low when seen in historical perspective.

Twelfth point is that China has failed to impact the Indian industry by supplying goods cheaply and seems to have seen the folly in going for too aggressive export policy which has made inflation high there.

Thirteenth point is that the infrastructure spending is keeping pace and has not subdued.

Fourteenth point is that salary hikes will be moderated by the industry in times to come .

Fifteenth point is Indian banks have not been too badly impacted by the sub-prime crisis in USA and luckily the same kind of scenario is absent here as the property prices are holding firm and the housing mortgage business has not come under threat here.

Sixteenth point is that the loans advanced for purchase of two-wheelers and four-wheelers have not seen defaults of menacing proportions and the banks have become slightly more choosy in the mean time.

Seventeenth point is that the food inflation will moderate with coming crop.

Eighteenth point is that sugar is aplenty and the cane growers are not going to get too high prices for cane as they did in past. This will see transfer of some of the cane area to other crops, helping both fronts i.e. the sugar front and the grain and pulses front. You may see how the inflation in food prices and the glut in sugar was invited by the wily politicians. They are out to do the similar thing in the area of cement of steel by meddling in free pricing which is so necessary to ensure the balance in supply in times to come.

Nineteenth point is that the next elections are likely to throw up a majority commanding party (or compact combination of like minded parties) unlike the compulsive adjustment of pseudo rightists and pseudo leftists.

Twentieth point is that the govt. has comfortable tax revenue which will be sufficient to take care of some spending for populist causes.

Twenty first point is that the organisation of Indian stock market place is near perfect and it responds to the new needs in a smart fashion. There has a near absence of the scams.

In the end suffice is to say that if you keenly watch smart money, it will be seen getting in to stocks rather than going out of it. The correction from top of the order of 25% is no small thing to happen. This has happened during the period when the profits or sales of companies actually did not suffer. Market was wrong in the month of Jan 08 at 6000 plus Nifty level and the market is wrong at sub 5000 Nifty level just now.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix as on 18 Jan 2008

January 18, 2008

By krsna Khandelwal – A veteran market analyst

Friends,

Asian,US and European markets are all in a mood to take a dip. Sensex suffered a good fall and is settled below 20000. I expect a worse scenario. I place the right value for Sensex at 17500 and for Nifty somewhere at 4800 . Any higher point is a higher risk and lower reward. Let us see what is actually in store. The future events may force me to further down grade the performance of indices.

Our Mr Man Mohan is shaking hands of Chinese leadership in Beijing during his visit to China but handshake with Chinese leadership will never be with a warm heart. He is also attending meetings for the resolution of border related issues but this is only to postpone the time to come to brass tacks. Actually both are overwhelmed by the business prospects and therefore would keep at bay other worries and remain confused. Only thing that China feels secured under its military might and its ability to give marching orders to forces at will and without preparatory diplomatic work unlike India.

What are the options for India to remain free from dragon breathing up its neck. I think the best is to not bring to fore any concerns at all and just allow the Indian businessmen and Chinese business interests to exploit every business opportunity available, without helping it and without curbing it. Let Chinese authorities take their own stand . This may eventually prove to be state of entrenched business interests on both sides and leave the border related matters as of least importance. However, there would always remain a need for India to keep building up its military might and remain in state of preparedness. It is also to be followed for reasons of remaining prepared of USA’s adverse stand in future and also from a combination of Pakistan plus others. Needless to say that in the new order India has to emerge a power block itself and not just catch coattails of some other big power .

IBM posted better profits on the strength of weak dollar. The falling USA market at one point may turn fit for investment against emerging markets.

Peak power deficit hit highest point in Dec 07 for the year 2007 at 156% due to burgeoning demand and less than targeted addition to capacity. The peak demand was at 106184 MW during Dec while supply was 89620 MW.

Citi Group Inc posted biggest losses in 196 years history due to write down at $18bn.

Infosys forays in to Indian BPO market. This is going to be a big stabilising factor for Infosys in future. India outsourcing market has been growing at 56% and would grow to Rs 36000 crs by 2010.

Digby Jones, the British Minister for Trade, is not pleased at the manner in which RBI has treated application for opening of 100 rural branches by Standard Chartered Bank. Bank would like to spread some micro finance in villages enabling inclusive growth but RBI’s protectionist policy in not allowing it open branches is sen by him not right under the circumstances.

Apollo would put tyre unit in Hungary at an investment of Euro 200 mn.

PM’s Advisory Council has recommended slashing excise on consumer durables. I think this is not right thing to do. There should be reasons for the govt. to forgo revenue otherwise it will spur so called growth. While it is 16% , the service tax on tele-services is at 12% and this is contributed by mostly the poorer sections of society. If the revenue is not required better reduce the service tax on tele-services.

SBI has 2 lac employees , 9500 branches and operates in 32 countries. SBI is thinking to offer ESOPs to its employees which will form about 0.7% of the capital. Not a bad idea but it has come pretty late in the day.

Goan protests against SEZs and the state govts’ sympathetic stand has forced the central govt. to find ways to scrape the SEZs midway. Center may allow scraping the SEZs if the amount spent so far is compensated by the state govt. This idea is not bad considering the possibility of setting right a wrong. That SEZs concept was faulted one was mentioned in these columns long back when govts were busy giving clearances. SEZs happen to be for the benefit of industrialists and the Neta/Babus. The public does not see any benefit coming to them in general.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: this is not a blip, it is beginning of a slow down

January 13, 2008

By krsna Khandelwal – A veteran market analyst

Friends,

While the IIP growth in Nov 06 was 15.3% , it is only 5.3% for the Nov 07. Infrastructure growth also plunged to 5.3% in Nov 07 (9.6% in Nov 06). Rajiv Kumar, Director and Chief Executive, Indian Council for Research on International Economic Relations said :

‘ this is not a blip, it is beginning of a slow down. Domestic demands hit by high interest rates and external demand is hit by rising rupee. This is double whammy. This could represent a turning point in business cycle. The govt now needs to get in to the act as target of double digit industrial growth for the fiscal will not be achieved.’

Following Gujarat, Maharashtra also would be abolishing octroi. 22 Municipalities in Maharashtra gathers Rs 5572 crs as octroi.

Wheels of big economies once turning slow can not be put to accelerate in a short time. They may whine to even a slight reverse turn and then only get to turn spinning in positive direction with acceleration.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market