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Thursday 31 December 2015


Financial stability report was presented by RBI on 23rd December 2015. The major issue discussed by the media was with respect to dividend policy followed by the PSU banks. The other major highlights went unreported. The financial stability report is a confirmation of the improved macro-economic conditions and lower domestic risks present in our economy. The central bank accepts the fact that despite improved macro economic fundamentals, domestic demand remains weak and the government faces stiff challenge of going for higher public investment with stringent fiscal consolidation.

The major part of the report focuses on financial system and its major constituent, Indian banking sector. The banking sector has been facing increased risks due to deteriorating asset quality, lower soundness and sluggish profitability. Gross non performing assets ratio increased between March and September 2015, whereas restructured standard assets ratio declined. Without getting into numbers, PSU banks lagged behind its private sector peers with respect to asset quality, profitability and capitalization. The central bank also assessed NBFCs, insurance and pension sector and Indian capital markets which kept pace with the changing global scenario by creating special platform for start-ups. RBI has also recognized the role of domestic institutional investors especially mutual funds for being a stability factor against volatile foreign portfolio investment flows.

The systematic survey conducted by RBI indicated that global risks continued to be perceived as major risks facing our financial system compared to domestic macro economic risks which have receded over the last one year. Thus the Financial stability report concluded that India’s financial system remains stable and resilient with strong macro-economic fundamentals against global uncertainty and its inherent risks. 

Monday 28 December 2015

Now that we are way past US FED rate hike and ECB quantitative easing, we can now look at our own domestic economy and major reforms undertaken in 2015. Being an emerging market, our economic outlook is so much dominated by inflows and outflows of FDI & FIIs, that we have forgotten our own financial gangotari, our rural unbanked population. The Pradhan Mantri Jan Dhan Yojana (PJDY) has accumulated, approx Rs. 26000 crore as on November 2015 by opening 19 crore bank accounts within one year. This feat would have been impossible without vast penetrating network of our PSU banks. Even though we feel that our PSU banks are there in every nook and corner of this country, 40% of our population is still unbanked. Thus, the Indian banking sector especially PSU banks needed a structural overhauling to tune in with volatile global scenario.
The year 2015 started well for the banking sector with ‘Gyan Sangam’ in January where the bankers (PSU) along with government laid out both short term and long term goals for strengthening the Indian banking sector. This was followed by the 7 point ‘INDRADHANUSH’, program launched by the government on 14th August 2015. Though the banks had been long asking for empowerment, higher capitalization and removing bottlenecks for de-stressing assets, the major breakthrough was splitting of CMD & MD posts and bank board bureau for monitoring the performance of the PSU banks. Licenses for small and payment banks completed the picture and thus fulfilling the financial inclusion agenda of the government.

PSU banks have under-performed in the stock market in 2015, due to lower profit margins, NIMs and falling ROAs compared to their private sector peers. But in the long run, PSB banks will not only outperform but will tether the whole financial system together making the Indian economy even more resilient and dynamic.   

Saturday 26 December 2015


The recently concluded winter session was pretty productive compared to the previous monsoon session. This winter session had altogether 20 sittings with over 60 hours, of which 47 hours were used to discuss and argue petty issues. Lok sabha passed 13 bills whereas Rajya sabha passed nine. The major bills passed included Negotiable Instruments bill, Waterways bill, Scheduled Castes and Scheduled Tribes bill, Juvenile bill, Arbitration and Conciliation Bill, Atomic Energy bill to name a few. The last three days were the most productive with Rajya Sabha passing six bills that to without discussion.  

With GST stalled and Bankruptcy bill referred to joint committee of both the houses, reform agenda of the government remains unfulfilled. Passing of GST bill would improve ease of doing business in India and propel our GDP by 1-1.5% whereas Bankruptcy code would improve stability of our banking sector.But who cares?

Even though US FED has indicated further interest rate tightening in 2016, global economy would still be flush with capital to be deployed in investment destinations providing transparent investor friendly laws along with stable returns. Foreign direct capital was $16.60 bn in April to September 2015 compared to $14.70 bn in the same period previous year. There was a modest increase of 13% YOY. If FDI flow has to be enhanced all political parties need to rise above petty politics. Next general election would be in 2018, just two and a half years to go and as witnessed in 2013, the level of intolerance among Indian electorate is growing. 

Wednesday 23 December 2015


Kingfisher airlines would be the best example for making anyone understand, why bankruptcy bill needs to be passed. It took two years for the creditors to get hold of company’s prime property, Kingfisher house, for recovering a debt of $1.5 bn. This shows the strength of our current bankruptcy law and the urgent need for reforming it. Our banks have been victims of such financial irregularities as law always gave benefit of doubt to the debtors affecting the financial health of the banking sector and of the economy as a whole.

Bankruptcy bill introduced by the government addresses the issue of fast recovery and ease of doing business for the creditors which get stuck by willful defaulters. Time frame of 180 days has been specified for completing the insolvency process and can be extended by 90 days in certain cases. Thus fast track resolution of bankruptcy issues will allow failed business to windup and freeing up of capital which can be used in other productive assets.

The insolvency process can be started by financial or operational creditor or the corporate itself on the default of debt by filing proceeding with the National Company Law Board. Committee of creditors comprising all financial creditors of the debtor would be set up. The committee needs to come to a consensus with 75% vote for restructuring, if not company will be liquidated. Apart from getting it through parliament, government also needs to put the required infrastructure for implementation of the bankruptcy bill to improve India’s ranking currently 136 in the ease of doing business index. 

The new H-1B and L-1B visa rules are going to cost around $ 200 mn every year to the Indian IT industry. America, being the most liberalized country has shown how protectionism has to be implemented at the expense of the rest of the world. Instead of whimpering, we should also implement swachh bharat cess on services offered by MNCs. But we won’t do that. Our slogan has always been ‘Bhai Bhai’ for everyone and never ‘Eye for an Eye’. In the current scenario hard core professionalism should take over our world renowned ethical values. 

Now that H-1B visa issue is a done deal, we should be worried about the next target and be ready for it. No prizes for guessing. It is going to be Indian pharma industry which accounts 30% in volume and 10% in value of the $ 80 bn US generic pharma industry. 

Monday 21 December 2015


So, the game is still on. Now its OPEC’s turn to make the next move. US Senate has lifted the 40 year old crude oil export ban to re-energize its domestic oil market. As a result there is more glut or in other words a highly satiated global oil market. Refined oil was already being exported from US, but now like any other oil producing country, US is going to export crude oil to the world. Though chances of oil prices crossing $60 or $70 have become thinner, US oil producers will benefit as now WTI price will not fall below their cost of production. Thus US shale oil producers are trying their best to improve margins. What is to be seen next is how OPEC is going to defend its market share globally. For oil importing countries like India, Make Hay Till the Sun Shines.

Saturday 19 December 2015


BSE Sensex closed 284 points lower and its counterpart Nifty 50 fell 1.05% yesterday, don’t worry there is no vendetta here. Bank Nifty fell 0.88% because of new base rate guidelines announced by RBI, IT sector fell as HIB visas became more expensive, energy and commodity stocks declined due to OPEC and china slowdown, and of course our own GDP revision, the list can go on and on ……

Though the global sentiment is negative because of so many obvious reasons, is any body lamenting here. What did the senate do? They are fast putting their house in order. Their economy is improving, currency is strong, employment levels are high and of course they have politicians ready to put their work before their grievances. Last night, senate has passed $1.3 trillion spending bill to fund the government till next September. Perhaps, US Congress could be coaxed to organize a workshop for our parliamentarians to explain them how to do business, pass bills, negotiate and strike deals fulfilling each others agenda and not stalling work for the betterment of the country.

Right now, they only have three days left before winter session closes on 23rd December and so many bills to pass, if only we could expand time as per work. As for workshops, may be before next elections.  

Friday 18 December 2015


While we were still reeling under the after effects of US FED rate cut, RBI gave its own booster shot to the banking sector by announcing the new base rate guidelines. Base rate system was instituted from 1st July 2010 and all loans & advances were priced only with reference to the base rate. In simple terms, banks could not lend at rates lower than the base rate determined by them. This was done mainly to impart transparency in the whole lending process. But as credit growth faltered and non performing assets mounted, RBI has come up up with this magic formula.

As per the new rule, banks cannot have their own base rate methodologies based on average cost of funds, marginal cost or a blend of both. They have to calculate their base rates based on marginal cost of funds and transmit the repo rate cut benefit to the borrowers. Yes, of course, it will bring uniformity among the banking sector and perhaps also transparency but will it propel growth of banking sector loan book. Credit growth cannot be created by banking sector; it can only manage and be a source of credit. With GST and bankruptcy bill stalled in parliament, may be the RBI is just doing it’s bit.

Thursday 17 December 2015


Madam Yellen is definitely better than her predecessor, Mr Ben Bernake. She did not give, ‘zor ka jhatka dheere se’. In fact she managed in a way that everybody took it well. There is no mayhem in the markets right now and whatever it was for the past few days, you can’t blame her. Credit for that goes to everybody from OPEC to US shale oil producers to Russia to Syria and not to forget our own politicians performing various theatricals to pass this GST bill.

I remember the days of my booster shots when my mom used to update me few days ahead of that horrible thing. I felt awful everyday and mom made it atrocious by telling me that it for my good only. But once it’s was over, I definitely felt better. I think the markets share the same feeling after the 25 basis point shot, they are feeling better. Our domestic indices opened positively and of course Dow Jones jumped 250 points and S&P 500 gained 1.45% after the rate cut.

Coming to the FED rate, it is now in the range of 0.25% to 0.50%. US FED has also made its clear that policy stance remains accommodative and further rate cuts would be dependent on the conditions of both the US and the world economy. Strong US economy is good news and though the inflation target of 2% is yet to be achieved, high employment levels will lead to higher consumption and higher imports benefitting the world economy as a whole. For India, higher FED rate means dollar borrowings will be expensive for corporates which account for 80% of our total foreign borrowings. With CAD and fiscal deficit in control, India is well placed to weather the coming US interest rate policy tightening in 2016. As for the stock markets, they have to start looking for the next volatility trigger factor to thrive.  

Wednesday 16 December 2015


Termed as an inflation hawk by industry and analysts alike, our RBI governor would be smiling after IIP data release. Vindicated, it would be difficult to push him towards severing repo rates at least in the current fiscal. And there is not much reason for further rate cuts with IIP coming at 9.8% for month of October. Of course, next month IIP data would not have the low base effect but things are going to improve from here on. Sectors indicating economic activity, manufacturing, electricity and mining reported 10.6%, 9% and 4.7% rise respectively YOY. In addition to that even consumer durables and capital goods category went up by 42% and 16% respectively in the same period previous year.

Growth is not possible without mild inflation. And we do have this requisite ingredient with CPI at 5.4% (November 2015) well within the target band of RBI and WPI at lower negative rate of 2% which has risen for the third successive time this year. Indian industry activists would still believe that India is going through deflation as for them repo cut is the only panacea to lower their cost of funding. Thus the only thing they can do is praying to the rain gods because if they don’t oblige for a third time in a row, RBI would not be coerced to ease its policy in the midst of high food inflation.  

Monday 14 December 2015


IIP reported blockbuster numbers of 9.8% for the month of October 2015. Though so much has been written about the low base or negative base effect of (2.74%), it still holds well with respect to quantum of growth which is the highest in last five years. The negative growth last October 2014 is attributed to Diwali shutdowns & holidays in addition to poor form of the economy resulting in almost double digit growth in October 2015. Important sectors indicating economic activity such as manufacturing, electricity and mining rose 10.6%, 9% and 4.7% respectively YOY. The October IIP data has been complemented with WPI at a lower negative range of (2%) for November compared to the previous month for the third consecutive time this year signifying diminishing deflation.  Last but not the least, CPI came at 5.4% still within RBI target band. These numbers show that our economy is regimented and of course resilient. Do we still need to worry what Madam Yellen is thinking right now?

Saturday 12 December 2015

Is India the silver lining for the slowing global economy?

BSE Sensex and Nifty both fell below their respective psychological barriers of 25000 and 7600 respectively on Friday. Investors are just thinking; what if there crude oil touches $ 20 or FED raises its interest rates steeply or China slows down further. But aren’t we over-reacting. Okay foreign investors need to worry as US interest bearing instruments will give better returns and they need to re-balance their portfolios. Of course markets will be affected but it will be a short term impact. Coming to crude oil, Brent crude is $ 40, so let’s make hay till the sun shines. With lower CAD and fiscal deficit, government can drive more into public expenditure contributing towards investment and production.  

The huffing and puffing of the second largest economy has been impacting global economic health. Lower domestic demand is also forcing China to export excess steel, aluminum and petroleum impacting commodities prices worldwide. China became economic powerhouse on the basis of its exports and high availability of skilled cheap labour. Things would have been different if China had concentrated more on its domestic consumption.

Inspite of all these problems, India is still favorable investment destination, WHY? Because we mitigate their systematic risks. We have a stable macro economy which will be galloping in the next two years and our vibrant primary market should be taken as the best lead indicator for future growth. Companies have raised close to Rs. 13000- 14000 crore in 2015, which is one of the best performances of Indian IPO market over the last five years. Even IIP numbers for October  (10.8%) predicts a silver lining not only for us but also for the rest of the world.   

Friday 11 December 2015


To hate uncertainty is human nature. When Arjun asked Lord Krishna how the war will end, Lord asked him to do his karma. We should all observe this in every sphere of life, even in stock-markets. Smart informed investors will not wait for the FED rate hike, they will buy strong valuable companies available at low prices when everybody else is selling. In cricket men are separated from boys. Similarly smart investor splits horses from mares in a stock-market and waits for the appropriate time. As time justifies everything.     

Thursday 10 December 2015


This is no contrarian view that you need to go against the market. The behavior of the market over the last few sessions just forces you to think otherwise. Sensex has lost around 1000 points or 5% over the last five days. On Wednesday it fell 274 points and its counterpart Nifty by some 89 points. May be its general upheaval in the markets. Yeah it is really, But how?

Lets’s, first look at our in-house contribution. The GST conundrum continues, thanks to our political parties and now even the courts are involved. So DEADLOCK and the fate of other bills also seem uncertain. So the general feeling among the business community and markets is that nothing is moving. In addition to this, US FED, OPEC and China slowdown have become constants in this equation of global volatility. So what should we do, nothing, just bid our time. India is a fundamentally strong economy guarded by institutions like RBI, LIC and SEBI. Things will only improve from here with visible results by mid 2016. That is the reason why domestic investors are buying when FIIs are selling. By the way Sensex is already up by 180 points.

Wednesday 9 December 2015


Lending rates should be sensitive to policy rates. This is what Reserve Bank Of India wants. In other words when RBI cuts policy rate so should the banks. But is this really possible. Is lending the sole function of banks. Advances or loans form the asset base of the banks whereas deposits in the form of current, time and savings constitutes the liabilities. So when the interest paid by the banks, the cost of deposits is not going down, how can income of the banks be reduced.

In addition to all of this non performing assets of the banks are still not under control and profitability is marred by rising provisions. In the backdrop is it possible for banks to reduce their base rates by following marginal cost of funds. And what happens when policy rates go up. Will we still be able to follow marginal cost of funds? 

Tuesday 8 December 2015


Markets discount everything according to Random Walk theory. But the side-effect is that markets have knee jerk reactions also as seen yesterday with respect to tobacco companies. ITC fell 6% whereas Godfrey Phillips and VST Industries tumbled 4% on Monday. GST report presented by our CEA scared the investors as 40% tax has been recommended which will affect profits of these companies. Really,  Is this going to happen. Well no.. revenues are increasing even after the tax increase in the recent budget. Revenues from cigarette /tobacco has increased 4% (QOQ) for ITC after the budget. Even the net profit for the company rose 7% in QOQ. Even if we consider ITC as diversified company, Godfrey Phillips has also improved its bottom-line by 53% in the current quarter compared to the same period previous year. So where is the HIT!!

Indian taxes are amazingly manipulative and for this tobacco industry is not be blamed. Taxes levied on cigarettes in India are on the basis of length and filter, thus providing enough room to avoid taxes. If demand of cigarette has to be curtailed, a single high tax rate on all lengths of cigarettes needs to be adopted. Can this be done? Just apply a single sin tax on tobacco. May be the government is following the Hebrew meaning of the word sin which means ‘forgetfulness’. 

Monday 7 December 2015


It is really a god sent tax, as people with different inhibitions can come and work together for betterment of all of us. Well I am talking about our politicians. But why are they so eager to do it…… You can call it anything…. Need of the hour or need of the day …. Whatever.  Business community both domestic and foreign has made it plain clear to set the ball rolling. GST is expected to improve tax compliance, remove multiplicity of taxes, thus reducing price of goods and services and boosting revenues. In other words it will be one of the stepping stones for ease of doing business.

Our Chief Economic Advisor submitted GST report which has already accepted the removal of 1% tax on interstate sales. The report recommends three tier tax structure with essential goods taxed at 12%, luxury goods taxed at 40% and standard tax rate of 17-18% for remaining goods and services.  The report also recommends revenue neutral rate of 15-15.5% at which there would be no revenue loss for both the centre and state. For a country as diverse as India with so many complexities, the three tier GST structure seems to be appropriate. In addition to that GST tax rate base has been broadened to include petroleum, electricity and real estate. Goods & Services Tax needs to be passed by the upper house of parliament and subsequently by state assemblies for its successful implementation by April 2016. Thus, political constraints and economic necessities should be crystallized into one unified transparent tax structure. This will not only raise our GDP but also transform visions like ‘Make In India’ into reality.

Sunday 6 December 2015


Cleanliness is godliness… But what it has to do with our banking sector? Nothing related to general cleaning of premises or painting their walls. It actually meant cleaning their balance sheets of non performing assets. And our RBI governor in December monetary policy has already given a date to it, March 2017. OMG less than 15 months. Banks especially PSU banks would be having sleepless nights if they take this date seriously. But how did they managed to amass so much of stressed assets (NPAs + restructured assets) and why only PSU banks. Gross NPAs of listed banks stand at Rs. 3.1 lakh crore in the current fiscal.

At the time of 2008 financial crises, our banks (especially PSUs) were prodded to lend aggressively at lower rates to stimulate growth. Though we managed to weather the financial crises well, the banking sector suffered leading to high gross and net non performing assets. In addition to that the banking sector needs to comply with BASEL III norms requiring higher capitalization.  

Central bank is right on its part asking for a fast clean up process as higher NPAs require higher provisions leading to lower profitability and reduced lending ability. With the number of private banks increasing and small & payments banks making debut in the next 2-3 years, our PSU banks do need to gear up. Our banking sector has almost insulated our economy during various global contagions, thus the cleaning process becomes all the more important in current irrational financial times. 

Saturday 5 December 2015

Killing them softly

Killing them softly

Oil importing countries like India, heaved a sigh of relief when OPEC decided against production cuts or raising their oil prices. So we still have some months to go before crude oil crosses $ 70 per barrel. So what are you thinking, oil is going to hover around $40 for eternity? The recent OPEC meet has forecast global economic growth at 3.4% in 2016 and the demand is expected to outstrip supply by mid 2016.  In addition to that demand for OPEC crude is expected to rise by 1.2 million barrels per day to average 30.8 million barrels per day in 2016.

But how will this projection come true. This is no calculated projection or estimation but a well laid out strategy. On 3rd December WTI crude breached $ 40 per barrel and as per OPEC’s estimation, non OPEC countries like US and Russia will face significant reduced production leading to contraction in oil supply. The number of oil rigs and capex has already fallen in US. Thus oversupply of crude oil by OPEC countries led by Saudi Arabia which controls one third of the total world production seems to be working. And by the middle of next year the 13 member cartel will again be in the driver’s seat charting course towards both higher market share and price. But with Iran entering the oil markets next year and refusing to adhere to any output cuts, the cartel is definitely not going back to its hey days of $ 100 per barrel.    

Friday 4 December 2015


Nobody knows what will happen on 15th December, but atleast ECB has decided not to increase the monthly pocket money. As a result Mr Draghi, the Messiah of EU has upset everyone. Why? He did not increase the monthly bond purchases. Reducing the interest rates to negative 0.30% and extending the bond purchase program was not enough. Markets asked for liquidity and they fell when they didn’t get it. Unconcerned whether the Europe’s economy is recovering or that euro surged by 3% against the dollar, stock markets across Europe declined after the ECB meet.  

Stock markets are no longer the so called barometer of domestic economy. They are now the thermometer of liquidity in the system.  Charles Dow who first designed the Dow Jones Industrial Average would be having hiccups seeing the daily rise and fall of stock markets worldwide and the amazing monetary easing going on. So in these irrational financial times, retail investors like us need to be rational as only FUNDAMENTALS CREATE WEALTH.

Thursday 3 December 2015


If I had a magic wand, I would have rescheduled ECB meet by a few days. Why? Our CPI inflation estimate for November will come by then. Definitely, it would be higher than 5%. So whatever increase 0.25% or 0.50%, we can just export it equally to both US and Europe (serious deserving candidates among so many contenders).  We will not have inflation and they will have it….. no stimulus, no interest rate hikes and then we can have our rate cuts. So growth growth everywhere……   really funny…. Wishful thinking can sometimes ease off the pressure.  

The Fed meet is regarded as a historic event scheduled to happen in the next 12 days. There is still no complete surety that US economy is back on track because of mixed signals. But they are sure of one thing. This spoon feeding has to stop. The sooner the better. If only the US regulators had put their house in order 10-12 years ago and tightened their financial system, this mess could have been avoided.  As regards EU, problems started the day they didn’t follow their own charter and admitted members not fulfilling the laid out eligibility criteria.

For us life will go on…  we already have green shoots. By the same time next year we will have flowers on them. Now flowers can be of two types. One real flowers and their fragrance reach even the rating agencies and they upgrade us. In other words we are on solid ground with fiscal deficit & CAD still in control, steady IIP and core sector growth and of course banking sector in better shape. Now the other scenario is, if crude prices take the upward trajectory, we will have higher CAD & fiscal deficit, high inflation, raw material input prices will increase affecting corporate profits and industrial growth and we have simulated or hybrid flowers spreading obscurity and uncertainty.

So in short, instead of thinking about the FED and ECB, we should be worried about the OPEC meet on Friday. WTI crude oil has fallen below $ 40 yesterday and if the OPEC members decide that they have had enough and cut production. We are in real trouble as crude oil constitutes 70-80% of our import bill.  So wishful thinking will not work here as crude prices will go up sooner or later and we should brace ourselves to face this eventuality. Alas! Americans are in better position, they have oil to their heart’s content and no inflation. 

Wednesday 2 December 2015


While watching recent RBI policy press conference, I went back in time (some 20 years), still in school when I first heard the word liberalization. It sounded like a magic wand or fevi-quick which will make everything up & running. Then also the first thing we did was compare ourselves to CHINA, the dragon. Twenty years hence, nothing has changed as someone asked the RBI governor (during the press conference), where do we stand with respect to China. On 30th November 2015, IMF included Yuan as the fifth currency in the SDR basket effective from 1st October 2016. So can we even afford to think like that? Yuan with 10.92% weightage in the SDR basket is way ahead of the Indian rupee.

China started its reforms in 1978 and we in 1991. Over the last thirty years, China has transformed itself into a global powerhouse with $ 10 trillion economy and forex reserves of 4 trillion dollars. So it’s just getting its due. Though some experts might argue that it’s just symbolic, becoming a reserve currency with dollar, pound, yen and euro definitely gives a high. In addition to that trade in yuan will go up considerably in the years to come.

We on our part  should stop playing this sleeping elephant or tiger game and just wake up first. Stop looking at foreign rating agencies for their cursory nods and approvals and start doing what is actually to be done. And the first thing is to PASS GST and other pending bills and keep moving forward for economic reforms.  As for China, we should remember what Lord Krishna once told Arjuna, “Sarvashreshta mat bano. Uttam banne ki cheshtha karo”.

Tuesday 1 December 2015



Reserve Bank of India maintained its status quo with policy rates being held in its fifth bimonthly monetary policy. Though all the business channels claimed that RBI had stuck to its script, I think it was a sequel to the previous October policy when our governor handed us pre diwali gift hampers of 50 basis point cut. One basis point is one hundredth of a percentage point. Everybody knows that Fed is going to make things difficult for us, so it was right on the central bank’s part to start work early. There has to be a time lag between our monetary policy rate cuts and US Fed hiking its interest rates. With the GDP coming at 7.4% in September quarter on a strong base of 8.4% in the corresponding period previous year, expecting a rate cut would have been really na├»ve.
As per the RBI’s accommodative stance, it meant we have done enough (cutting 125 basis points since January) and the results are showing so let’s wait and watch. Manufacturing sector growth is up by 9.3% and even agriculture rose by 2.2% despite of poor monsoons. Major takeaways from the policy were the confirmations given by the central bank which led our benchmark indices both Sensex and Nifty closing in positive territory at the day’s end. First and foremost, economy is definitely recovering with certain areas of concern. Secondly marginal cost of pricing model for the banks will be out within a week and last but not the least the pay commission benefits will be offset by government fiscal tightening (no major impact on inflation).
Though RBI downplayed the Fed meet in the coming few days as a residual factor, its accommodative stance will certainly come into play incase the markets upheaval is manageable in the coming quarter. With respect to Banks, government is deliberating on linking small savings rate to market based interest rates and marginal rate pricing is expected to be used on incremental loans for effective transmission of rate cuts. In addition to that, banks (especially PSUs) are expected to complete their clean up process by March 2017.  
Though the policy seems to be a non event, the work was always on with rate cuts being done over the past few months taking into consideration the whole global scenario including improving US economy. So now we just need to sit and watch what the Fed will do and earlier than that the ECB’s stance in the next 48 hours.

Lets make it Absolute

At last I understood the, the law of relativity. It just makes u feel better in today’s fast & furious routine life when u find someone at a disadvantageous position relatively with you.  Attending a family function and going through the usual pleasantries, my mother in law was enquired how is the weather, electricity, water condition in the city by her close relatives. To which she replied only water problem which we get every three days. THREE DAYS !!! U ARE SOO LUCKY… WE GET IT EVERY 45 DAYS…… I didn’t know how to respond, whether to feel happy for us or sad for their poignant situation. But it made us forget about are daily problems. Nothing comes in absolute value these days. Even media covers everything relatively. China slowdown is good for India. India is the only performing emerging market among the BRICS.  But does it help!!!

China’s stock market crashed in August. What have we achieved from then…… slower IIP, escalating food prices leading to increased CPI and of course continued political shenanigans. Even in our stock market everything is discussed relatively with variables like PEs, EPS, ROE, ROCE, EBIT, EBITDA to name a few. Though all these are indispensable, they tend to move towards relative short-term investing in accordance with the mood swings of global bigwigs. Even our banks are asked to compare their NIMs globally. Legendary Warren Buffet bought stakes in Coca Cola, American Express and Wells Fargo, foreseeing future of these companies with respect to their competitive advantage along with future financial growth. Being a fundamental analyst, I am unable to comprehend the short term trend followed by our financial experts not only quarterly but on daily basis. Can value be created through this, not possible, only short term gain is accomplished. Hasty decisions and quick rich results have become the underlying behavior dictated by FIIs for whom emerging markets like India is just an asset class in their portfolio. Thus our stock indices worldwide are no longer barometer of their respective domestic economies in today’s global financial integrated system. So what should retail investors do?  The first step is to become informed investors not driven by rumor or herd mentality. Keeping oneself updated of all systematic and unsystematic risks and financial analysis should be the basis of every stock investment as only FUNDAMENTALS CREATE WEALTH.