The stock market is known for erratic behaviour. After all it is a five sensed dumb operated by six sensed people who are directionless. Despite the good pumping of public funds to boost up the growth in the last budget it nosedived more than 800 points in a single day. But now it is zooming because there is a possibility of disinvestments. Definitely the market analysers don’t have judicial analysis of the budget.
Abheek Barman writes in The Economic Times (21 July 2009)
Despite the crash after Pranab Mukherjee’s big-spending bu-dget earlier this month, India is now the best performing emerging market in the Volatility in the stock markets world. The MSCI India index is up an eye-popping 58% from January. But has anything changed from July 6, when the budget was presented to now, to merit the surge? Practically nothing.
Yes, the government has made noises about disinvestment, a topic that the finance minister skirted in his speech. We’ve been told that at least seven reformist amendments will be brought to Parliament before the session ends. And the finance ministry is trying its best to convince us that the massive Rs 450,000 crore borrowing in the budget won’t all be funded by crisp rupee notes printed by the Reserve Bank of India.
If all these things get done, they’ll help. But remember, disinvestment is a long process. We’ll have to see how much money the government prints and how much fuel that adds to inflation. And the budget session will end on August 7, so the government has two weeks to push reformist legislation through. Clearly investors aren’t responding to reforms or the big macro picture while pumping dollars back into Indian equities.
They’re probably excited by the fact that Indian companies are growing profits faster than anyone expected. So far, about 130-odd companies have announced their first quarter results and the numbers look great: profits are up by a third. But those gains have been squeezed out by cutting costs, not through surging sales. If earnings don’t grow as fast as share prices, the price to earnings (PE) multiple will bloat, setting us up for another crash.
Today the sensex trades a little more than 17 times the earnings of its 30 companies. That’s more than double the multiple of eight that it plunged to in November last year, when the market hit bottom. Today’s PE multiple is not frightening, it’s still lower than the figure of 25 it hit on December 16, 2007, at the peak of the equities mania. But I’m scared at the speed at which the market has run up. Too much, too fast could set us up for another bubble in stocks. And that’s something we simply can’t afford.
Yes, India is one of the great economic stories for the century. Most people agree that it has the potential to grow fast for a very long time, may be for the next 20 years or so. Its population is young and energetic. And there’s no question that India’s appetite for roads, bridges, ports, schools, hospitals and energy will continue until all Indians have a chance to lead a life of dignity.
It’s also true that there are very few countries that offer India’s blend of democracy, courts, diversity and demographics. By sheer chance, India was colonised by the British and not, say, by the Dutch or the Portuguese. That chance happening made sure that many Indians speak and write English, something that’s useful when English has become the dominant language for science, technology and business.
But that’s the long-term story, and we know that financial investors — pressed to show returns every quarter — don’t get in and out of markets for the long term. Ultimately financial investing is all about buying into companies that promise steady revenue and profit growth. Today, we’re seeing faster than expected profit growth, but the topline moves sluggishly. Slow sales growth means only one thing: demand is growing slower than expected.
That’s supported by another piece of evidence: from December 2008, when economies tanked the world over, to May this year, India’s imports have been contracting. Now, imports measure the ability of India to absorb goods and services from all over the world. If that’s in negative territory, then there’s certainly been a slackening of demand in the economy. Sure, commerce minister Anand Sharma says that the rate of decline has slowed, but neither Sharma nor anyone else can predict when demand will bounce back.
Demand is slack in India. Demand is falling in many parts of the world. Meanwhile, there’s a giant wave of cash that’s building up, ready to turn into a tsunami of funds. These funds will flood into any market that looks better than the rest.
For example, China’s printed 28.5% more money from June last year, to June this year. The US has forked out tens of trillions of new dollars to restart its economy. It’s the same in Europe and Japan. And our government has promised to spend a whole lot more to make sure growth doesn’t stop.
So, there’s a lot of money in the system. Right now, this money is going to restore confidence, shore up banks, mend financial systems, and get people to spend. But soon, there’s going to be a very large amount of money chasing too few good assets.
If you look around the world, India looks very attractive: low risk, low exposure to export markets, around 7% growth, and a regulated — but relatively safe — banking system. So, I fear, India is going to be one place where this funds tsunami will head. We’re seeing the first breakers from that wave hit us. That’s probably why we’re seeing markets run up so much, so fast.
That is the most plausible explanation that I can find for a more than-100% jump in the sensex’s PE multiple. What that means, essentially, is that the gap between the price of a share and the profits earned on that share has widened more than twice, from eight to 17. You could argue, quite reasonably, that the lower number was a product of unnatural circumstances — the fallout from the worst crash in living memory. Point taken, but the recent run up has happened at terrifying speed, as the Indian market has raced up within eight months of its recent lowest ebb.
Can policy help? Unlikely — and probably undesirable — as any action by the government to stem the tide of money coming in could cause investors to turn tail. That in turn could create further problems with exchange and interest rates and foreign currency reserves.
But there’s hope. If the tsunami of money breaks up into smaller waves that hit different countries around the world, the impact on India will be less severe. For example, a lot of the money will flow towards China, a lot of it will head our way. But as the US and Europe emerge from their troubles, investors will find value there as well. Everyone loves a healthy, growing market. Recent experience has taught us to be very wary of irrational run-ups.
It is good hear the hopeful news from the economic survey for the year 2009-10. It promises the good health of the Indian economy despite the global shockwaves. If this is going to be realised then we must salute the country’s ruling representatives.
Providing healthy, hygienci and nutrious food for all citizens is the biggest challenge for the government. This can be achieved only by increasing the food production multi-fold and plugging the loopholes in the supply chain. Either the purchasing power of everyone should be increased by providing high income or government should transact cash through nationaliProviding healthy, hygienci and nutrious food for all citizens is the biggest challenge for the government. This can be achieved only by increasing the food production multi-fold and plugging the loopholes in the supply chain. Either the purchasing power of everyone should be increased by providing high income or government should transact cash through nationalised banks for the poorer people. This can be achieved by providing a smart card. The UPA II should expedite this process through UIC and remove hunger from the map of India. Chaitanya Kalbag writes in The Times of India (3 July 2009) I remember standing in long queues at ration shops in Calcutta, Madras and Delhi when i was younger. Lines for food were a part of everyday life. You got substandard rice and dirty, large-grained sugar. The majority of Indians lived on rationed rice, sugar, kerosene, palmolein and even cloth. My children are the first generation to not experience food rationing. It is interesting that you see fewer queues in India today. But don’t think for a moment that we are a land of plenty. You see fewer queues because there are far more ghosts. The Green Revolution did fend off famine, but the definition of famine is very subjective. I was reminded of the fragility of India’s food situation this past week as the clangour about the delayed monsoon began to get deafening. Agriculture minister Sharad Pawar assured the people that there were ample foodgrain stocks. Probably very true and comforting if you are talking to real people, not ghosts. The trouble is that our ration shops (there are half a million of them) supply wheat, rice, sugar and kerosene to a lot of people who don’t exist. The government estimates that there are 65.2 million people below the poverty line (BPL) and so entitled to rations of 20 kg of foodgrains a month at half the “economic cost”. But there are actually more than 80 million ration cards issued to BPL families. That is not all. The government has issued a total of 223 million ration cards against a total estimated 180 million households. In other words, there are at least 43 million ghost cards. Reportedly, prisoners in one US state get only two square meals a day three days a week. “This is inhumane,” a newspaper editorial said. Over here in India, the government says blandly: “A National Sample Survey Exercise points towards the fact that about 5 per cent of the total population in the country sleeps without two square meals a day”. That is 60 million people. The Antyodaya Anna Yojana aims to help the truly destitute by selling them up to 35 kg of foodgrains a month ^ rice at Rs 2 and wheat at Rs 3 a kg. As of April 2008, the government had identified 2,42,755 “poorest of the poor” families. The UPA government has taken power almost exactly midway through the 11th five-year Plan. Next Monday, finance minister Pranab Mukherjee might want to address some of the concerns spelled out in the Plan documents. “There are large errors of exclusion and inclusion and ghost cards are common,” the Planning Commission says, adding that “leakages” are common ^ higher than 75 per cent in Bihar and Punjab. During 2003-04, it estimates that eight million tonnes of foodgrains out of 14 million allotted to BPL families never reached them. “For every 1 kilogram that was delivered to the poor, Government of India had to issue 2.23 kilograms” of foodgrains. These figures have almost certainly worsened over the past year as the economy slowed down. And this is happening at a time when foodgrain prices have been rising steadily, despite misleading data that shows that India’s official measure of inflation, the wholesale price index (WPI), is now slightly negative. Although experts say the WPI is a more reliable, broader measure, the consumer price index, which takes in what the aam aadmi buys everyday, has put inflation at over 10 per cent in the 2008-09 fiscal year. Higher prices hit the poor hardest. Statistics show that in rural India, the poor spend close to half their incomes on food, and higher food prices are deepening malnutrition. Higher prices also mean changes in food habits. Cereal consumption has been falling steadily in rural India ^ from 15.3 kg per capita per month in 1972-73 to 13.4 kg in 1993-94 and 12.12 kg in 2004-05. This would not have been alarming if the poor were consuming more of other foods like milk, meat, vegetables and fruits. Over a 20-year period, the Planning Commission says, per capita consumption of calories and protein has steadily declined in India. The calorie norm for the rural poor was set at 2,400 calories a day, and rural India’s calorie consumption has dropped to 2,047 calories from 2,221. In urban India, cereal consumption has fallen less precipitously, from 11.3 kg in 1973-74 to 10.6 kg in 1993-94 and 9.94 kg in 2004-05. No wonder one-third of India’s adult population in 2005-06 had a body mass index below 18.5, the cut-off for malnutrition, or that India accounts for about half the developing world’s low-body-weight babies, and a very high rate of anaemia among women and girls. The new government has said it will push a Food Security Act. What those 60 million forever-hungry people need is nutritious food, and clean drinking water. Pawar and Mukherjee have their work cut out for them. sed banks for the poorer people. This can be achieved by providing a smart card. The UPA II should expedite this process through UIC and remove hunger from the map of India. Chaitanya Kalbag writes in The Times of India (3 July 2009) I remember standing in long queues at ration shops in Calcutta, Madras and Delhi when i was younger. Lines for food were a part of everyday life. You got substandard rice and dirty, large-grained sugar. The majority of Indians lived on rationed rice, sugar, kerosene, palmolein and even cloth. My children are the first generation to not experience food rationing. It is interesting that you see fewer queues in India today. But don’t think for a moment that we are a land of plenty. You see fewer queues because there are far more ghosts. The Green Revolution did fend off famine, but the definition of famine is very subjective. I was reminded of the fragility of India’s food situation this past week as the clangour about the delayed monsoon began to get deafening. Agriculture minister Sharad Pawar assured the people that there were ample foodgrain stocks. Probably very true and comforting if you are talking to real people, not ghosts. The trouble is that our ration shops (there are half a million of them) supply wheat, rice, sugar and kerosene to a lot of people who don’t exist. The government estimates that there are 65.2 million people below the poverty line (BPL) and so entitled to rations of 20 kg of foodgrains a month at half the “economic cost”. But there are actually more than 80 million ration cards issued to BPL families. That is not all. The government has issued a total of 223 million ration cards against a total estimated 180 million households. In other words, there are at least 43 million ghost cards. Reportedly, prisoners in one US state get only two square meals a day three days a week. “This is inhumane,” a newspaper editorial said. Over here in India, the government says blandly: “A National Sample Survey Exercise points towards the fact that about 5 per cent of the total population in the country sleeps without two square meals a day”. That is 60 million people. The Antyodaya Anna Yojana aims to help the truly destitute by selling them up to 35 kg of foodgrains a month ^ rice at Rs 2 and wheat at Rs 3 a kg. As of April 2008, the government had identified 2,42,755 “poorest of the poor” families. The UPA government has taken power almost exactly midway through the 11th five-year Plan. Next Monday, finance minister Pranab Mukherjee might want to address some of the concerns spelled out in the Plan documents. “There are large errors of exclusion and inclusion and ghost cards are common,” the Planning Commission says, adding that “leakages” are common ^ higher than 75 per cent in Bihar and Punjab. During 2003-04, it estimates that eight million tonnes of foodgrains out of 14 million allotted to BPL families never reached them. “For every 1 kilogram that was delivered to the poor, Government of India had to issue 2.23 kilograms” of foodgrains. These figures have almost certainly worsened over the past year as the economy slowed down. And this is happening at a time when foodgrain prices have been rising steadily, despite misleading data that shows that India’s official measure of inflation, the wholesale price index (WPI), is now slightly negative. Although experts say the WPI is a more reliable, broader measure, the consumer price index, which takes in what the aam aadmi buys everyday, has put inflation at over 10 per cent in the 2008-09 fiscal year. Higher prices hit the poor hardest. Statistics show that in rural India, the poor spend close to half their incomes on food, and higher food prices are deepening malnutrition. Higher prices also mean changes in food habits. Cereal consumption has been falling steadily in rural India ^ from 15.3 kg per capita per month in 1972-73 to 13.4 kg in 1993-94 and 12.12 kg in 2004-05. This would not have been alarming if the poor were consuming more of other foods like milk, meat, vegetables and fruits. Over a 20-year period, the Planning Commission says, per capita consumption of calories and protein has steadily declined in India. The calorie norm for the rural poor was set at 2,400 calories a day, and rural India’s calorie consumption has dropped to 2,047 calories from 2,221. In urban India, cereal consumption has fallen less precipitously, from 11.3 kg in 1973-74 to 10.6 kg in 1993-94 and 9.94 kg in 2004-05. No wonder one-third of India’s adult population in 2005-06 had a body mass index below 18.5, the cut-off for malnutrition, or that India accounts for about half the developing world’s low-body-weight babies, and a very high rate of anaemia among women and girls. The new government has said it will push a Food Security Act. What those 60 million forever-hungry people need is nutritious food, and clean drinking water. Pawar and Mukherjee have their work cut out for them.
Money matters in human relationships. Few can be exceptions to this universal practice. The global economic melt down tests the love capacity of people. When the money flow is affected, jobs are cut and purchasing power is down, one can feel the heat in day to day lives. Not only his smile is missing but the real charm of life is gone. The person is pushed to the extreme of frustration. He feels empty without income and enough money to spend. Suddenly all his friends are deserting and girl friend dumped him. Love is boiling in the extreme financial climate. Very few candlelight dinners, spa tours, beach swims and exotic vacations. Romantic relationships are getting dumped and switched for the lack of money.
Economists are much sought after during the recession periods. Although they are responsible for both good and bad prescriptions governments keep them close to its time-to-time advices. Like the popular bipolar socio-economic ideologies – capitalism or socialism, recession solutions too are neatly divided. Hayekian or Keynesian solutions dominate the tables. In this age of private sector collapse many governments are compelled to go for Keynesian solution. This model makes the establishment to spent a large amount of its funds in the social sector. The USA administration under George Bush II spent injected $2 trillion to cool down the boiling economy.
Vijay Mallya the colourful corporate honcho wears many hats at a time. He fancies Tipu Sultan’s sword, Ferraris, latest jets and costliest yachts. After UB group unveiled King Fisher airlines Mallya hogged global limelight for his entrepreneurial adventures. He turned off the low cost airlines cultures and tuned in king on the skies style. This was his successful turn around of the industry. He always broke stereotypes and set high standards. 
