Gunnebo India, a Swedish security group, which has been present in India for over 80 years and makes safe deposit lockers, vault doors, fire resistant cabinets and ATM safes, is now looking for opportunity in infrastructure and banking sectors here.Gunnebo's customers are primarily retail banks, central banks, CIT companies and it is now ready to enter into infrastructure such as DMRC project, airports, entrance control etc.Per Borgvall, Global CEO and President of Gunnebo Security says "with a view on future and to expand our current portfolio in India, we have plans to invest Rs 30 crore in a manufacturing plant at Halol, Gujrat to expand capacity by 75 per cent from the current level."Other than Halol, Gunnebo has another unit in Chennai.He said the company is planning to continue investing in the growth markets like India, China and Indonesia. The four key businesses where the company invests are core banking security and cash handling, secure storages, entrance control (infrastructure security) and global services.India continues to be one of the most important markets for Gunnebo and possesses great potential for growth, says Borgvall.He said currently India contributes to around six per cent of the company's revenues globally and is growing at 25 per cent compounded annual growth rate and that they would like to maintain a similar profit rate in the next two years.Gunnebo is a Swedish listed global security group operating in 31 countries across the globe and with presence on a further 100 markets though agents and distributors. It provides integrated security solutions to customers that set high standards on secure is a world leading supplier of high graded fire and burglary resistant safes.It has been active on the Indian security market through its subsidiary Steelage since 1932. Steelage was acquired into the Group in the year of 2000. It also markets and sells products and solutions for secure storage under the well-known brand Chubb safes.
Read More
Last week, the Indian market as expected corrected itself after the previous week's sharp upturn with the Bombay Stock Exchange (BSE) 30-share Sensitive Index (Sensex) losing nearly 4 per cent to end at 16,213.46. The fall was more to do with domestic events than global. Players offloaded their position after the government suspended it plans to allow foreign direct investment (FDI) in retail. The inability to implement policy reforms by the government has been the biggest concern for the market. Concerns over the government's finances, particularly rising fiscal deficit after it cut India's economic growth forecast to 7.25-7.75 per cent from the earlier 8 per cent also added to the woes."Until know, despite all the poor economic indicators, growth wasn't impacted. This is the first time we are witnessing bleak economic growth and that is bad for the market," says Avinash Gorakshakar, vice-president and head research at Edelweiss Financial Advisors. He adds that the fall in the market is also because players have sold their position ahead of the dismal IIP numbers on Monday. "The IIP number is expected to be poor than the September months' number and the market has already factored it in the price," says Gorakshakar. The broader consensus on the October 2011 IIP numbers is at -0.7 per cent on a year-on-year basis. The inflation data on Wednesday, 14 December 2011 and the Reserve Bank of India (RBI) policy on Friday, 16 December 2011 are some important events that would provide direction to the markets. Analysts expect inflation to slip on a year-on-year basis to 9.04 per cent compared to 9.73 per cent.Meanwhile, the third quarter advance tax collection on 15 December 2011 will be crucial for the market as it will give indication about the December-end quarter results of India Inc.In India there is a lot of concern about the lack of governance and poor accountability within the government. A consistently high inflation is the other concern. Today the problem for the Indian market is if FII flows don't start pouring in it could lead to depreciating rupee and lower exports and impact our ballooning fiscal deficit further. In an environment of high inflation and fiscal deficit, RBI doesn't seem to cut rates in a hurry.The outcome of the EU summit despite being in line with market expectations, is not going to help the market in a bigger way. The EU consensus does not end the problem with the European Union and global economies. In the next 6 months, there are going to be elections in the leading European countries like Germany and France. The ruling Christian Democratic Union has faced defeat in all the six state elections in Germany until September 2011. This is probably an indication that Chancellor Angela Merkel has not been able to convince voters to accept the rescue plan for the Euro Zone. The next federal elections in Germany are due in September 2013. At present, it looks like taking tough decisions may be difficult. Similarly the environment in the US also looks bleak. The US is still grappling with problems of low employment, lack of growth and no consensus to reduce spending levels and manage debt. The ability to keep debt at manageable levels is exacerbated by the need to replace or upgrade infrastructure that has been created almost 50 years ago. With the US Presidential elections scheduled in 2012, the task of announcing measures that make economic sense becomes even more difficult. In such a scenario, the crisis in the west has not yet reached its conclusion and thus uncertainty will continue to prevail in the global and domestic markets. Faced with uncertainty, the markets will remain fragile. Meanwhile, high volatility has become a part of the Indian market and the Sensex swing between its intra-day high and low is close to 2 per cent. Until India specific issues are not adressed, particularly regarding opening investment windows, it is difficult for equity markets to witness a clear upmove. Satish Menon, executive director at Geojit BNP Paribas Financial Services, feels, "Though we aren't in a bear market, it is possible that due to external and internal concerns markets may continue to witness swings, maybe with a downward bias over the next 3-6 months."
Read More
Sometimes no bad news can be good news and that helped the Indian market last week which ended with a gain of over 5 per cent. Though news flows from the domestic as well as global market fell in line with market expectations, the news of European leaders striking a deal to resolve the two-year-old Euro-zone sovereign debt crisis helped the market to end positive.This week, investors' focus will turn to the G-20 meeting in Cannes, in southern France where details of Thursday's (27th October 2011) anti-crisis measures for the Euro-zone are likely to emerge. While October has been pretty solid for equities with over 1,351 points, it remains to be seen whether the momentum can be sustained in November. We will also see the Indian markets reacting to monthly auto sales, cement volumes, trade data and manufacturing PMI data. Global events — especially results from the policy meetings of federal open market committee (FOMC) and European central bank (ECB) — will be eyed and will have a bearing on the Indian market.Meanwhile, for the week ended 28 October 2011, the Bombay Stock Exchange (BSE) Sensitive Index (Sensex) ended with a gain of over 1,000 points to close at 17,804.80. "With the Euro issue being resolved temporarily, investors took fresh position in select stocks. Better than expected US GDP data and expectation that the Reserve Bank of India (RBI) may not hike rates in December also helped improve sentiments in the market this week," says Samir Gilani, Head Derivatives & Co-head Equities at Mape Securities, a Mumbai-based financial service firm.Last Thursday, European leaders announced the deal that would wipe out 50 per cent of the investments of Greek bonds held by private holders. Banks would be recapitalised and the size of the European Financial Stability Facility (EFSF) raised to $1.4 trillion.Though investors were focusing on the broad contours of the Euro-zone debt plan and encouraging economic data out of the US, Gilani feels there are several risks in the Indian market that will restrict the sensex rise. "It's no more a bull-run in the Indian equity market and there are several risks associated with the market –structural as well as systemic issues," says Gilani. He feels that until the government spending increases in building infrastructure and issues in sectors like infrastructure, power and real estate are resolved and reforms process like GST, mining and metal policy, etc that have hit the bottleneck not eased, there isn't expected to be conducive growth in India. "Unlike 2009 when market rallied due to lower interest rates, low inflation, fall in commodity and oil prices and a stable Indian rupee, today things are quite the opposite. If the Indian market has to see a bull-run all these factors have to turn favourable." However indication of a pause in interest rates by RBI has been positive. Last week on 25 October 2011, the RBI raised rates for the 13th time in last 19 months. The central bank announced a 25 basis points hike in repo rate to 8.5 per cent.The Sensex is moving in a narrow band of 1,000 points on low liquidity. Though all the bad news is factored in the price, uncertainty still prevails in the global market and therefore Indian market is not going anywhere in a hurry. Even though select blue-chip stocks have been moving up, the current market gives ample opportunity to investors wherein they are able to pick these stocks at their price. This is a good time to start building long-term portfolios.
Read More
It was another bad day at the market today as the BSE Sensex fell 2.3 per cent, its biggest slide in nearly three weeks, amid fears about slowing growth and policy paralysis as well as uncertainty over whether the euro zone can agree on how to resolve its debt crisis. Added to this potent combination was the Opposition demanding that Home Minister P Chidambaram step down and the market tasted mayhem with the Sensex sliding 389 points while the NSE index Nifty plunging 119 points. Moreover, hopes of a functioning Parliament after sacrificing retail reforms were belied as the Opposition kept the government under fire on Chidambaram and price rise issues, leading to early adjournment.Even a piece of good news like the easing of food inflation to a three-and-a-half year low of 6.6 per cent had no effect on the market. Reports of the industrial output likely to move into negative territory further dented the market. After a weak start, the Sensex dropped 388.82 points, or 2.30 per cent to 16,488.24.Marketmen said there were doubt among investors that the EU summit on Friday will be able to tackle the region's debt problems. Pressure was also put by the brokerage firm CLSA lowering 12-month target for the benchmark, citing earning cuts.The Sensex heavyweight Reliance Industries dropped 3.71 per cent and second-heaviest Infosys lost 1.06 per cent to Rs 2,723.75. The two carry over 20 per cent weight on the Sensex."The market will be quite volatile for the whole week starting today. There will be pressure on the downside," said R.K. Gupta, managing director of Taurus Asset Management."The market is playing in a very cautious zone and people would not like to take long positions because there are a lot of important issues coming up in the next five to six trading sessions," Gupta said.India's industrial output and inflation data are due next week, while the RBI will review monetary policy on December 16.FM Takes Global LineFinance Minister told the Parliament that India's exports and foreign direct investment inflows have been hurt by the global slowdown. India's October exports growth slowed to 10.8 per cent to $19.9 billion, from high double-digit growth in the early months of the current fiscal year that ends in March 2012.He also said the country cannot afford to have near double-digit inflation. He, however, said recent readings of food inflation was encouraging, citing the latest weekly food inflation rate, which fell for a fifth straight week.But Mukherjee's arguments failed to cut ice with the Opposition. The government came under sharp attack on the issue of price rise with the Opposition accusing it of failing to curb inflation and the BJP even asking it to quit if it fails to "find a way out" of the current situation.Swaraj also accused the government of "doling out" figures and statistics when the "hungry actually need food".Leader of the Opposition in Lok Sabha Sushma Swaraj accused the government of pursuing wrong economic policies, while Gurudas Dasgupta (CPI) said the seasonal reprieve from inflation should not work as a respite for the government which should aim at brining down inflation in the long term.Referring to Finance Minister Pranab Mukherjee's statement 'I don't know where this country is going' made after a man slapped Agriculture Minister Sharad Pawar, Swaraj said it was the duty of the government of the day to find a way out."...You find a way. If you cannot, leave the chair and then we will show the way," Swaraj said, winding up her speech on a discussion on inflation.Nothing Against Chidambaram: GovtRejecting the opposition demand for resignation of Home Minister P Chidambaram, Law Minister Salman Khurshid on Thursday suggested there was nothing in the Delhi court observations against him or the government.Asserting that Government is firmly behind Chidambaram, he said, "Chidambaram is in the Government. He is part of the Government and we are all part of the Government and we all stand together."His statement came after opposition disrupted Parliament following a Delhi court allowing Janata Party Chief Subrahmanian Swamy to depose as a witness and lead further evidence in support of his complaint against Chidambaram in 2G case.India Redux? Not NowSo where does India stand now? A market favourite and member of the ever stronger BRIC group, global investors have started showing their unhappiness with the slower-than-ever pace of reforms in India.Goldman Sachs Asset Management Jim O'Neill, the man who coined the term BRIC for the emerging market giants — Brazil, Russia, India and China — says India's record on productivity, FDI and reform has been the most disappointing. United Nations data shows that India received less than $20 billion in FDI in the first six months of 2011, compared to more than $60 billion in China while Brazil and Russia took in $23 billion and $33 billion respectively.The glacial reform pace has hit India's hopes for double-digit economic growth, O'Neill said, adding: "India is as bad as Russia is on governance and corruption and, in terms of use of technology, Russia is in fact much higher than India."
Read More
The Securities Appellate Tribunal (SAT) has upheld the Sebi order against Sahara banning them from raising money from the public through optionally fully convertible debentures or OFCDs. The Sahara Group, sponsor of the Indian cricket team, owner of the Pune IPL franchise and part-owner of the F1 Force India team has been asked to pay nearly Rs 24,029 crore raised via the OFCD scheme back to the investors within six weeks. "...both the appeals are dismissed...The appellants in both the appeals shall now repay within six weeks from today the amount collected from investors on the terms as set out by the whole time members (of Sebi) in the impugned order," SAT said in its order.While dismissing the appeal filed by Sahara Group companies against the Sebi order, it held that the market regulator has jurisdiction over such fund raising schemes."...we may mention that in view of our findings that OFCDs issued by the company are securities and that the issue was a public issue requiring mandatory listing and that Sebi has the jurisdiction under the Sebi Act to deal with all kinds of securities and companies, whether listed or not...", the order said. The issue relates to Sebi's finding in November, 2010 indicting two Sahara Group firms — Sahara India Real Estate Corporation now known as Sahara Commodity Services Corporation Ltd and Sahara Housing Investment Corporation — for raising funds from the public through OFCD scheme without conforming to prudent disclosure and other investor protection norms, which govern such public issues.On July 15, the Supreme Court had directed Sahara Group firm Sahara India Real Estate Corp to approach SAT against the Securities & Exchanges Board of India (Sebi) order directing the return of money collected from investors for an OFCD scheme within three weeks.A three-member bench headed by Chief Justice S H Kapadia also directed SAT to decide Sahara India Real Estate Corp's appeal against Sebi within a period of eight weeks.The apex court had stated that it has understood the concept of OFCD and was of the view that the matter involves important questions of law, which need to be adjudicated upon. The Court also indicated that though the Sebi order explains the concept of OFCD, it goes beyond the mandate. As two avenues were available for such adjudication one being before the High Court, and the other before SAT, the court ordered that Sahara should file a petition before the SAT."We are of the view that keeping in mind interest of the investors... better option would be to give an opportunity to the petitioner (Sahara) a hearing before SAT," the bench observed.Meanwhile, senior advocate Fali S Nariman appearing for Sahara Group firm had submitted that till the final order of SAT, it will not invite any fresh deposit in the optionally fully convertible debentures (OFCD) scheme.The apex court also said that the interim order of Sebi would not be operational till the appeal is decided by SAT.In addition, the apex court directed the Sahara Group firm to withdraw its petition filed against Sebi in the Allahabad High Court.The apex court said that SAT will take a decision irrespective of Sebi's interim order and the remarks passed by the Allahabad High Court in this issue.The Supreme Court also directed the Sahara Group firm not to take any adjournments before SAT.The apex court on July 15 asked SAT to pass an order in eight weeks (from the date of filing of the case – the parties can move the SAT within three weeks from now). It added that until then the Sebi order will not be operational. The court has also directed the Corporate Affairs Ministry to be a party (respondent) in the matter.Earlier, on June 27, a vacation bench of the apex court comprising Justices P Sathasivam and A K Patnaik had declined to hear the plea of Sahara India Real Estate Corp and asked it to list the matter before the Chief Justice, who has been hearing the case.Following the orders of the Supreme Court, the Securities and Exchange Board of India had on June 23 directed the two Sahara Group firms -- Sahara India Real Estate Corporation and Sahara Housing Investment Corporation -- to refund the money, along with 15 per cent interest, raised through its OFCD scheme for violating regulatory norms.As per Sebi's order, the two companies, promoter Subrata Roy Sahara and directors Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary, jointly and severally, shall refund the money.Besides, the regulator had also restrained the entities from accessing the securities market for raising funds till the time payments are made to the satisfaction of the SEBI.Issue Of JurisdictionThe apex court has also asked the tribunal to decide the issue of jurisdiction on the regulation of instruments like OFCDs. There is an ongoing tussle between the ministry of corporate affairs (MCA) and Sebi on which body should regulate financial instruments like OFCDs. MCA told the Allahabad high court that the Registrar of Companies (RoC), which forms a part of its organizational machinery, would have the jurisdiction and not Sebi."We make it clear, in the appeal which is proposed, that ministry of corporate affairs should be a party as a respondent, particularly in view of issues arising in this statutory appeal," the bench said.(With Agencies)
Read More
It was a good week for the markets, largely because there was no bad news. Bargain hunting at lower levels from foreign institutional investors (FIIs) on back of positive news flow from Europe and impressive results from software bellwether Infosys Technologies helped keep the momentum going for the Indian equity market. It ended the week with a gain of 5.2 per cent. The momentum in the coming week will be almost purely dictated by September quarter results, especially from heavyweights Tata Consultancy (TCS), Larsen & Toubro and HDFC Bank. Reliance Industries announced its quarterly performance on Saturday October 15, which were in line with expectations."I don't expect much from the quarterly results. But any disappointment from biggies can bring down the market next week," says Avinash Gorakshakar, vice president at Edelweiss Financial Advisors. With the Sensex up 8.5 per cent in the past seven sessions, any disappointment will lead to a sharp correction in the market. On Monday, the mood will purely be dictated by Reliance Industries, HDFC and TCS results. TCS is expected to record a sequential quarter-on-quarter net profit growth of 6 per cent at Rs 2,520 crore.All eyes will be also on the outcome of the European Union (EU) nations meeting on 23 October 2011 that are meeting to discuss the bailout of Greece and other heavily indebted European nations.Past as Prologue?In the week ended 14 October 2011, the Bombay Stock Exchange (BSE) Sensitive Index (Sensex) ended above the psychological mark of 17,000. The Sensex gained 850 points to end at 17082.69. All thanks to foreign inflows that even forced bears (market players) to cover their short position this week. Players had gone short in the market following the concerns surrounding sovereign debt crisis in the Euro-zone, but FII buying on positive news flows from Euro-zone forced players to cover their short position, thus helping the Sensex to record gains this week. In the four sessions till 13 October 2011, FIIs invested nearly half billion dollar. However for the month of October they still continue to remain net sellers to the tune of $86 million."The recent recovery in the market to a large extent has been due to the positive news flows from the Euro-zone," says Anand Shanbhag, ED and head of research at Avendus Securities. Though the rise is positive, he feels it's not a full recovery and there is still some uncertainty left in the market over domestic and global concerns. Domestic concerns surrounding the market are inflation, interest rates and rising energy prices, while the globally it's the European debt crisis. "Until such time one can't forecast a complete recovery. In such circumstances the index (Sensex) could stay in a trading zone up to 6 months," says Shanbhag who feels players (institutional) are risk averse to equities and it will take some time before they come back to the market.With the sharp rise in the past few sessions, experts feels there isn't much upside left in the market. But the good news is there isn't much downside either. "From the current levels (17,000), the market doesn't seem to fall over 10-15 per cent," says senior analyst at the Mumbai-based financial services on condition of anonymity. So what should investor do in the current environment? "I see the next two quarters (September and December) bad for Indian corporate," says Gorakshakar. He still sees some pain left in the market and therefore would like to park his fund in fixed income and use the downfall to accumulate stocks. "Today I have invested 50 per cent of my money in FD (fixed deposit) which is giving me 11-12 per cent return and I am waiting for the market to correct," says Gorakshakar.With uncertainty still prevailing in the market over bail-out of European countries and Reserve Bank of India's (RBI) monetary policy on 25 October 2011, which is expected to hike rates –13 times in 19 months –to capture the rise in inflation, investors would be better-off waiting on sidelines. Rather than buying cheap in an uncertain market, it always better to buy slightly higher in a clear market environment.
Read More
Though year-to-date foreign institutional flows has been flattish, better FII flows can result in a good rebound, says I.V. Subramaniam, Director at Quantum AMC. 'Subbu' as he is popularly known among market fellow and friends, in his 20 years of fund management has been a conservative fund manager whose biggest regret and concerns for the market all these years has been lack of depth in the market in terms of having a more robust domestic institutional and retail clientele. Though he feels the solution to the European crisis will see a rebound in the near term, but a more benign inflation and interest rates scenario within India could act as a big trigger for the Indian equity markets.Talking to Businessworld''s Mahesh Nayak he strongly feels equity market returns can still give better returns than fixed income, with a caveat that investor may have to hold the security for more than a year. Excerpts from the conversation: Is this the worst period for the equity market that you have seen in the last 20 years of fund management? And why?I do not think it is the worst period for equity markets, but definitely the situation is grim. The scale of the problem is much larger and monetary institutions are weak in terms of the decisions they take. There have been periods of excesses in the past as well but this time there is a feeling that the monetary authorities in many countries are looking at quick fix solutions i.e. willing to print currency and assuming that this will solve all problems. And from a purely Indian stock market point of view, it cannot be the worst period. Our GDP is still growing at close to 7 per cent. India is not linked economically to the western world at the same level as some of the other emerging countries. Therefore any slowdown in the western world should not seriously impact India. However, from an equity perspective owing to capital flows share prices in the short run may be impacted by risk aversion of an FII. Inflation and high interest rates are not new to India. We had it in the past and managed it quite well. In fact I would say that our central bankers are probably the most skilled in terms of managing inflation. Taking all these factors into account, from an India perspective I do not think that this is the worst period. Now that we know about Euro-zone and the trouble in the west, how do you see global and Indian equity markets in the near-term to medium-term? (1-6 months)One to six months is too short a period to have a view for. Global investors face more headwinds. They are a nervous lot today and any un-anticipated bad news could lead to a sell off and a sharp decline in share prices. Year-to-date FII investment is slightly negative but the markets are down by 21 per cent. If they begin selling, then the decline could be worse. Having said that, with Indian rupee (INR) close to 52 to the dollar, there could be a strong reason for an FII to invest now if they expect the rupee to appreciate in the near term. What are your concerns for the equity market? Are we in a bear phase? And why?I am concerned about the lack of depth in the market in terms of having a more robust domestic institutional and retail clientele. Share prices are significantly influenced by FII flows. Although the savings rate in India is above 30 per cent, very little of that savings flows into equity markets. This to me is a big concern. The Indian investor has gained little in terms of returns from equity compared to an FII. I think we are in a bull phase, and see significant opportunities for attractive returns from investing in equities. We cannot avoid intermediate declines, but I would not call it a bear phase. When do you see the equity market rebounding from its lull? What will be the trigger and when do you see it coming?Better FII flows can result in a good rebound. Year-To-Date FII flows have been almost flattish. The trigger for rebounding could be a near term solution to the European crises. A more benign inflation and interest rates scenario within India could also act as a trigger. How has your interaction with Indian and global clients been? What are their concerns and what are you advising them?Clients in general have been concerned with the impact of high inflation and interest rates on GDP growth. Our view has been that inflation and high interest rates are not new to India. We had high interest rates in the 1990's and that did not stop India from growing at an average of 6 per cent. Our perspective is that inflation will come down to more normal levels going ahead. Some investors are also concerned with the policy freeze at the government decision making level. Again, our view is that if corruption led investigation brings about a change in the environment in which businesses operate and makes the entire system more transparent and clean, then that is a better situation to have. We are less concerned with the policy freeze situation. Do you see the equity market giving much better return than the fixed income return of 10 per cent in the next one year? And why?Assuming the Bloomberg consensus estimate of EPS Rs 1,324 for FY13 is correct, if we apply a multiple of 17 or 20, the sensex could be anywhere in the range of 22,500 to 26,500 by the middle of next year. This means a return of 33 per cent to 57 per cent. The market for a variety of reasons may choose to ignore the earnings in the short term and these returns may not come true. However, in the long run the markets cannot ignore these earnings. Historically the returns from investing in equity in India have seen a CAGR return of 17 per cent. Given the growth rate of 7 per cent in the GDP and an inflation of 6 per cent, earnings in India should normally grow by 13 per cent. If we are able to choose slightly better companies then the return, after taking into account dividend returns, should be in the range of 15 to 17 per cent. Also holding equity for the long term attracts zero capital gains tax, while a 10 per cent fixed income return will attract tax. In all equity returns can still give better returns than fixed income. However the investor may have to hold the security for more than a year. In times of uncertainty where will you advice investors to invest?Uncertainty can come from market conditions as well as personal situations. Where to invest will depend on an individual's financial goals as well as his risk appetite. The only universal investment rules that I can share are: Do not leverage, have adequate diversification, invest in products that you understand and quiz your financial advisor/distributor on why they are recommending certain products and what commissions do they get for recommending the same.Currently where are you investing your own money, and why? Are you a fan of equity at this juncture?Personally my money goes into our mutual fund (Quantum Long Term Equity fund) on a regular basis, and in case of sharp declines, I add more to my equity portfolio. My view is based on assumptions that I mentioned earlier on equity returns. Given my expectations on equity returns it would be foolish to not be a fan of equity markets. Having said that, equities by nature are volatile, and I am mentally ready for such volatility. As a fund manager how are you managing the money in your portfolio and where are you investing in this market?The cash in the portfolio is being used to buy and average down the cost of acquisition of certain stocks. Since the beginning of this year, we have been buying some stocks, particularly those pertaining to industries and those that have exposure to the power sector. Some of these stocks have seen a sharper decline since we invested in them largely due to near term negative sentiment i.e. investor worries about policy freeze, the weak finances of state electricity boards etc. However from a fundamental point of view, particularly when we look over longer time horizons, we find them attractive, hence we have been increasing our exposure to these stocks. Certain stocks in the consumption sector are still 15 per cent away from our buy limit. If they decline to our buy price, we will deploy cash in them as well.
Read More
The Indian economy is entering 2012 on a much softer note. Fading economic growth, lack of reforms, fiscal constraints, volatility in currency and margin pressure on corporates are some key factors that are putting pressure on markets. Apart from domestic issues, the European debt problem and the United States' fragile recovery pose problems to the world. So far, developed nations have adopted many policies like quantitative easing, special credit lines, etc. to tackle issues but the problem is still very much there.In emerging markets, there is a fear of a hard landing in China because of the real estate market bubble and many experts are of the opinion that it can jeopardise the growth in the fastest growing emerging economies. So all in all, we are entering the New Year on a cautionary note. In 2012, one can expect pro-growth policy making by the Reserve Bank of India (RBI), with about 100-150 bps of interest rate cuts over the calendar year. One may not expect much from the fiscal side as the government is already walking a tight rope because of higher subsidies; social programmes such as the Mahatma Gandhi National Rural Employment Guarantee Act, the Food Security Bill, etc. The budget to be presented in February 2012 may not bring much cheer as duties and taxes are still lower than the pre-crisis levels and tax collections this year so far, have not been up to expectations. We expect the RBI to begin lowering interest rates by March 2012 and that would start yielding positive results by a lag of one to two quarters. Though current happenings are very much discounted by the markets, a lot would depend on how the future shapes up. There is a likelihood of the market oscillating next year and of consolidation if things do not get worse from here. The challenging thing for policy makers here would be to restrict any sort of moderation in economic momentum and coming up with pro-growth policies. KEEPING TRACK OF THE GLOBAL MARKET CONTINUING CAPITAL MARKET UNDERVALUATION COULD DRAW INVESTORS TO INDIA SOONLACK OF ADEQUATE EMPLOYMENT OPPORTUNITIES COULD LEAD TO YOUTH UNRESTTHE RBI COULD BEGIN TO CUT RATES BY MARCH 2012CHINESE REAL ESTATE BUBBLE COULD BURST, CAUSING A HARD LANDING Focus on growth acceleration is vital in the New Year. It is important because our country has a large young population, and it is essential to ensure proper employment opportunities to our youngsters. And to ensure employment opportunities, growth is imperative. If that is not achieved, it can lead to huge social unrest propelled by unemployment and under employment. India's young population which is widely referred as a "Demographic Dividend" can turn into a "Demographic Disaster", if not provided proper job opportunities. During 2011, the Sensex has given a -21 per cent return, making investors nervous. A further 20 per cent fall in the rupee has made the returns of foreign institutional investors (FIIs) stand at -41 per cent for the year. Such underperformance was punctuated by slowing order books, subdued revenue growth and pressure on the profitability margins. The weakening rupee and high interest rates have surely put pressure on Indian companies.Interestingly, if one sees the market cap to GDP ratio (GDP at market prices, at current prices and calculated by adding latest four quarter data), it is currently at around 62.25 compared to 56.22 in March 2009, when the markets made lows. Typically the ratio around 50 suggests value in the market and closer or above 100 indicates overvaluation. Further, the ratio of bank deposits to market cap ratio has also reached below 94 in December 2011. This ratio is below 100 for the first time since April 2009. This indicates that capital markets have corrected so much that the entire market capitalisation of the stock exchanges is lower than aggregate bank deposits. This clearly indicates that capital markets are slowly becoming undervalued and one can expect some smart investors to come into the markets soon. This can arrest the capital market fall and can bring smiles to capital market participants in 2012.As the world's capital markets have become highly integrated, interrelated and interdependent, the Indian capital market participants shall keep the following factors in their radar:1. "European Union" region breakup (or) "Euro" currency breakup2. Elections in US scheduled in November 2012, as Obama is fighting against high unemployment, reducing popularity ratings and subdued economy3. How strong will be the US economic recovery?4. A possible Chinese real estate bubble burst.As things stand now, it appears that Europe and emerging markets are in a clear mess. Ironically, the economic revival in the US is appearing to gain steam. If that happens, then the US may be the first one to recover, ahead of Europe and the emerging markets. So, what had started as a US economic crisis in 2008 may find the recovery from its point of origin.(This story was published in Businessworld Issue Dated 09-01-2012)
Read More
