Zero From An Investors Angle

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Budget 2012 is a big disappointment from each angle. If looked through the eyes of banking sector it will reveal the plight caused by the tug of war in between so called liquidity and income from interest. In a bid to make everyone cheerful the government could simply bring tears to each eye. And everyone is invited in the aspect of divestment the government came forward with a proposal of 30,000 crores of rupees. It cannot be the spokesperson of reforms. Rather those who eyed the reform scenario with utmost keenness got sorted with these meagre steps ahead. There hadn’t been anything to write back home about, but the staggering volume of budget deficit, government borrowings and government expenditures. A country that passes through economic rough wind needs to take some bold steps towards consolidation, so that the GDP growth in the coming fiscal doesn’t make faces – but to no avail!


The proverb goes: ‘Too many cooks spoil the broth’! Time and again we are to make ourselves understand – India is a multi-ethnic, multi-lingual country. And each one has got some veto power by virtue of vote bank. Now forget about banks (financial) if not river too, but dare not play with vote banks. The game could be really dangerous; it may make your existence, non-existent. My India is great, so are her people and specially her people’s representatives. Their endeavour made this country the biggest display board of the intercourse of Demos and Craters. Great is our country, great is the house that houses the people representatives and great is the book that teaches, preaches, and makes us carry on home – work …. on dos and don’ts! Unfortunately, our economic desires and aspirations seem to be all but a far cry to the deaf ears of the great demonstrators of Demos and Craters.


A country that witnesses flood and drought each year, and which witnesses child deaths due to malnutrition, and even occurrence of pseudo famine in some districts like Kalahandi, Koraput, Amlasol have not only become self-sufficient in food and beverage, but also become consumer to the extent of a dinosaur. Dear reader, please note that the expression is strictly for the birds not for you! Of – late, the country’s IIP number had been published and it stood like a respectable Manhattan of 6.8. 92 percent of this Manhattan is the contribution of food and beverage industry. Now, let us go with this number to a Panchvi pass student and ask him or her, “beta 6.8 ki 92 fisadi kitni hoti hai”, the answer will be 6.256. So the rest 0.544 came from industry. The industrial captains smirk. To their accounts, the IIP number for actual industrial growth should not be less than 2.5. Hence, 1.956 credits have been taken away from their credential and thereby portray the image of “Yeh duniya, yeh industry, yeh growth, hamare kaam ke nahin”! Now dear reader it is you to decide who you should garland for this incredible record. Taxmann Dada, we file ITR to feed to those pets of your who brings the replica of history that a hen gulfs down fodder worth INR 1,750!


There is an English phrase “Playing to the gallery”. With due respect to the Railway Minister during the last one decade all we could witness is playing to the gallery. During this one decade, INR has lost more than 40% of its purchasing capacity, if not more. Thanks to the Railway Budget they didn’t let INR erode. Come tread wind or recession, Indian Railway made its fare and freight charges a poll – star. Unfair enough! For the first time a person could understand the ground realities. His sin was to dream of a railway network that could contribute to the country’s GDP. The treatment he got made the railway ministers in the time to come not to think of this country and her economic growth. Poor man even his words could not boost the morale of investors in Dalal Street. The man stressed the need for safety, but the company which produce anti-collision device could not show any spurt in volume. To the contrary, the scrip’s faded almost 3 percent on the D – Day. Now, if investors are that smart, how can you expect a female domestic help who by virtue of a Jadui Chirag (people’s verdict) become the duchess of a dukedom could be able to understand the implication of what the man intended. The domestic help in question is always in fear of losing that Jadui Chirag and so her behaviour is understandable. No matter her fear or anguish may or may not boost the country’s economy.


Dear Reader, please forgive us for writing this mouth watering phrase in money market as a ravage register. In fact, even if you put your experience to test, we assure you will second this opinion. Whenever INR gets into this quicksand, our apex bank count the ravages in the name of CRR cut. A couple of days before budget, our apex bank came forward with a dramatic 75 bps cut - much to the cheer of capital market. The capital market that close at somewhere 5,320 opened on Monday with an eye-popping gap up of more than 70 points. However the bond market immediately showed signs of high fever. The bond yield went up 8.40 creating pressure on inflationary front. Despite the cheers of capital market INR eroded further and the price of US dollar went up to Rs 50.61.


The government made its intention clear to leave no stone unturned in the way of reforms and thereby make this country more investor friendly. Bravo! For the first time they went for divestment in the aspect of ONGC. Before this the government played on the pocket changing game (say, government sold 10 percent of MUL stake and the buyer had been LIC Mutual Fund). Dear Reader, is it anything but to take a stock from the right pocket of your trouser to pass it to the left one? When the tight-lipped brokers could not help laughing at this innovative style of divestment. However, the past experience made the government a smarter animal. Now they divested the ONGC stake in such a way that it fells on the deaf ears of so many. It had been a bidding process starting from INR 297 onwards, but the smart investors looked for proper time so that they could take a call on ONGC at a very softer rate much less than 297. Evidently they acted in a smart way now the stock has drifted down almost 268 levels. Again the investors know it very well that there are so many back seat drivers who will veto any government move to hike the price of petroleum products. Hence the OMCs are bound to bare the extra burden of subsidy. Hence ONGC is likely to drift down further. In a word the government’s divestment programme caught the wrong end of the stick. In his annual function, the FM spoke of divestment worth INR 30,000 crore is most likely to witness this kind of full hardy wisdom once more. Make no mistake divestment worth INR 30,000 crore is most unlikely to express Union Government’s sincerity for reforms.


As it had already been discussed that the procedure provided by the honourable government are unable to walk on their own feet. Forget about cat-walk and thereby draw the attention of global community. Here the government had come out with a moderate inflation number, where food grains and their consequent subsidies roared aloud, but the core inflation has somehow softened. However, our honourable finmin has spoken of a horizon of seven and eight and is enthused to find the rate of inflation within that horizon in the next fiscal year. Here, with due humility let us put forward his helplessness on the global food price. He made it a point that the global food price is to be contend at $115 a barrel. According to the most investors FIIs and even BIIs are of the view that the crude price is going to the joker of the pack. It will have many negative surprises in store. For instance, even the OPEC countries went on supplying regular crude production, Uncle Sam cut a very sorry figure and made the crude price touch stratosphere. Thanks to the existence of the Middle – East countries who could be made scapegoats for this unreasonable price every now and then.


A country’s economic growth depends on investment. An investment cannot land in a barren chunk of earth where fiscal consolidation is a far cry. CRR cut may ease the liquid scenario, but we must remember if there is any enough liquidity, there should be measure to mop up the extra liquidity in the name of repo rate cut. Else there will be tremendous pressure on interest and the banks are going to lose the deposits. What the investors expected from this year’s budget cannot be expressed as crying for the moon. The investors even didn’t expect too much from the honourable FM, as they can understand the existence of back seat drivers behind the curtain. Again a country with almost negative IIP growth is unable to perform on growth ground. The country needs to gain health through fiscal discipline. At the same time the country should keep the reform torch lit in sun and shower. An investor seeks the following things from an FM:

  1. Budget deficit to be kept under control
  2. Government expenditures should be confined within a boundary.
  • Government expenditures to on an hour glass figure.
Posted by: Soumendra Roy. in Finance | Date: 04/04/2016

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