April 30, 2008 • 1:32 am 0
Unless commodities don’t reverse their trend, inflation may go sky high threatening demand for the same and causing major food crisis. There are no clear winners in this inflation saga, not even the OPEC countries who depend on food imports. These OPEC countries not only have to contend with rising food prices but also drop in oil demand.
There is a major lesson in this crisis for all of us to learn. Live and let live.
Filed under: Uncategorized , food crisis, inflation, OPEC
March 24, 2008 • 3:26 pm 2
Rising rupee was the first reason given for drop in export focussed sectors like textiles, software.
Rupee recovered (temporary recovery though), but sensex didn’t stop its downward trend. US subprime mess was second most famous reason by many technical and fundamental analysts for sensex fall. US Stocks are seeing rapid flucations and are reacting to Fed’s action , but Sensex in India is continuing its downward trend. People on the dalal street are as clueless as they were when sensex was on its upward trend. IIP numbers is the latest mantra and rising inflation is another bandwagon kept ready by several analysts to blame on, if sensex doesn’t stabilize at this point.
Simply put, INdian markets rose with the expectations that our GDP would reach double digit growth. The local high networth investors, mutual funds, banks etc don’t have cash to push the sensex in an upward direction. The rise we have seen in the last 2 years was a rally by FIIs.
Indian growth story is dependent on demand by Indina consumers and to meet those demands, supply has to be increased. To increase supply, corporate India needs money. This money can’t be raised locally (don’t know why) and so we are dependent on foreign direct investors or debts from foreign lenders. With liquidity crisis, that channel is more or less closed for corporate sector and an indication that our GDP growth will not touch double digit. FIIs sensing this pulled back money in fear, expansion plans of corporate sector is on hold, but consumers demand is on the rise causing inflation to rise.
There are two things to focus on a) Inflation b) gloabal liquidity crisis.
a) Inflation: Rising inflation is not necessarily a bad thing for a growing economy. Contraray to comon belief this should be a good news. Rising inflation indicates rising demand and thus encourages heavy investments to meet the demand.
Inflation may also rise out of fear to unsustanable levels. Will it rise forever? No.
1% inflation is bad in USA, but considered excellent for India. Inflation geater than 4% in India is bad according to analysts. I ask why?
My salary has risen more than 50% in the last 3 years. For me a mere rise of 2-3% in inflation is barely noticeable.
If the street or the politicians are worried about WPI, then remember everybody including labors have seen their pay rise. This doesn’t mean that their problems have gone, it only means their fortunes (lower class) have not significantly dented due to Inflation. I don’t think, people are necessarily cutting down on their food or spending, fearing Inflation in India. So, don’t sell stocks based on fears that Indian economic growth story will come to an end due to Inflation or due to global economic met down.
Inflation and economic growth go in parallels and in same direction. If they go in opposite direction, they have to meet again at some point for economic well being.
Take for example Crude prices. You cannot expect Crude prices to go up in perpetuity. Oil producing countries like Saudi Arabia, Iran etc know that if OIL continues to rise, the demand for oil will reduce too, causing their earnings to drop. Not to mention political fallout for Saudi Arabia, if Oil continues to rise.. domestically for OPEC countries inflation will rise muti fold too as they are dependent on imports for their food items. Why aim saying all this? Coz, it is in the interest of OIL producing companies to slowly bring down the price of crude to sustainable levels and help subside the global inflation. This arguement which is for OPEC is true for every country that exports commodities whose price have to come back down for gloabl economic health. The emerging countries cannot continue to consume if the prices keep on rising.
Commodity prices will drop helping inflation to subside. This has already begun.
b) Global liquidity crisis: This crisis will never go unresolved. Fed and several central banks are working over night to help banks with liquidity. The only question is how. They are figuring out ways to help flush the banks with cash by lending them or buying out the mortgage backed securities using tax payers money.
There are two big questions. One is will the people in the West especially America allow to use public money? Even if that was allowed and banks are flushed with cash, where will the banks lend that money to remain in good health?
We got to assume few things here to move forward. Banks will never loose in this fight. They will get the cash they need to power the global economy. If that doesn’t happen, then consider that we are all doomed. So, it is safe to assume that Banks will be back to lending now or in some time in future. The only question staring them is where to lend, so that they are guranteed a return? No guesses, it will undoubtedly be in emerging markets where there is risk apetite for people to take debt and keep their prmosie of returning the debt. Also, lending rates are high too, which again is a good reason, why liquidity will come back to emerging markets like India. The investment banks and commercial banks around the world cannot lend money to the same people who defaulted on their home loans or are finding it hard to pay back their loans. So, there is no alternative but to cycle their money in emerging markets. The gains they make here will help keep the jobs afloat in US and help them come back from recession.
So, i am out on a limb suggesting that markets have bottomed in India. Even if they have not bottomed, i have no doubt in my mind that the markets in emerging countries will have to be lifted sometime in future for global economic system to function normally again.
Money flows where there is a risk apetite and where there is demand for consumption. Then what better place than India and China?
Filed under: Finance India, India blogs, Indian Bloggers, Uncategorized , BSE, india finance, india growth story, inflation, market meltdown, NSE, risk apetite, sensex, wpi
March 13, 2008 • 6:23 am 0
TRS Chief KC Chandrasekhar Rao has resigned and got re-elected just few months ago. He along with other M.Ps have resigned again and are getting ready for By-elections. The notification for by-election will be issued next month as per paper reports.
When General Elections are due next year, why should we conduct by-elections now costing Tax payers money and also their time? Also, there should be a law prohibiting Law makers resigning without any strong reason. Also, there should be provision to bar such candidates from contesting again.
These MPs and MLAs are insulting the mandate they received by not performing their duties.
I will be writing another blog with more details on Telengana issue.
Filed under: Finance India, India blogs, Indian Bloggers, Uncategorized , Andhra, AP, byelections, Chandrasekhar rao, Telengana, Telugu, TRS
February 12, 2008 • 5:03 pm 0
Every body has to take their share of blame for the dismal performance of Reliance power shares. To start with, i would blame Anil Ambani, investment bankers and all those analysts who pumped up the stock in the hope of bumper listing.
Due to bumper listing of several IPOs, value investors were sidelined for long now and momentum investors took front seat and technical chartists were revered.
THe right way for Anil Ambani was to do private placement and raise money to get the projects started under Reliance Energy fold. However, seeing the boom period Anil ambani lost his senses and wanted to make a quick buck just like a normal trader.
He quickly made Reliance Energy a holding company and shifted power related projects to Reliance Power and floated another publicly traded company by filing IPO.
The original price was around RS 180-RS 200 few months ago and don’t know, how and why they came up with RS 450-RS 480 range for this Company with no revenue to show, no concrete contracts for sourcing GAS, Coal for these projects. Anil adamantly didn’t listen to any suggestions for private placement as he thought the stock market will give him the right price. By offloading 10%, he was dreaming to get more value for his 90% share holdings and quickly wanted to become richest Indian.
There are many risks in completing the power projects and there will be too many negative trends for this company going forward.
By 2013, the cost of power per watt may become cheaper due to Rupee strengthening and there could be lot of competition from wind power, solar power providers.
So, i certainly can buy Anil Ambani’s shares for less than RS 100 going foward.
I suggest that we should all avoid any IPO led by tainted investment bankers of Reliance IPO.
I suggest you do both fundamental and technical analysis before investing money in stocks.
I am afraid, my earlier prediction of Reliance group promoters becoming poorer by their recent highly pumped Reliance Power listings coming true.
Certainly the investors are to be blamed for thier losses in Reliance Power.
Filed under: Finance India, India blogs, Indian Bloggers, Uncategorized , Anil Ambani, Biggest IPO, BSE, NSE, reliance energy, Reliance Power, sensex
January 10, 2008 • 4:34 pm 0
Tata’s nano dubbed as People’s car is the talk of the world. Almost all radio channels, newspapers are covering it breathlessly.
I was driving from Norwood, MA to Acton, MA for my work and turned on Radio FM channel 90.9 and to my surprise there was an ongoing discussion of People’s car. There were echos from people in Afghanistan, Europe etc wanting to buy this car. However, there were also people from Ghana who said big NO for this car as they have seen negative side of it due to cheap cars from Korea.
This is what analysts are saying: Tata’s Nano (alias JEH) could be a huge hit in India. This type of car may work in India in the present conditions of Road infra structure. There is a huge apetitie for such cheap car from Lower and middle class families, who would want to switch from 2 wheelers and also from first time car buyers. Especially families who wanted to buy 2 wheelers to carry their entire family of 3-5 would now switch to buy this cheap car instead of 2 wheelers from Bajaj, Hero Honda.
Youngsters will still prefer 2 wheelers though.
Tata’s car can push the whole auto indsutry into a tailspin. This is my view though.
A) Tata’s nano has the immediate effect of putting a price pressures on 2 wheelers, 3 wheelers and 4 wheelers and ultimately affecting their margins. This will negatively effect the top line and bottom line of all the auto majors. Utlimately Indian people will benefit as the prices will be drastically reduced by Tata’s competitors.
Net affect: 2 wheelers will become lot cheaper. 2-3 lacs car prices will come down and ultimately become attractive to the point that Tata’s nano buyers will start looking around for better options such as safety, design and status.
Tata’s nano can create class wars among car buyers.
B) Tata’s nano can aggravate our traffic jams and burden our creeking infratructure. Unless government does something immediately, 1-2 years from now, you will see traffic jams for hours.
However, contrary to this opinion, if Road infratructure improves inline with Western standards, Tata’s car may not be suitable for fast mobility as their engines are V3 standard and their max speed is much less compared to what it should be on good raods. Tata’s car wil again impede the fast mobility and again create bottlenecks.
C) India has to spend lot on importing OIL. Almost 2-3 times what it does now. Their will be huge pent up demand for petrol.
D) Safety issues will crop.
If i were you, this is what i will do.
Instead of spending 1 Lack rupees on tata’s nano, i will but Tata Motors stock in open market.
No doubt, tata motor stock will go up for next few quarters as their sales volume will pick up. Meanwhile, the car prices and the stock price of other auto majors will come down. I will book profits on tata motor stock and buy Maruti car or other brand with the profits in tata motor stock.
Thanks
Sri
Filed under: Uncategorized
December 2, 2006 • 2:41 pm 4
eNewss.com is glad to get an oppurtunity to talk to Anurag Gupta who has extensive experience in diverse industries. Anurag also maintains a blog and mostly writes about Internet in India. You can access it here http://anuraggupta.blogspot.com/
eNewss) Give us a brief introduction about you and your work.
Anurag) I am an MBA from one of India’s premier institute – IIM Ahmedabad 1989 batch with more than 17 years of rich work experience across diverse industries. – FMCG, Office Automation, Stock Broking, Yellow Pages and now Internet.
I have recently joined India’s leading Interactive Agency – Mediaturf in Delhi as Exec VP & Director. My mandate is to set up the Northern operations and more importantly to take Mediaturf’s business to next level by aggressively foraying into newer areas like Search marketing, Mobile marketing, Retail advertising and Affiliate marketing. Prior to joining Mediaturf, I worked for 4 years with one of India’s largest Internet Company – Indiatimes.com. I was instrumental in creating and heading the “Subscriptions” business. Starting in February 2003 with a single product Indiatimes Meramail, the business today has a very large number of paid users across varied products with many of them becoming leaders in their categories. I also led Indiatimes’ foray into education by launching testing services at www.testcentre.indiatimes.com . The aim was to eventually offer a full services education portal. You can refer to some of the products that I handle at http://business.indiatimes.com – these are essentially on similar lines as Yahoo Small business products aimed at enabling and facilitating businesses online.
Filed under: Uncategorized
