Indian bloggers mania: sridhar kondoji


Indian blogs

Inflation and the fear factor

Markets rise on speculation and fall on fear. These are spikes that are impulsive in nature. They do not necessarily reflect the real conditions but the fear and speculation of traders.
This argument can also be applied to Inflation and more directly to prices of goods we purchase.

Member of Planning commission Abhijit Sen said that India may not need to import wheat and rice this year, as it is heading towards a record production.
Now this statement is a speculation (definitely not a fact) that can affect domestic markets as well as international markets.

Domestically traders with advanced data of weather and also data about stock piles of rice and wheat could react in two ways.
Traders may raise prices of Rice and wheat because they know for sure now that Government is not planning for imports and if weather data for this year runs contrary to what member of Planning commision says, then prices may rise further causing inflation to inflate further.

Intrenationally traders may take that (message of planning commission member) differently and cut down production of Rice and wheat speculating low demand for the same.
The member of planning commision should keep both options (importing or not importing) open all the time to keep in check the prices.

Government should scare the traders by keeping the option of import threat. This should very well be done in case of rising cement prices (Top cement producing companies alleged to have created a cartle), rising steel prices (Government have stopped exporting iron ore and this should help prices to subside), rising edible oil prices etc.


Filed under: Finance India, India blogs, Indian Bloggers, , , , ,

Mark To Market and Mark to Model algorithms are flawed

Mark to Market and Mark to Model algorithms are flawed meaning they don’t value a derivative accurately. They don’t clearly show the underlying weakness or risk in the derivative. Most of the time, they over rate a derivative and hence markets are not taking the Mark to market losses at their face value. They know the losses are much more than what these algorithms are saying.
Don’t believe ICICI bank, if they come out next quarter with Mark to Market losses of few million dollars.
Legally they are not wrong in under reporting their losses as per these models, but ethically they are wrong.
If they say that these are notional losses,  then they are wrong again because the chances of recovering from these losses are very grim. Most of US banks have written them off and don’t believe in recovering from these losses.

Banks are on a downward trend for many reasons in India.
1) Unrecoverable losses in derivatives and forex hedging.
2) Rising retail loan rates pose a danger for their growth.
3) Rising inflation will curtail their growth further because people’s borrowing costs rise that much more.

I won’t be surprised if i see ICICI bank scrip below RS 500.
Investors in ICICI bank should thank God, If their exposure to Derivatives (traded and non-traded) is only $2-3 Billion. In that case, the maximum loss could be that much only ($2-3 bilion).
However, i doubt it, their exposure to US markets could be much more than that and they may be in other risky investments too.
It is best to avoid Bank stocks untill they come out and clearly say what their exposure is.

Filed under: Finance India, India blogs, Indian Bloggers, , , , , , , , , , , , ,

Slow digitisation process to affect broadcasters

If your background is electronics, you already know that analog cables bandwidth is limited and they can carry only so many channels.
So far that was not an issue at all, but with recent flood of news channels and several varieties of entertainment channels the analog cable which is still predominant has maxed out. Not knowing this or should i say ignoring this fact, new entrants are coming into broadcasting business and loosing money competing for the limited channel bandwidth.

CAS is not manadatory except in 4 metros and there are almost 75 million cable homes running on analog cable.

Who will be the winner in this slow digitisation pace from investment point of view?
Broadcasters or MSOs or Last Mile cable operators (aka LCO)?
So far LCOs under reported their subscribers to MSOs so that they pay less to MSOs and mint money for themselves causing losses to MSOs. This was possible because analog cable doesn’t give MSOs an advantage to accurately measure the subscriber numbers.
In turn MSOs get less carriage fee for channels and broadcasters get less pay channel fee.

However with intense competition for limited bandwidth broadcasters are bidding high for their channels and MSOs are seeing their green days. Now LCOs will be the loosers if they continue to under report, so to get their proper share they have to good job of reporting the subscriber strength and take a share of that carriage fee. This will also result in MSOs getting more money from LCOs resulting in broadcasters getting their fair share of pay channel fees.

Under this new emerging scenario MSOs like WWIL are true winners. If the present slow pace of digitisation contunue, they make more money in carriage fee or if the CAS becomes compulsory, MSOs will still continue to make more money from their value added services and subscription fees from LCOs.

Government should act fast or else the carriage fee will hit the bottomlines of broadcasters forcing them to cut costs and thus sacrifice quality.
In a year or two, this present situation can easily get out of hand.
I&B along with TRAI should hike FDI limit to 74% to help cable companies to invest in infrastructure for faster digitisation program.

Filed under: Finance India, India blogs, Indian Bloggers, , , , , , , , ,

Start buying stocks, 14000 is the bottom atleast for now

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, , , , , , , , ,

Inflation biggest concern for India growth story

Any government at the center cannot overlook at inflation. If corporate sector and or investors want government to introduce pro growth policies, then inflation should be in the comfortable zone. With inflation rearing its ugly head, gdp growth is expected to decrease to 6-8% range and investors fled the market causing the stock market correction.

Rising commoditiy prices and agricultural produces causes inflation to rise and there is an indication today (March 19th 2008) that commodity prices may have peaked and are on a downward trend. Gold price and crude oil price have come down heavily today and also prices of potash.
This will definitely contain inflation and stock market may see good days again especially in India.

Wish you all a good luck for Friday March 21th market.

Filed under: Finance India, India blogs, Indian Bloggers, , , , , , , ,

India Growth story dented or intact?

The way i feel it, India growth story began with Software sector. Seeing Indians in United States and few consulting firms like infosys and Wipro, West started looking at India and wrote many research notes upto year 2050. Fortunately or unfortunately most of the highly paid jobs are in Software sector and work force in other sectors too saw better pay hike but not as high as work force in Software sector. Most of the growth story depnded on the software sector work force which had high disposable incomes.

With West in turmoil where consumers almost stopped spending and big investment banks loosing their shirts on securities tied to mortagages, spending on software will take a beating. Financial services is where most of spending happens in software and if they are in a mess, then software sector will be logical next to fall creating a chain reaction and spreading its ugly tentacles to outsourcing industry in India.

The lofty projections we made on Software exports will be next to nothing with crippled Topline (outsourcing contracts reduced/canceled) and bottomline (due to currency fluctuations) of our Software companies. Adding to this agony is rising salaries which will become unsustanable going forward.

If thousands of employees are given pink slips, then the consumer spending will be reduced back to the levels a decade ago and this will definitely dent our growth story.

Real Estate will take a big hit especially the prices of Gated communities where prices have soared to unsustainable levels. Not to mention the default rates on loans already taken by work force in software sector.
The banking sector will take a hit with this fall out which is already reeling under the stress of their exposure to US Subprime market. These banks especially ICICI which are using Mark To Market or Mark to Modal techniques to write-off is flawed. The underlying secutities may have significantly lost their value and the total write-offs may go upto Billions of Dollars causing a turmoil in our banking sector.

With Inflation rising and Retail loan rates at its highest, the GDP growth is no doubt going to 7-8% levels.
Forget about double digit growth for another 2 years.

This being an election year, the Congress government took a populist route and waived the loans for Farmers causing enormous deficits which will have an effect on inflation too and push our Countries growth ona downward spiral.

The governments first priority is to safeguard existing jobs and create newer ones.
We need companies who can manufacture products here in India and sell it to Indians thus creating jobs.
If Software industry didn’t realize its follies by now, then they are doomed. They need to change their business model and be more professional and take risks in diversying. As of now, they just behaved like mom and pop street corner shops and never exhibited any leadership qualities in developing enterprise strength products.
Infosys and Wipro are to be blamed for this. Despite being cash rich, they never dared to venture out of their shells. They minted money as long as Rupee was cheaper and weaker and misused Indian talent to their advantage. They didn’t learn anything from Western software companies. Instead they just concentrated on labor costs differentials and minted money.
The change has to come and this is the time, otherwise it will not be too long when Indians start hating Infosys and wipro.

The political parties need to evolve too to keep the Indian growth story intact. They can’t recklessly misbehave with Indian tax payers. They need to realize that they are our money managers and can’t act in a way that jeopardises our future. They need to spend more time looking at policies which wrongly incentiivized our software sector. They need to gove similar privillges to other sectors too. Its time, that our lawmakers pay attention to all the Bills introduced and amend it if is not in the intersts of Indians. As of now, they merely attend Parliament to take a nap.

to be continued…..

Filed under: Finance India, India blogs, Indian Bloggers, , , , , , ,

Tibet unrest

Beijing Olympics are around the corner and China is facing all sorts of resistance in the run upto the games.
First major incident which China had to face was resignation of Steven Spielberg for its allged mishandling of Darfur massacurs. Second is its Human Rights record inside China and the latest is Tibet unrest. Chinese leaders should have been more careful in handling peacefull protests of Tibetians.

Tibetians protests are justified given China’s attrocitis on them for years. However the timing of such protests and the death toll is puzzling.
This could have far reaching implications for China, India and Tibet. China is already under radar for its mishandling of Tibet protests and may be under pressure to handle it with patience. Tibet may win some sympathy as a result, but India will be blamed for allegedly allowing incursions into Tibet. The worst thing that could happen is bombing of Tibet’s Government in Exile (which is India). If that happens which will be a highly irresponsible act, war may break out and markets may collapse in Asia especially in China and India.

That was too extreme of me in assuming that China will attack India. If that happens then Olympics which is China’s show of its developed nation status will be put off.
Also, Beijing’s army cammnad has rcently spoken of getting ready for war and we thought they are reffering to Taiwan. It may actually be towards India. Its wait and watch game.

Filed under: Finance India, India blogs, Indian Bloggers, , , , , , ,

By-elections for Telengana region again

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, , , , , , ,

36% of NASA are Indians and 100% of Times of India (TOI) is trash

Let me first start of this blog by saying that Times Of India (aka TOI) lacks leadership, ethics in the business of journalism. This news paper has not evolved a bit reflecting emerging India. This news paper still continues to fool people by diplomatic reporting.

There is a spam email which is floating around from long time (i first encountered it around 1998) and it being refined and re-refined adding many more and more lies or facts which cannot be substantiated.
Here comes our beloved Purandeshwari, minister of state for HRD, who read a note in Rajya sabha.
“The extent to which desis have made an impact in the US was reeled off in the Rajya Sabha — as many as 12% scientists and 38% doctors in the US are Indians, and in NASA, 36% or almost 4 out of 10 scientists are Indians.

If that’s not proof enough of Indian scientific and corporate prowess, digest this: 34% employees at Microsoft, 28% at IBM, 17% at Intel and 13% at Xerox are Indians.

And the House of Elders also heard some startling facts about a country that’s still stuck with a Third World tag — 20% of gold in the world is used by Indians and nine out of 10 diamonds used in the world are made in India. ”

She says that all this is because of country’s higher education system and the state of research.

Back to blogging…….
Purandeshwari being an HRD is misinformed about the successes of Indians abroad. For the big mouth she opened, misguided and misinformed is not an excuse at all for this minister of state. Her open lies to members of Rajya sabha is an insult and also injustice to the job she is doing. She should be politely told to give up the job or be proactive in getting the facts from several sources and do independent analysis before speaking in the House.
This episode also scares me a lot on the quality of information that is being read/spread by several ministers of State.

TOI on March 11, 2008 reported what Purandeshawari said in the House and slightly exaggerated them to look even more glorious. Instead of criticizing the minsiter for lack of research and misinformation on their news paper (TOI lacks standards and objectivity), they are now playing on both sides of the coin. As soon as people started poring in with comments screaming ‘LIES’, the news paper is now taking the side of readers and blaming spam for the entire episode.

When does our Indian news papers be half as good as Nytimes, WashingtonPost ?
Never is my answer.


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