Saturday, May 05, 2012

The UPA Government should know how to manage an economy and at the same time give respect to Stock/Share Markets
The BSE Sensex closed at 16831.08  on Friday with a decline of 356.26 points or around 2% from its close on 28th, April, 2012. It was the Sensex's lowest closing level since 23 January 2012. On the other hand the CNX Nifty closed at 5086.85 falling 122.15 points or 2.34%. The BSE Small-Cap index fell 137.91 points or 2.05% to end at 6,588.26, outperforming the Sensex while the BSE Mid-Cap index tanked 171.53 points or 2.73% to close at 6,100.80, under-performing the Sensex. 
Also, the markets crashed on last Friday, taking the indices below their 200 DSMA, on dwell fears of further downgrade by the S&P and on the rumours that FIIs are exiting the Indian markets, following implementing the provisions of the GAAR. 
Now who is to be blamed for this mess other than our present government run by an economist by the name of Dr.M M Singh? When the Indian economy is struggling, Dr.Singh thinks of going on a pilgrimage to Pakistan, so that His divine grace could bring the wheels of the Indian economy back to the track. Probably Dr.Singh felt that without His Grace, it would not be possible to revive, the falling trajectory of the Indian Economic Gradient.
The government is being run by a coterie who understands laws and theories/ postulates like a school teacher, rather than the process of practical implementation. The government's haphazard and lopsided moorings, have only brought misery to the man of the streets. We have an old-bone Finance Minister, who is out of sync with the modern dynamics. He probably thinks, stock market traders are like those gamblers in Las Vegas--so penalize and suck them as much as you can and then arrange for free trips for the current worthless Lady President (Surprisingly Shiv Sena supported her in the name of "Marathi Manus" Concept---a dangerous trend!!) with her family round the globe; with the Ministry of External Affairs clarifying, it to be, "A normal exercise". "It's a normal diplomatic practice that a visiting dignitaries occasionally takes members of his/her family on visiting trips. Hospitality for such visiting dignitaries in such cases is usually provided by the host government. It is not abnormal," official spokesperson in MEA Syed Akbaruddin told reporters. Wow!! CLICK HERE.
What to say to these shameless ladies, who become President of this great country in order to exploit it to the hilt and especially when many Indians go to sleep, with an empty stomach or live in abject poverty. These butchers, want to suck the common man, industrialists, businessmen, etc and use their money in such kinds of fruitless trips, along with a Jumbo Sized delegations. This is not the end, to the corruption trail of the FIRST LADY PRESIDENT OF INDIA--according to media reports, Rs.8 crore of public money was allegedly being used to construct President Pratibha Patil’s bungalow on a land, which cannot be used for civilian purposes, before too much hue cry, stalled her efforts, to loot the public exchequer. Palatial military resources were being deployed for her, while the Indian "Jawans" live in abysmal conditions. CLICK HERE
Maharashtra's track record of ministers, MLAs and MPs is one of the worst in India, and Ms.Pratibha Patil, Mr.Suresh Kalmadi, Mr.A R Antuley, Mr.Chavan, etc are glaring examples. Mr.Sharad Power is too clever to be caught in the net; he is alleged to be one of the pioneers in the land grabbing exercise in the "Maratha land". 
Now coming back to the main topic, let me say, that when the government knows that without FII money it is not possible to perform the show in the Indian Share Markets, then why go on scaring them, all of a sudden? This does not show any intelligence on the part of the FMO. 
The point which I am trying to hammer through since last few months is that the current Finance Minister does not understand business nor does he have clear cut idea, how a vibrant stock market is necessary barometer for any economy. Moreover, even I have not seen the great Indian opposition speaking much for or against the GAAR. So, it makes me feel in which side of the fence the opposition stands in this issue.
Because the Parliament has been given the right to frame, laws, that does not mean, that we should start making foolish laws, because some politicians like Mr.Kapil Sibal thinks so, and make ourselves a laughing stock among the peers. The Indian Finance minister blundered when he attempted a retrospective proposition to tax Vodafone after having lost the case in the Supreme Court. This action was read by the FIIs and other overseas business houses, as a vendetta to nail the companies in any manner. This action and then the government's dictatorial attitude in dealing with the issue of Coal India Ltd, had already left the FIIs high and dry; now they have discovered that the provisions of GAAR are almost hitting them on chin. After these FIIs started to withdrew from Indian markets to greener pastures abroad, the Indian stock markets lost almost half the gains it had made between 20 December 2011 and February 2012. After the current over-ambitious Finance Minister, came to rule Indian people, the situation of Indian economy has only turned worst. Now, the Finance Minister wants to put the economy on the shoulders of the RBI and govern it through proxy. The current Finance Minister, likes to dream and whatever he sees in his dreams he likes to send it to the press. Recently, I saw one such "Dream Headline"in  one of the pink dailies as, "Indian economy more resilient than other nations to withstand global turmoil: Finance minister". These kinds of statements coming from a Finance Minister, of this great country, when we have started to show plunging GDP-growth is really puerile and childish. He should understand that, making statements does not make, an economy strong or great. He has been making such statements since the last couple of years, while the economy is continuously shrinking, out of shape. He has done everything to destroy a vibrant economy gifted from the NDA and now GAAR, adding final nail in the coffin. It is to be understood that when the world economy was not doing fine, the FIIs supported the Indian markets and now it would not  have been proper, to suddenly bring in the provisions of the GAAR, much to their disenchantment. When anything needs to be implemented, it has to be done slowly and steadily. If a girl is suddenly, asked to change clothes in room, will it be possible, in the same way, if anything as serious as GAAR is to be implemented for the benefit of the Indians, then it needs to be done slowly, without harming the money flow or harming the sentiments of the FIIS. What the government should have done is to give FIIs, some time to adjust to the new law before bringing to their actual practice. When the Indian markets are already in a comatose state, it was quite foolish to bring such serious issues before the people and spoil the ambiance altogether. The stock market is purely based on sentiments, and once this is hurt, the market participants could shift to the markets, where there are better chance of returns. The Finance Minister should understand that in stock market, many stock only moves up and down due to demand and supply issues and there is not much fundamental involved or else how can one justify a price of Rs.37 for Jai Balaji Industries Ltd, when the replacement cost of setting up such a plant is more than 15 times the current market cap, leave alone other things? 
India has already lost its tag of a place for "Preferred Investments" and with the provisions of the GAAR getting rammed through, the things will take some more time to get streamlined. In such a circumstance, I would not be surprised if the Nifty comes below 4700, mark, which provided great support earlier. 
At the end I would only say, the Finance Minister, should understand the business of the business of running an economy!! If he fails, then it is time to resign and shift to other departments. The Finance Ministry is not for all those un-innovative college and university professors. Here, one needs to be nimble and sometimes needs to play to the gallery, to bring any economy back to the track. The Finance Minister, should note that he has pushed India to a "Poor Chap" status with his mindless policies and actions, now it is time that he retires from this post, lest it gets terminally ill. 
The recent RBI move to tame in the INR--USD fiasco, will hardly bring in much benefits, because the stakes are too high this time. Too much depreciation, of INR would put in more fears of inflation, with widening of the CAD. Keeping the interest rates high for too long  has already damaged the capex of many Industries and at the same time, it has stalled many infra-projects, aiding to the inflation. High interest rate regime pursued for too long, has forced many compneis to borrow money in the form of ECBs and FCCB, now with the INR depreciating against the USD and the stock prices of companies plummeting, the things have become even worse. With many companies pledging shares to borrow money and no money in the hand, they are virtually in the state of bankruptcy, eg. Koutons Retail Ltd. With Fiscal Deficit rising and CAD showing no signs of ebbing, it will really need a miracle for our Indian economy to spring back to action, quickly. 
Gone are the days of 9% GDP growth, India will be satisfied if the growth stays around 7-7.5% this year. Since the slowdown of 2008 all those signs of  a nascent signs of recovery has already gone down the drain. RBIs, adamant stand to keep the Interest rate too high for too long has had its toll on the Indian economy, as the inflation fear still persists. Is it possible to stop the demand of essential items by raising the interest rates? Will people start taking less rice and salt---this is absolutely ridiculous. 
This shows that there is lot of difference between a "Copy Book commuting and vomiting" economist and a person, who understands the nuances of the game well and can play the ball on the front foot too, in the slog overs. This actually proves that in all times, the inflation might not come down, even if we have steep upward moving interest rate curve. Now rising Oil prices and weak global cues might further complicate the scenarios. We have lost our place among the peers and have been ranked as one of the most corrupt countries of the world, with a series of big scams, emptying the coffers of many international companies--the on going tug-of-war between the Indian Judiciary and the overseas telecom companies have already soured the sentiments. Vodafone case have already ushered in lot of discomforts in the minds of the international communities. Now the GAAR implementation has blown the final whistle. What is left of the skeleton, named India, is it final journey to the funeral pyre to be turned into ashes.
While a large section of Indians live in abject hunger and poverty, our politicians across the board are busy, to find out who will be the next President of India--a constitutional post, which hardly carries any meaning and could be called a mere luxury, in a country called India. This post should have been abolished long back, and money should have been used in productive sectors; but alas, the power and money hungry Indian politicians, would keep it for their own benefits. The way the things are going on, we might soon land ourselves in a Egypt like situation, where the "Janta Janardhan", will take over the power from these bunch of jokers. Democracy cannot be successful in a country, where still vote are given to elect legislatures, on the lure of money and alcohol. That we are no better than a "Banana Republic" has been proved by our moronic actions like talking of inventing laws, on the bed of the Parliament to tax some entities retrospectively.
Nifty, on Friday closed below the 200DMA for the first time since its close above the same in Mid Jan. It took almost 9-10 months for Nifty to recover and close above the 200 DMA. In the chart we can see that the 50% Fibonacci retracement levels from the low of 4530 to 5630, comes to around 5087. A close below the same might take the Nifty to its 61.8% retracement level which placed around 4950; however, the Nifty might get some psychological support at 5000 levels, but the levels of 4700 and deep down cannot be ruled out if the government remains obstinate, to implement GAAR and other investor unfriendly, fiats. I do not anticipate a quick recovery unless the government becomes investor friendly and helps revive the sentiments of Indian capital markets. The UPA government has been treating, it like a milch cow, since the time of P Chidambaram, who went in for a Rs.60, 000 crore loan festival, draining the public exchequer of the much needed blood.
India is a sordid tale, of how a vibrant economy can be doomed by an Economist Prime Minister, a too cunning Telecom Minster and a novice--dialogue-belching-Finance-Minister. God bless India and Indians, this is the only thing, I can think at the present moment; with so much pessimism around!!
Post a Comment