panch-tattva talk…macro economics and nifty III

Friends,

 

Credit growth is a poor level of 24% for the fortnight ended May 9, 2008 largely due to retail credit taking a dip to 17% in March end quarter of 2008. It was high at over 50% in 2004-2006.

 

This information tells a lot about the basic understanding of the Indian consumer .  The period 2004-2006 was also a period when the entire asset class was witnessing a continuous rise in prices. This along with reasonable rates of interest made the consumer go for buying agaist retail finance. Since than banks raised interest rates and the assets became rather to costly and the consumers resorted to buying through owned funds. The dip in the retail credit is too sharp while the offtake of the consumer durables and two-wheeler and cars has not suffered the same fate.

 

By above analysis , it may be deducted that the sub-prime type of crises are not to be expected here unless there is offering of loans is with govt’s initiative and to win favours. The write off of the farm loans is not so much due the conditions demanding it as much it was due to the eagerness the govt to oblige farmers.

 

The markets should not take the dip in consumer finance a sign of weakness.   There would an agressive buying by the consumers for the interest rates offered by banks are not even covering the inflation . The consumer will only prefer to spend cash rather than save it. The rise in sale volumes in last month is something on this account.

 

HariOm,

krsnaKhandelwal

panch-tattva talk…macro environment and nifty II

Friends,

 

IPOs are nearly absent and are puttting no pressure on investor’s funds or the markets as a result of investors demand for funds.

 

The greatest dampener for the ongoing bullish equity markets comes in form of the IPO rush. What happens that while the promoters realise that the equity markets are at a point which is outvalueing the real worth of stocks, they cannot sell their own holding for the fear of giving jolt to their own stock. The larger sales will not be absorbed by market in any case when they start selling and this point is too well known to them. These promoters do not however sit quite and start making plans to come out with issues at hefty premiums . This has two way advantage ie they get funds without obligation to pay interest and the net worth of the company goes up with large pool  public funds but under their control without equivalent dilution of their own equity interest. The good managements carry out the expansions as per the prudent norms and the tricky ones some how benefit themselves and leave the new stake holders high and dry. The flood of the IPOs as a tool for garnering money with little cost to company eventually sees the markets plunge.

 

After this has happened the markets keep seeking the lower levels till there is pure value left and some dicering investors start entering the markets. The  smart promoters now make up the lost percentage of holding by stealthily buying and keeping quite about the companies real strength. Eventually the markets strart reacting positively on account of these smarties. I suspect that the media is roped in at the both extreme stages to confuse the public.

 

Some such full circle of things have been played out in Indian markets since after Sept 2007 and now. The wise will take the cue and skeptics will sit on fence till it is too late and will crowd the market when the risky times have nearly arrived.

 

HariOm,

krsnaKhandelwal

panch_tattva talk…thank the costlier oil

Friends,

It is not just a thought.The crude is high because humanity now has got very efficient processes and engines/machines which are fuel efficient and have delivered double the work done by the same single drop of oil. Why then the oil should not costlier if it has more delivery power.

Now will come the time of alternate energy sources to have greater attention and gear up for the relatively cheaper and greater work done for the same dollar spent.

There is too much subtlety in the above statement. I am not elaborating it for the sake of brevity.

Now we should find as to what sort of companies will flourish in future. I think high crude price is high opportunity for the high_tech engineering and energy companies. High crude prixes would prove to be the most important factor in seeing a better world, economically and environmentally. The cheaper tele-connectivity will save millions of business travel miles and hence the oil in times to come with practices getting changed. The economies of mass transportation will see more people travelling farther and in greater comfort for the same dollar spent.

HariOm,
KrsnaKhandelwal