panch-tattva talk…the bad quarter

Friends,

The bad quarter of Oct-Dec 08 is now history. This quarter was worst as far as the flow of news goes and it was the worst period in the sense no body had guts to be optimistic about the times ahead. Now there are people who have regained their confidence partly. The sectors that have shown dent are metal , chemicals , auto and realty. Rest of the sectors have had mixed fortune and in a way exceeded the expectations. The january nunbers will be out shortly and if these nunbers do not show further weakness , the marekts will be rebounding.

The sugar companies have given better results and some of which have not, will be improving in the current quarter. What is more is that the sugar scene for the next year will be still better because the carry over stock will be lower this year. Of the sugar companies in north Dhampur Sugar and Oudh Sugar have given very encouraging results while the leaders like Balrampur and Bajaj have not been up to expectation. Bajaj has shown outgo by way of other expenses to the tune of Rs 80 crs (almost double of last year). If the next quarter will be without such extra-ordinery provsion towards other expenses , its profits will be pretty large too. It is better now to concentrate on sugar sector because this is the only sector which has cycle turning for the better.

The cement companies have given pretty satisfying sales and profit figures and the share prices for this sector will improve in coming times.

The third stimulous package will instill the needed injection of strength. The interest rates in India will keep softening as the demand for funds has not been too high while the savings rate is maintained.

Some analyst have predicted that the NPAs of Indian banks may rise but I differ here. The lenders have been quite careful and there is not very excessive leverage as the companies have been having robust earbings during last four years which is resposible for low debt/euity ratio. There is now some pent up demand from such buyers of automobiles and housing units who expected lowering of interest rates. The bail-out package under Obama regime will be tabled next week and if it gets through , the USA markets will have to show strength. The positive news is now having impact and the liquidity scene is not all that grim. USA’s GDP has shrunk by 3.8pc (the lowest since 1982). There is, however, a govt in place almost evrywhere which is concerned and is busy at keeping the recessionery impact under check.

The crude prices have relieved the Indian govt a lot. It has been able to reduce petro prices twice in last few months.

We have forgotten it but it is a big thing that in India the duties were reduced by 4pc across the board. Most of all as the dust will settle , the FIIs will be back here to invest. They have even started to come back. Some odd days have seen buying by FIIs.

The insurance sector will be receiving good amounts by way of premiums in last quarter. A good part of which will find way in to stock markets as ULIPs constitute big chunk of new business for last few years.

The relative pricing for metals and other assets is getting on the extreme side against metals and may shortly see reversal of trend.

The salary rises this year will be modest and will help corporates.

There will be no effort at hiking tax collections upto may when the new govt only will balance the budget nunbers. Till then the RBI will take care of the short fall in revenue and the expenses. Should this happen on even slightly larger scale, there would be sudden rise in liuidity level which will spur the rise in stock prices.

The damage caused by ‘satyam’ fiasco is getting subsided. If a comany which has lost entire saving of last ten years is seeing the share price rise by more than 100pc from its lows, why others which have had no such problem should be punished further.

The money belonging to copanies will be treated with greater respect by the mangements now and this is very beneficial fall out of the ‘satyam’ episode.

The polititians and beaurocrats also will be careful while supporting their choosen corporate houses.

The chartered accountant community will be now less lenient about the misdeamnors of the corporate heads and will be less in awe of the supremo. The balance-sheets will get healthier. The crusaders amongst the share-holders will be more vocal against the managements seen doing wrong.

The big groups will fight shy of trying to aquire foriegn based companies as the Tatas and Birlas have had to eat the humble pie for their such aquisitions abroad. They now know that it is possible to be at home only at home. They did not appreciate the simple logic that the capital is best placed where it is in least supply. They reversed the logic and took capital to places where there was ample of it already.

In the end it may be said that for the Indian industrial sector the worst is over and if the costs are kept in control and reduced further , there is a high-way ahead for them to move fast.

I am eagerly awaiting for completion of Bajpai’s quadrilateral and east-west and north south digonal highways to be ready. It was a mistake that the congress govt kept the pace slow. When completed these projects will make GDP go up by good percentage all by itself.

Then our railways are ready to absorbe good amount of capital and improve capacitiies.

Modi of Gujrat is showing how the susinesses can be falicitated. If the level of industrialisation of all states in India equals that of Gujrat, our country will be only a small distance away from the status of developed country. If Gujrat can do the rest also can do. The only required things are commitment and corruptionless govt.

HariOm,
krsnaKhandelwal

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