infotonic

Is Power is the new dotcom? The report in some media papers refers to the surge in the number of companies of all kinds wanting to get into the power business. This is a scary scenario. This is given that power is not an easy business to pursue.With a host of regulations and execution risks that even large power companies face, new players will have a tough time making any business sense of their overtures. Forget the small companies, i am also wary of some large companies that recently floated IPOs to raise money for their power sector plans and this is where i believe things could turn out to be worse than the dotcom bust. With backgrounds in non-related sectors like real estate and trade, some of these companies are just jaywalking into the power minefield. And when they would realize their incapabilities in the future, probably it might've been too late for them, and their investors. It is important to stay away from such companies that are foraying blindly into the power secto...

If everything goes well, in a few weeks from now, we may have sown the seeds of a major bull run. We say so because a new wave of stimulus money is most likely to be unleashed in the biggest economy of the world, the US. Sensing that the current efforts are not keeping more people employed at their work, President Obama has called for a major new burst of federal spending. "We avoided the depression many feared. Our work is far from done," Obama thundered in a recent speech. He further added that he wants to spend new money for highways and bridge construction and for ensuring adequate social security net for the US citizens, especially to the unemployed. And the figure that is being talked about is in the region of US$ 170 bn. Of course, given the kind of fiscal mess that the US is in, spending more would have meant going further down the path of suicide. But what has given some government authorities hope is the unexpected windfall that the government is likely to make from...

Hero Honda: Strong performance continues Hero Honda (HH) continued its robust performance with sales of 0.38 mn units (up 32% Y-o-Y, 7.7% M-o-M) for November 2009. It seems to have recouped from the impact of a strike last month. Despite increased competition, HH continues to dominate the core executive segment and benefits from its strong rural presence. With underlying demand remaining strong, the company is clearly on the path of beating its guidance of 4 mn units for the full year (particularly, with inventory at the lowest levels). Maruti Suzuki: Domestic segment drives growth Maruti Suzuki’s (MSIL) domestic volumes, at ~76,000, were up 60.1% Y-o-Y and 6.7% M-o-M. Key growth driver has been the A2 segment that performed well Y-o-Y as well as M-o-M, mainly on account of improved production at Manesar plant (manufacturing Swift); the waiting period for Swift has declined in the past month as allocations have increased. Export volumes declined 17.4% M-o-M which may be indicative of ...

The crisis is not over yet. Not by any stretch of imagination. The shockwaves from Dubai proved this in ample measure. The once sprawling emirate kingdom is now finding it difficult to repay its debt obligations. And investors are busy analyzing which one would be the next country to follow suit. Not that there aren't enough contenders. Infact, the list is bigger than any other time in history. As per LiveMint, OECD has already warned that the world's 30 leading industrialized economies will see their outstanding public debt to grow to 100% of their GDP in 2010,a near doubling from the percentage 20 years ago. Now imagine what would happen if creditors refuse to lend to the governments anymore? While the governments could still resort to a lot of methods, sadly, none of them promise a swift and a strong recovery in the near to medium term. In other words, get used to anemic and subpar growth in economies with a significant amount of outstanding debt vis-à-vis the GDP. So how wi...

Q2FY10 GDP surpasses expectations by leaps and bounds India’s real GDP during Q2FY10 recorded 7.9% Y-o-Y growth rate, leaving India Inc. gaping and pointing at Y-o-Y H1FY10 growth of 7% (comparable with 7.8% Y-o-Y in H1FY09). Agriculture escapes fall; manufacturing, trading lead recovery The strong growth is on the back of a sharp rebound in industrial activity and sustained momentum in service sector growth. Nevertheless, it was the agriculture sector that surprised market estimates by growing ~1% Y-o-Y vis-à-vis estimated decline. Historical trends, however, suggest that the severe rainfall deficiency (deficit of ~23%) during the monsoon season of FY10 is bound to have a sharp adverse impact on the growth of agriculture GDP in either Q2 or Q3FY10. On the other hand, manufacturing sector clearly stood out as the growth propeller, owing to improved performance of domestic-focused sectors, possible reflection of a lagged impact of stimulus measures, significant inventory re-stocking, be...

The US dollar has received a lot of bashing in recent times. And why not? The US economy is in the doldrums, unemployment is soaring and the deficit has widened all of which has put immense pressure on its currency. So much so that there have been voices in many quarters questioning the dollar's status as the world's reserve currency. China has been at the forefront suggesting that the US dollar should be replaced with another reserve currency. However, the MD of International Monetary Fund (IMF), Dominique Strauss-Kahn has said that confidence in the dollar isn't under threat despite the fact that the debt on US' books has bloated. And his view is endorsed by the Indian Prime Minister Manmohan Singh who also believes in the strength of the dollar. Infact, the PM opines that the current setback in the US is 'temporary' and that there is no substitute to the US dollar for replacement as the global reserve currency. What is more, he expressed confidence that the c...

It is one of India's most mineral rich areas. It is also one of India's poorest regions. But that has not stopped some of its citizens from charting amazing career paths. No i am not talking about Forbes richest, i am talking about the state of Jharkhand and its governing class. As reported in a leading national daily, a rickshaw puller who entered politics now has two bungalows and a small time contractor who did the same now commands a fleet of cars. Of course, the cake is taken by a daily wage earner who eventually became the Chief Minister - Madhu Koda. While one should not jump to conclusions while the investigation into the alleged Rs 40 bn scam is on, there are some startling numbers already in public domain. Mr. Koda declared a personal networth of Rs 2.4 m in 2005 which swelled to Rs 11.7 m in 2009. That's nearly 5 times the money in 4 years. Two of his erstwhile colleagues Enos Ekka and Harinarayan Rai have personal networths of Rs 14 m and Rs 32 m respectively as...

With the Indian economy slowing down in FY09, many of us felt the pinch in terms of shrinking wallets and rampant cost cutting exercises by corporates leading to the ever palpable fear of job losses. But there were certain people who appeared to have a field day during the year gone by. Yes, I am talking about CEOs of real estate companies, who took pay hikes of nearly 2-10 times despite their respective companies facing a decline in both revenues and profits. In fact, the salary hikes of some of the top real estate companies were greater in FY09 when their businesses were considerably impacted by the economic slowdown. I find the intentions of these managements really appalling. There is a brilliant email doing rounds about confession of a job hopper which talks about these great CEOs. Good management practices call for giving due consideration to the interests of shareholders and customers first, but real estate CEOs seem more concerned about building their booty. It did not matter t...

After subprime crisis and liquidity crisis, it is now the turn of currency crisis. Investment guru Jim Rogers believes that the worst of the economic crisis is not yet over and a currency crisis can happen this year or the next year. And what is the reason he has cited for the same? There is too much debt in the system. For instance in the US, the deficit has soared above the US$ 1 trillion mark and is not likely to reduce dramatically for some years to come. What is more, the gargantuan stimulus packages announced by the Obama administration while they will pull up the economy in the short term, is certain to come back and haunt the economy in the longer term. Hence, the pressure on currencies notably the dollar is likely to intensify. Rogers further believes that the current recovery is a just a consequence of the fact that consumption had plunged so drastically in 2008 that people have to buy things that they need in 2009. And that it would be folly to assume that China would bail o...

There has been much discussion in the media about the crisis in the BJP post Jaswant Singh's ouster and how it will affect the very existence of the party. But from branding p.o.v this is an event that should worry congress, why, u might ask? Cause if so called non-congress moderate forces were to realign they will pose bigger threat to congress; the last 2 elections were won by congress coz of the fact that non-BJP votes consolidated and went to congress i.e. minorities and secular Hindus didn't vote for BJP. If the crisis in the BJP gets worse, the party is likely to split into two. There will be the ideologically right-wing Hindutva section whose fortunes will be guided by the RSS bosses in Nagpur and more importantly there will be a moderate secular segment that will have the likes of Jaswant Singh. It is this segment of the breakaway BJP that will challenge the market leader currently the Congress. Voter will have a choice between the Congress, BJP and a third formation. ...

The warnings are getting louder. And they're now coming from some of the most intellectual minds in the world of finance and economics. We are talking about the rising claims that the US dollar will soon cease to be the global currency of reserve, a status it got 65 years ago after the formulation of the Bretton Woods agreement. Now, after China and other BRIC economies raised their voice against the dollar, the chorus of calls for a significant drop in the greenback is coming from sources such as Pimco (the world's biggest bond fund), and Joseph Stiglitz (economics Nobel laureate). A note from Pimco reads - "We are clearly seeing a loss of status for the US dollar as a store of value even in the absence of a single viable alternative. In combination with other factors, that likely means a continuing devaluing of the US dollars versus other currencies, especially the EM (emerging market) currencies." The note further adds - "...investors should consider whether i...

Forget the global financial turmoil, the swine flu epidemic and the drought, India has a much bigger problem in store, namely a looming 'water crisis'. As reported on Bloomberg, satellite data has shown that groundwater is shrinking in some of India's driest areas. Curbing demand for water seems like the most obvious solution but how feasible is that given India's rising population? Huge wastage is not helping matters either. And what is more, three-quarters of the country's rivers, lakes and dams are contaminated by human and agricultural waste and industrial effluent. So, the big question, is - If monsoons play erratic and the groundwater is declining, where will India get its water from? It is not that India does not understand the importance of water as the fight between states over distribution of water in the past has proven. But really, this precious resource has to be given its due consideration as is given to oil and stress has to be laid on conservation, r...

The Indian finance ministry yesterday released its 'Direct Tax Code 2009' (DTC), a proposal paper on simplifying India's complicated tax structure as also to bringing down overall taxes - both with a view to improve compliance and thereby improve the government's tax revenues. Given that the media has covered most aspects of the tax proposals on companies and individuals, i will leave it at that. My question is - what's the priority for you, the tax payer. Do you want lower taxes as the ministry has now proposed? Or are you willing to accept higher taxes, provided the government utilises the income so generated in a proper manner? See, the Indian government anyways has no point in worrying about you, the individual taxpayer (who is in the minority). This is because elections here are decided by agriculturists, whose farm incomes are tax exempt. Then, high levels of poverty and tax evasion keeps the other majority outside the direct tax net. So, it is unlikely that a...

"I should buy stocks before the markets run up." "I should sell stocks before the markets crash." Are these thoughts worrying you while at work, or keeping you awake at midnight? If yes, congratulations! You are a normal human being who is driven by the two emotions of 'fear' and 'greed' when it comes to money-related decisions. Indeed, these are anxious times for all investors. Nobody knows quite what to expect from the markets over the next few days, or even months. Will the Sensex continue its dramatic climb, as it has since March? Or will it take another staggering drop as it did in the week after the Budget was announced earlier this month? I don't know either! So why invest in stocks at all, when things are so uncertain all around? And what does one really make of what's going to happen next given that the markets are an extension of the collective psychologies of all speculators and investors that make it? See, whatever the experts on ...

Heard on the street (dalal street of course) TCS management had a hard time fighting the green-eyed monster of envy when investors attending its 14th AGM went ga-ga over its arch-rival Infosys. The investors questioned many of the company's policies regarding employee productivity and EPS and compared them with those of Infosys, making Mr. Tata and the top management a little uncomfortable. Not all the questions were relevant and well-founded though. Nevertheless, kudos to the management for clarifying doubts to the best extent possible. After all that's what AGMs are held for, aren't they?

The world is changing, and changing fast. Countries from the west that dominated the global economic and financial system still do so though their dominance has reduced manifold. And when it comes to energy consumption - the driving force behind growth of economies - we have reached a very important inflection point. As per statistics released by BP, primary energy consumption in the non-OECD countries exceeded OECD consumption for the first time in 2008. OECD, or Organisation for Economic Co-operation and Development, is an international organisation of 30 countries like the US, Canada, European nations, Australia and Japan. And given the fact that these countries have seen significant slowdown in their growth rates over the past few years, the energy consumption picture was bound to change, and it did in 2008. In fact, the Asia-Pacific region accounted for 87% of the world's energy consumption growth during the year. While the Chinese consumption growth slowed for the fifth conse...

Worried over the rising import of steel products in India, the government has been mulling over increasing the import duty on steel products from the current level of 5%. Terming the duty to be ‘insufficient’, the steel industry has demanded it to be raised to 20% instead. India has become a preferred dumping destination for global steel mills due to two major factors, rise in domestic steel consumption and lower price of steel products in international markets (due to oversupply). Favouring the increase in import duties, the management of steel major, SAIL, recently gave its view stating that “If the government considers raising the protection level by raising the general import tariff, I suppose that would be welcome at this point."

India's fiscal position is weak. In simple words, it has been spending more than it receives by way of taxes and other collections. To fund this spending, the government has resorted to heavy borrowing by way of issuing bonds and populist measures like subsidies on fuel, amongst others. Despite a new government that was said to be bringing in reforms very aggressively, such populist measures are not proving that easy to do away with. If the government is to give further stimulus to the economy, it will have to borrow more, consequently not only further deteriorating its fiscal position, but also bringing in the risk of further upward pressure on interest rates which will in turn be bad for the general investment scenario in the economy. Highlighting this very predicament, credit rating agency Moody's has warned that India's fiscal position suggests caution, as the government is not in a position to offer sustained support to a weak economy. Further, most developed countries...

That Dr Doom aka Nouriel Roubini is not seeing any 'green shoots' (a metaphor used to describe initial signs of economic recovery) has been largely publicized in the media in the past few weeks. However, for the first time in many months, he has expressed his views on the Indian economy and its stock market and sadly, it does not make for a very good reading. Speaking to a leading business daily, Roubini was of the opinion that the Indian stock markets along with other emerging market equities may have run up too soon too fast and there is a potential asset bubble building here. Although he agrees that part of the reason the stocks have rallied is because of better fundamentals in these markets, he remains concerned about the easy-money situation which is pushing up asset prices sharply. Roubini also proffered his views on whether inflation because of money printing by most governments or deflation because of rising unemployment and lower consumer spending is staring us in the ...

Here's another reason why the global economic recovery may still be vulnerable after all. Money, the raw material that helps produce virtually all of the nation's goods and services is still in short supply in US, the world's largest economy. As per CNN, the 21 biggest recipient of the government's capital injection also known as TARP funding reduced their lending to American consumers and businesses by 7% in the month of April. While the banks argue that there aren't just enough people to lend to, the borrowers on the other hand argue that credit is indeed tough to come by. Whatever be the case, the one who is clearly suffering is the US economy, as slower lending and higher GDP growth do not necessarily go hand in hand.

As the day for announcing the Union Budget is approaching, there are speculations, expectations, apprehensions and hopes all around. In the pre-budget meeting with the party office-bearers, the union Finance Minister, Pranab Mukherjee was inundated with the party's wish-list as well. The demand was for an 'aam-aadmi' centric budget, focusing on four sectors – education, health, infrastructure, and agriculture. The specifics included increasing the minimum support price (MSP) for crops like sugarcane, giving income-tax reliefs to salaried class, extending benefits to senior citizens and soft-loans for minorities, increasing diesel-subsidy for farmers and fishermen. It is a welcome sign that infrastructure sector emerged as the first priority, but it is a little sad why nothing was discussed about reforms like disinvestments, amendments in SEZ bills, insurance bills and other finance sector reforms. Though, Finance Minster didn't disclose any specifics of the budget, look...

The saga continues…of warring brothers, and their confused stakeholders! I am referring to the continued rivalry between the two Ambani brothers – Anil and Mukesh. And a leading news daily (almost all papers have carried it) has rightly called the fight a 'tug-of-gas'! In simple terms, the latest battle is between the first brother asking for a higher-than-originally-agreed-upon price for the gas that he will sell to the other, and the second refuting to pay the higher amount. Now, the second brother (Anil) has got some reprieve as the Bombay High Court has asked the first brother (Mukesh) to sell gas at the originally agreed upon price, which is 44% lower than what he is asking for. This has caused a lot of uncertainty in India's nascent natural gas industry, and could potentially deliver a sharp blow to the fortunes of Mukesh-owned Reliance Industries (RIL). While RIL had gone to the court to uphold the government-approved price of US$ 4.2 per mbtu (Million British Therma...

Cold water has been poured yet another time on the government's plan of deregulating the oil sector and freeing up the oil prices. And this time around, there has been more than just one culprit. First is the fuel price itself. When the talk of de-regulation first started doing the rounds, oil prices were perched quite comfortably. However, with the same inching up and touching the government threshold mark of US$ 67 per barrel, politicians seemed to have developed cold feet. For they do not want to greet the public with a fuel price hike, which at the current crude oil price would have become imperative. Secondly, with elections staring in the face in one of the states and also with one of the government's biggest allies eyeing elections at its home state, price revision could prove counterproductive. The oil ministry however is unwilling to admit that its hands are tied and instead, giving out assurances that although the decontrol of oil prices is definitely on its agenda, i...

India's very own version of the electric car is likely to hit the roads in a few months. Ratan Tata, chairman of the Tata Group recently stated that Tata Motors will be ready with one by September this year. In addition to this, there has been news floating around the world's smallest car, the Tata Nano being launched in the United States within the next two years. Apart from this, it is also planning to launch the vehicle in Thailand and other markets in South East Asia. This will be a strategic move by the company as it plans to use Thailand as its manufacturing base to export its products to other countries. In India, the car is expected to hit the roads by July this year.

Nothing describes the word 'optimism' better than run up we have seen in the past three months. This has been the sentiment prevailing in emerging markets such as China, Brazil and India. As the IHT puts it 'Stock markets in developing countries are riding a wave of optimism.'In hopes that the global economy is recovering and that the developing nations worldwide are leading this recovery, markets have surged tremendously over the past few months. However, the gains recorded in India have been greater to those witnessed in Brazil and China. There have been various reasons for the same - UPA coming back to power, improving auto sales and growth in production levels of core sectors, amongst others. But things have not been so different in the other two countries as well. China has witnessed its industrial production levels rebound, while retail sales in Brazil have seen an increase in recent times. However, on comparing the indices valuations, the situation is a bit diffe...

If you want to become a proud owner of a Lamborghini or a Ferrari, please do not join the finance industry and instead become a farmer. No, this isn't a figment of our imagination but is a candid assessment of the world that we would live in 10 to 20 years from now and it has been made by one of the world's most successful and outspoken investors. The man in question is Jim Rogers. Speaking to India's leading business daily, the bow-tie sporting maverick opined that the world is shifting away from the financial types to producers of real goods and the transition could last for several years. Hence, ten years from now, it could be the farmers who will drive fancy cars while stock brokers will move around in tractors and taxis. Rogers also said that if the Indian government really gets serious about reforms this time around, then India would be the one of the biggest investment stories for the next twenty years or so. He was also worried about the fact that few of the develop...

Stocks from the banking sector have been major beneficiaries of optimism that has been seen since the second week of March. Or what would justify that while the Sensex has gained by a strong 67% since March 9th, the BSE-Bankex is up a whopping 109%. While investors have rooted for stocks from the sector expecting that an economic upturn will be beneficial for the sector, the fact that is not being given much thought is the potential increase in banks’ non-performing assets (NPA) over the next few quarters. At least, this is what the credit rating agency, CARE, believes, as it foresees the net NPAs of the Indian banking sector to triple from the current 1% of advances to 2.7-3% of advances by the end of FY11. As per the agency, given that delayed loan repayments are currently suppressed under the shadow of restructuring where banks are giving more time to companies to pay back their loans or are lowering interest rates to help companies pay back faster, they will emerge bad once the res...

When i was away to disneyland, the markets across asia shot up. In an interesting interview to Mint, Ruchir Sharma, the head of emerging markets at Morgan Stanley Investment Management, has said that what’s happening right now in the markets is nothing but a cyclical bull market within what is still a structurally a bear market. As far as India is concerned, he opines that Indian markets can exit this bear market regime a lot quicker than the developed world. "I think valuations have already moved now from being cheap in March or late October, to being sort of relatively fair to slightly expensive... If you are looking for a true new bull market... I think the base for that will be set by the middle of the next year," he said. And that’s when he feels that the bull market rules will come back into play, and the Sensex will once again be free to touch its highs of 21,000. HOWEVER noted investment gurus Jim Rogers and Marc Faber are of an opposite view when it comes to world ma...

SECTOR UPDATE - BFSI ( Thanks to research departments of various analytical firms) Strong government – positive catalyst; but there is a price for everything A couple of thoughts on BFSI sector post the “Congress rally” Strong UPA led government can have following positive impacts for BFSI sector: Fundamental impact – earnings upgrade, RoE expansion 􀂄 Investment and credit activities to pick up – enhanced liquidity and improved industrial activity will bring confidence among corporates to borrow and invest; thrust on infrastructure will continue etc - Positive for the whole sector, as it would enforce revision of consensus credit growth estimates - SBI is key beneficiary as it has huge balance sheet liquidity to fund credit growth 􀂄 Recovery in economy and comfortable liquidity to further assuage concerns on asset quality 􀂄 Capital market activities to go up further from here – brokerage volumes, investment banking deals, inflows into mutual funds/PE funds etc - FII/FDI inflows like...

There was a time, not long back, when the ‘American Dream' was shared not only by Americans but just as fervently by many ambitious students back here in India too. Getting an MBA from a good university abroad and using that as a starting point to get a job in that country was the norm. Well, that dream seems to have been shattered. And the sorry state of the US is now forcing many into realising the potential back here in India. An Economic Times report gives some perspective on the situation. According to a University of California study that surveyed 1,224 foreign nationals from India, China and Western Europe, almost 86% Indian students and 74% of Chinese students believed their home countries' economies will grow faster in the future than they have in the past decade. And with that, many students are either looking homewards, or have already come back to India. Looks like India may not have to contend with a brain drain problem again for a long time to come.

We will take the reforms agenda forward, but not at the cost of development and not at the cost of state firms." This statement by one of the leaders of the Congress party and published in a leading daily highlights the importance of tempering one's optimism over the re-election of the UPA government. Let us not forget that this is the same party that came out with social schemes like the farm loan waiver and the rural employment schemes. Hence, to expect a reforms overdrive from the new government will be akin to asking for a little too much. Of course, the scenario is a lot better this time around as there are no left parties to take two steps backwards for every one step that the UPA government will take forward, but the fact remains that a move towards more reforms is likely to progress at a slow pace at best. Furthermore, unlike 1990-91, where problems were India specific, a synchronized slowdown has engulfed the world and this will give the government more leeway to impl...

With the UPA regaining power, this time without the Left’s support, what does it mean for India? No more political instability risk for India; the new government poised to complete its 5-year term successfully. Near-term positive because of smooth transition – this is more like an extension of UPA’s term. In the event of any other party/alliance coming to power, it would have taken some time for the new government to formulate its policies. UPA to continue with its policies with more power in hand now; no fear of strange coalitions or drag of the communist parties anymore. Near-term positive for the markets Equity markets are likely to open with a big gap up on Monday, as desperation to deploy excess cash (both by DIIs and FIIs) will be high. While FIIs may show interest in large caps, DIIs may hunt for beta (chasing mid caps). India has underperformed other emerging markets (EM) YTD because of election concerns. However, stable government at home and strong global liquidity are likely...

India may soon be the proud owner of a national gas highway network, one that will ensure supply of natural gas across the country. As per an Economic Times report, the oil ministry is contemplating developing this national gas highway as infrastructure firms are refraining from venturing into non-profitable segments. That is the reason why even though there is a nationwide demand for natural gas, gas pipelines are concentrated mainly in the eastern and western regions while the southern, central and north eastern regions lack infrastructure. As such, a balanced distribution of gas will help India achieve a more distributed growth as industries have been known to develop along natural gas pipelines. Besides, with such a massive investment, companies catering to this industry will be direct beneficiaries.

This week will be a cherished one for Indian telecom major, Bharti Airtel as its subscriber base crossed the 100 m mark. In fact, with this milestone, it has now become the world's third-largest single-country mobile operator and sixth-largest integrated telecom operator. As for the top spot, China Mobile and China Unicom are the world's largest and second-largest in-country mobile operators with 414 m and 170 mm subscribers respectively. Expecting India's teledensity to double within the next three years from the current level of 37%, Mr. Sunil Mittal, the company's chairman has given very optimistic views about the future. He believes that the company will be able to double its subscriber base within that period. Given the fact that the telecom players in India are adding mobile subscribers at a very robust pace and also that Bharti Airtel is the market leader (marketshare of about 25%), the task does not look very daunting. However, keeping in mind the intense compet...

The verdict is out and India has decided! Going a step better than most media projections, the Congress led UPA alliance looks all set to return to power and form the next government at the center. Although still some seats short of the magical 272 figure mark, it now appears certain that the Left parties will have no role to play in the government formation this time around. Dr. Manmohan Singh, the reformer par excellence has given enough proof of what he and his team can achieve if given a free hand. And the people of India seemed to have done exactly just that. Now it is up to him to deliver. The road ahead though is anything but smooth. The country's finances are staring down the barrel and economic growth has taken a big hit. However, looked differently, this could just be the time to unleash another wave of reforms and push the economy onto an even higher growth trajectory. Perhaps,it's time for ‘The Great Indian Reforms II'. If at all they happen, the Indian people w...

That the Tata Group is struggling to keep two of its most high profile members, Jaguar-Land Rover (JLR) and Corus, afloat has been very well documented by the media. But what has perhaps made its first public appearance is a statement by the Group Chairman, Ratan Tata that the period during which these companies came into the Tata fold may not have been very opportune after all. In an interview published in a leading British daily, Times Online, Mr. Tata has admitted that he may have gone 'too far, too fast' It is worth remembering that the Corus transaction undertaken by one of his group companies, Tata Steel was one of the most expensive steel deals ever. Even with JLR, had the group waited out, they could have gotten the company even cheaper considering the turmoil the global auto industry is in currently. "If one had known there was going to be a meltdown, then yes (Tata went too far), but nobody knew. Both the acquisitions were made, I would say, at an inopportune tim...

Here's something very interesting that comes straight from the man who saved India. Dr. Y.V. Reddy, the former governor of the Reserve Bank of India and the one whose policies are credited to have saved the Indian banking sector from the gallows of the financial crisis, has revealed the secret of his success as a central banker. In an interview with The Economic Times, he has said, "I cannot define God, but I can recognise the devil. And whenever I see the devil, I take precautionary measures to avoid being affected." I wonder how wonderful place the financial markets would have been only if other central bankers had this ability to recognise the devils! In fact, Nobel economist Joseph Stiglitz has said if America had a central bank chief like YV Reddy, the US economy would not have been in such a mess. Is it any wonder that the world listens to him and not to Alan Greenspan anymore? I believe credit must be given where it is due and Dr. Reddy certainly deserves it.

When we talk of natural monopolies, the usual suspects tend to be utilities like power, gas, waterworks etc. Dominant firms in such industries can easily notch up huge market shares and thwart competition. No wonder then, these industries tend to be regulated around the world. According to CNNMoney, US regulators are beginning to wonder if Google is a natural monopoly. That seems like a bit of a stretch. After all, isn't the internet a perfectly competitive market place? But 76% dominance of the search market does raise the question whether there's more than meets the eye. However, the company presents several points in its defense. First, 'competition is just one click away'. If internet users turn to Google, it is due to the power of habit and not because the company prevented them from turning to other search engines. Second, it doesn't lock anyone into its software like Google Docs. The software formats are open, so users can move content to rival products. Beca...

Now that Tech Mahindra has secured Satyam in its fold, the former is leaving no stone unturned in sprucing up the business and shedding excess flab. This means downsizing operations and Tech Mahindra intends to kick off the process beginning with Satyam BPO (the erstwhile Nipuna). 60% of the support staff in the BPO is set to face the axe. Further, Tech Mahindra has decided to use Satyam's existing marketing, HR and other support functions for the BPO too instead of having a separate set-up. The target is to save about US$ 200 m in costs, which means that more layoffs in the future cannot be ruled out. Given that many departments in Satyam were overstaffed, it is only natural that Tech Mahindra would want to go in for slashing jobs. Thus, while Tech Mahindra's strategy in this regard is pretty clear, Satyam employees continue to be fogged by an air of uncertainty

As per a leading business daily, Jet Airways will start a new no-frills carrier called Jet Airways Konnect. The fares for the service will be 10% to 15% lower than the normal Jet Airways economy fares. The company has not launched the new service under its JetLite brand due to pending litigation with the Sahara group. It may be noted that market share of the more expensive full service carriers has fallen due to the economic slowdown. There is a beleif that the airlines industry is value destructive. As Warren Buffett once said, "Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks." If only, our air carriers paid heed.

Recently, China has minced no words in making its discomfort clear with respect to the US dollar. That it was diversifying its huge cache of dollar denominated forex reserves into other asset classes was also being speculated. Recently though, it let the cat slip out of the bag. And quite a big one at that! China's forex managing agency revealed that it has nearly doubled its gold reserves to 1,054 tonnes, up from 600 tonnes in 2003, making it the fifth largest holder of the precious metal. The disclosure is likely to have quite a few implications. Foremost among them could be a renewed surge in the price of the yellow metal, which has already quadrupled during the last one decade. There is no reason why it cannot inch even higher and scale new peaks. Secondly, it might force a flight from the dollar by other central banks as well, who could well be spooked by the fact that if the largest supporter of the US dollar is stealthily moving out of it, significant depreciation in the gre...

Without any doubt, telecom is one sector that has so far bucked the trend in India while other industries face slowdown issues. Not only this, companies within the sector have been able to grow strongly over the past few months, at least when it comes to ramping up their subscriber bases. The month of March 2009, for instance, saw the sector add a record 15.6 m subscribers, the highest in any month in the sector's history so far. While reduction in tariffs and cost of handsets has supplemented the growth of the Indian mobile telecommunication sector, growth in the recent past has been largely driven by mobile service providers' aggressive entry into the large and relatively untapped rural markets. In these markets for instance, carrying a Rs 2,000 mobile phone can be something of a status symbol. This is clearly indicative of the much-larger drama unfolding in the Indian telecom market, once considered a backwater and now the fastest growing in the world. While the country stil...

The global financial crisis in the past one year had compelled foreign investors to pull out huge sums of money from the emerging markets causing the indices in these regions including India to plunge. But it appears that the appetite of these foreign investors for emerging markets seems to be on the rise again and India in this regard seems to be pulling ahead. As reported in a leading business daily, while India has pulled in US$ 1.8 bn of foreign money, other emerging markets such as Indonesia, Philippines, Taiwan and South Korea have bagged US$ 18 m, US$ 531 m, US$ 632 m and US$ 7 respectively. The perception is that global liquidity is improving and that there are not likely to be any major reversals in these flows immediately unless the risk perception about emerging market equities heightens again. Also, those foreign investors who have been sitting on huge piles of cash are now taking the opportunity to invest in emerging markets including India where valuations are very attrac...

Scary fall. Exports, which contribute around 16% to India's GDP, fell by 33.3% in March to US$ 11.5 bn, the sharpest fall since April 1995. For the whole of FY09, exports touched US$ 168.7 bn, recording a 3.4% growth in dollar terms and falling short of the government's revised target of US$ 170 bn. The fall in exports has obviously been due to the ongoing recession in the US, Europe and Japan. Imports have not been spared either. Non-oil imports in March contracted 18.9% to US$ 11.7 bn while oil imports shrank 58.1% to US$ 3.8 bn. Waning imports in the areas of machinery, equipment and project goods is likely to be an area of concern as it signals a slowdown in industrial production. While there are expectations that the recovery would start manifesting in July itself, others are of the opinion that the export growth will be subdued in FY10 as well. What is clear is that unless some sparks of revival are witnessed in the developed economies, India's export growth till such...

The great Indian middle class is now the focus of attention and for good reasons. Expected to touch 400 m people by FY10E, the middle income household earning be-tween Rs75, 000 and Rs5 lakh a year accounts for 61% of total urban income. While the metros continue to be the largest urban middle-class markets, tier II cites are fast catching up. Increase in the number of middle- and upper-income households has expanded the consumption, creating a strong pull factor to consume certain products and services. Not only FMCG companies (over 70% sales of FMCG products are made to middle class households), but also other consumption driven companies are eyeing this opportunity as this segment is expected to fuel growth in the long run. While Tata Motors launched the cheapest car Nano, Indian hotels have priced their Ginger Hotels below Rs 1,000 to attract these households. The real estate, malls and mobile companies have also lined up strategies to target this segment.

A report by Brand Finance Plc., a UK based independent brand valuation consultant, has estimated that the top 500 global brands lost about 25% of their value in 2008 due to the global financial meltdown. But the 'Tata' brand held up relatively well against this, eroding by less than 16%. Tata is the only Indian brand in the top 100 of the rankings, and held the 51st position for 2009, up six places from its ranking for 2008. The consultant found the Tata brand to be worth US$ 9.9 bn and its 16% decline in value was moderate against the huge 40% to 60% slump in brand value of many iconic brands over the same period. For example, brand Citi recorded a 59% erosion in value, Dell 60%, Mercedes-Benz 48%, and AIG 62%. Mr. Gopalakrishnan, the executive director of Tata Sons said that the brand didn't take a hard hit in relative terms for various reasons, and that "The brand has been built on a platform of a century of ethical behaviour." Couldn't agree more! Incident...

Warren Buffett may have called the current crisis in the US 'an economic Pearl Harbor', the Japanese government is in no mood to allow their stock market to become a another Hiroshima-. As reported in a leading, that it has passed a legislation allowing the government to buy shares from the market until March 2012 if share prices plunge to an extent that is seen as an economic emergency. While the exact contours of the 'economic emergency' have not been defined, the fact that the government is willing to bailout shareholders will itself offer enough stability to the Japanese market. The plan strictly limits buying shares to cases where the price-to-book-value ratio of a majority of listed companies falls far below 1.0 time and the price earnings ratio falls below ‘normal’ levels. The Japanese government will set up a public body which on instructions from the country’s prime minister would buy a basket of shares such as exchange-traded funds (ETFs). The funds needed for...

Another case of "diworsification" by a company that seems to be incapacitated to generate returns from the excess cash in its balance sheet and does not wish to return the same to the shareholders. Madras Cements’ decision to venture into sugar manufacturing business at a total investment of approximately Rs 4.5 bn seems to have no logic other than the temporary reversal in sugar cycle. Further, the improved sugar realisations would be offset by higher cane prices. Such instance of companies diversifying into unrelated businesses despite lack of expertise and insufficient rationale is a case of disregard to the rights of minority shareholders.

Infosys kick started the March quarter and full year FY09 result season today on a mixed note. Although its fourth quarter operating performance did not have much to be enthused about, the company managed to add 37 new clients and 1,772 employees (net) during this quarter. This goes to show the consistency in the company’s long term business prospects. While the full year profits grew by a healthy 29% YoY, the company announced an earnings guidance for FY10 that would be lower by 3% to 7% YoY as compared to FY09 EPS.

At a time when companies across sectors are looking to cut costs by slashing salaries, pharma companies seem to be an exception, as many of the employees here are set to receive generous bonuses and increments. The rationale cited for the same is to retain talent and encourage a culture of growth and learning. Further, given that the pharma sector is highly research oriented, attracting the right talent, atleast, in the R&D department becomes very important. For instance, while Lupin has given its employees increments in the range of 25% to 40%, Cadila Healthcare is contemplating an increase of 25%. Those companies which have been catering to the US and are basically well diversified in terms of geographies have done well and this has translated into higher salaries. Having said that, not all pharma companies have been that lucky and those who have not logged in a strong performance will be shelling out relatively lesser increments to employees

If you thought that only banks in the US were going bust in the economic meltdown, think again. As per a business daily, when banks in US were falling like ninepins, some cooperative banks in India were not far behind. In fact, for every five banks going bust in the US, there were two in India that were going belly-up. It may be noted that as many as 19 Indian co-operative banks collapsed in FY09, as against 44 American entities. The newspaper report also states that the RBI’s credit insurance arm had to pay over Rs 1.4 bn to depositors to cover the liabilities of these 19 entities. Under the insurance norms of the Deposit Insurance and Credit Guarantee Corporation, a wholly-owned subsidiary of the RBI, a maximum of Rs 1 lakh is paid to a depositor in case his bank becomes insolvent.

I was just wondering, if the Samajwadi Party (SP) supported government comes to power at the Centre this time around, many companies in India might have to write off another kind of loss from their books - loss on account of unused computers. After all, the party’s supremo Mr. Mulayam Singh Yadav believes that - "The use of computers in offices is creating unemployment problems. Our party feels that if work can be done by a person using hands there is no need to deploy machines." Incidentally, the party is also against stock markets, use of English language, agricultural machines, and high corporate salaries!

It has become fashionable these days to call a highly improbable event, ‘A Black Swan event’, an obvious reference to the hugely popular book ‘The Black Swan’. And now, Nassim Taleb, its author has once again decided to cash in on the phenomenon by coming out with what he believes are 10 principles for a ‘Black Swan-proof’ world. Well, i am not going to give you the summary of his principle; here is a quote for you to analyse Taleb states, "This crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the "Nobel" in economics, banning leveraged buyouts, putting bankers where they belong, claw...

Some of our top Indian companies continue to make their mark on the global stage. They also seem to have made it a habit out off beating some of their bigger and more well established global peers in various areas of business expertise. Now, three Indian corporate behemoths, Reliance Industries, the Tata Group and Infosys Technologies - have entered BusinessWeek magazine's list of world's 50 most innovative companies. While the rankings were topped by iPhone maker Apple, the Tata Group ranks 13th, Reliance Industries 15th and Infosys 26th. What's more, the Tata Group and RIL have been ranked ahead of American industrial conglomerate General Electric (17th), German car manufacturer BMW (20th), Japanese auto firm Honda Motor (22nd) and telecom major AT&T (23rd). Wow! Way to Go, India!

After more than three months of confusion and speculation, Satyam finally got its new owner today in the form of Tech Mahindra, selected through a competitive bidding process. L&T and Cognizant-Wilbur Ross were the other two contenders in the fray for the beleaguered IT firm but Tech Mahindra out bid them with a comfortable margin. Tech Mahindra (through its subsidiary Venturbay Consultants Pvt. Ltd.) will now pay Rs 58 per share to buy a 31% stake in Satyam through a preferential allotment. L&T and Cognizant-Wilbur Ross, on the other hand, had reportedly put in their bids at Rs 45.9 per share and Rs 20 per share respectively

Day in and day out we have been bombarded by the news of gloom and doom. Watching the business news channels has been depressing. Reading the newspapers has been depressing. Luckily, we have the comical relief provided by the elections and the wonderful speeches of hate and violence to inspire us to move onward, to move forward. Should i exit from stock market now? or should i remain invested? - "to be or not to be" Investing in shares is actually an investment in the underlying business of company. In the ability of the managements of those businesses to ride the company through good times - and bad times. Of course, you need to be careful that you don’t end up investing in companies where the management starts riding a tiger of fraud and deceit -as Satyam shareholders found out. Or one in which the horses are pulling two carriages - one with air-conditioned comfort for the founder promoters who get their rich exits (as in the case of Ranbaxy) and one for the rest of us chum...

It looks like recession will be over before we know it. Look at the chart below, which perhaps helps unfold the most potent reason behind the world economy's huge contraction in the fourth quarter of 2008. Image Source: Business Week US consumer, the biggest driver of the world GDP chose to cut back massively and instead, opted to save some of his hard earned income. Well, the trend has continued to this day, manifesting itself in the huge reduction in household debt as indicated by the chart above. As per Business Week, savings as a percentage of US household income during the first two months of 2009 is already ruling at 10-year highs and businesses, adjusting to this new shift of lower spending and higher saving have embarked on a major cost cutting drive. The end result? Even a small pickup in demand will help companies post robust bottomline numbers and help bring back confidence in the battered economy. Furthermore, while everyone knew that deleveraging i.e. reduction of debt...

The worse may not yet be over for the already battered US housing market, where the seeds of the current financial crisis were sown. While house prices since then have crashed, the question that is now on everyone’s mind is - whether they have fallen enough? And the answer may well be ‘no’. The logical conclusion being the bigger the bubble, the bigger will have to be the crash. Not only that, while prices have melted, they are not cheap as comparable to wages and even more so in a scenario where job uncertainty looms large. Furthermore, as reported in the Wall Street Journal, the prices currently are at a level last seen in 2003 when they were perceived to be inflated even then. Therefore, to find pre-bubble prices one would have to go back to about 2000 when values overall were about a third lower than they are today. Interestingly, the paper has compared the current bubble with the 1989 property bubble and has observed that the home prices currently are more expensive in relation to...

Just as odds of bankruptcy at GM and Chrysler continue to rise by the day, there are a few Indian companies who are feeling jittery as well. Because at stake are deals worth nearly US$ 1 bn annually, ranging from outsourcing of IT services to supply of some critical auto components. As per a leading daily, in IT services the worst hit could be TCS, which counts GM amongst its top 10 clients and had also signed US$ 150 m contract with Chrysler last year. As far as auto components are concerned, few of them are already feeling the heat as orders from the two US companies have dried up. Furthermore, payments are also getting delayed on account of the two companies facing severe liquidity problems.

Just as the US Fed chose to take the long end of the yield curve by the scruff of the neck, Mr. Srinivasan has argued that a similar method should be adopted by the Indian central bank. He seemed frustrated that despite RBI lowering rates, Indian firms are not getting access to funding as most banks are parking their surplus liquidity in government securities. Furthermore, increased government borrowing is also leading to crowding out of private investments. Thus, printing money by the RBI and buying back bonds from the market seems to be the only way out as per the new CII President. Furthermore, since the inflation is also very benign at the moment, the odds that such a step might lead to runaway inflation are also on the lower side. Although he was aware that such a step might unleash a fresh round of sovereign downgrades, it also carried an upside with it in the form of greater GDP growth. The central bank must have indeed deliberated upon such an idea but seems to be adopting a wa...

The US consumer, they say, is broke. And we got another evidence of the same, albeit not in the US but in Japan, its trans-pacific neighbor. As per Bloomberg, the world’s second largest economy saw its exports plunge by a whopping 49% in the month of February on a YoY basis, its worst showing in almost 30 years. What more, exports to the US fell even more, a shade under 60% as consumers in the world’s largest economy scaled back their purchases of autos and electronics big time. Courtesy the miserable showing, Japan’s economic contraction in the current quarter could well match the 12% decline it experienced in the previous quarter, forcing the government to resort to yet another round of fiscal stimulus. However, this is easier said than done as the country already is knee deep in public debt. Its public debt to GDP ratio currently stands at a whopping 170% and any further stimulus will only exacerbate matters. Furthermore, its rapidly ageing population means that every year, the univ...

We indeed live in a strange world. While Tata Motors has tried to put car ownership within the reach of millions of Indians, an altogether different company belonging to the Murugappa group is making an effort to wean away people from cars by offering them a bicycle. And this is no ordinary bicycle. As per a leading daily, each cycle is a good 3-5 kgs lighter than the ones available in the market and has been handcrafted and fitted with tubeless tyres and cutting edge technologies in shock absorbers and gears. Already surprised? Well, the most surprising part is yet to come. And it lies in the bicycle’s price. The company has priced the most premium model, hold your breath, at a whopping Rs 2 lakh. Nearly twice the price of Tata Nano! And just as Tata Motors is confident that the Nano will sell like hot cakes, even this company is quite bullish on the prospects of its products. After all, it reckons that the market for such bicycles is growing at a rate of 25% annually. Indeed, when on...

Most Indian media companies rely on advertising revenue. That explains why they are having a tough time in the economic slowdown. However, they are not alone. As per CNN Money, advertising revenue has declined dramatically for the two iconic American newspapers - The New York Times and The Washington Post. As a result, the papers are resorting to cost cutting and layoffs. The Times will cut the salaries of its non union workers. It has already laid off 100 union workers and has asked the unions to take pay cuts in order to avoid further job cuts. A bunch of other American newspapers have shut down or gone bankrupt. The newspaper industry broadly relies on two sources of revenues -subscription and advertising. The advent of the internet has meant that readers look for news online. However, online subscription revenues have not been able to replace the print subscription that has been lost. Overall, the hold of newspapers on paid subscribers has weakened considerably. Still, when it come...

The much awaited production of KG basin gas is finally on the horizon. As per a leading business daily, Reliance Industries (RIL) has signed contracts with 12 fertiliser firms for the sale of its first stream of natural gas from its D6 block in the Krishna Godavari basin. The company will sell around 15 m standard cubic meters of gas per day (mscmd) to these firms from mid April at US$ 4.2 per m British thermal units (mbtu). In addition, these companies will pay a transportation margin to RIL, Gail or Gujarat State Petronet. Hence, the actual delivered price will range from US$ 5.34 per mbtu in Andhra Pradesh to US$ 6.21 in Uttar Pradesh. Fertiliser companies have received a priority allocation because of the gas utilisation policy. Other users like gas based power plants and city gas distribution will receive a share from the subsequent streams from the D6 block. The production is set to increase to 40 mscmd during the year and eventually to 80 mscmd. It may be noted that production w...

It is important to look at the holistic picture and have an individual opinion rather than get swayed away by the public consensus. This is the view of the man who pioneered the retailing boom in India - Mr. Kishore Biyani, the founder of India’s largest retailing company - Pantaloon. In an article in the Wall street Journal, Mr. Biyani wrote, "Almost daily doses of bad news on television screens and newspapers have possibly done as much damage to the economy as the events on either side of the Atlantic." I completely agree with him. Mr. Biyani’s predicament is based on the fact that an overwhelming majority of Indian consumers are self-employed, who can neither get laid off nor can have pay cuts. Consider some statistics he has provided. The share of the national income represented by proprietor-run concerns and partnerships is 35%. The share of companies is around 15%, government around 25%, and agriculture around 25%. Combine agriculture and the self-employed in industry a...

India Inc. might have something to cheer about on the forex front. The National Advisory Committee on Accounting Standards (NACAS), whose accounting policies are followed by the Indian industry, has favoured suspending for two years, the Accounting Standard 11 (AS-11) that requires firms to mark-to-market foreign exchange assets and liabilities. The last two years had seen very volatile movements in the foreign exchange rates which had severe repercussions on the profitability of companies. In the last year especially, the sharp depreciation of the rupee against the dollar compelled many companies to report losses in their profit and loss accounts, thereby denting net profits. The purpose of AS-11 was to account for forex gains or losses under normal business conditions, but because of the sharp fluctuations in currency movements and the unpredictability of the same, it has been contended to suspend this standard for the time being. Thus, corporates will be able to report higher profit...

With markets testing their mettle, the new mantra for hedge funds is ‘perform or pay back’! - a la shapeup or ship out. Hedge funds that enjoyed a one-sided bargain with their clients in reaping handsome fees now need to pull up their socks. For if they don’t, they will be losing some of their biggest clients. As per Wall Street Journal, the California Public Employees' Retirement System, popularly known as Calpers, that is one of the biggest investors in hedge funds, is demanding better terms from funds. This includes lower fees and claw-back of fees if performance weakens. For the uninitiated, the US$ 172 bn pension fund is a bellwether in the money-management business. A Calpers investment can in fact help money managers like hedge funds attract other clients. This move by Calpers therefore underscores the changing dynamics between hedge funds and their clients. Just a couple of years ago, investors clamored to get an entry into these funds, agreeing to pay fees that in some cas...

I don’t know why I am blogging this– my guess – a typical (perfect??) Indian middle class – common man – who can read & write these kinds of articles and hope that things will improve one day! Wimp: (noun) a weak, cowardly, or ineffectual person (Merriam Webster) We have had India Shining; Resurgent India; and India Incredible. And we were the "I" in the greatest growth story in economic history that this generation was all set to witness. India is the world’s largest democracy and the "I" within the "BRIC" area that comprised of Brazil, Russia, India, and China. But that was when semi-nude women graced the front pages of the financial newspapers. And the now-naked CEOs and financial geniuses flashed their power and wealth on the TV channels. And the leaders of India went around the world staking their rightful claim in the New World Order. But this is now. Welcome to the New India, where a billion heart beats are beating so faintly that the patient i...