Tuesday, May 27, 2008

Value emerges in "Front Runners"

What is wrong with the stock markets?

For months on end we heard about tons of money waiting on the sidelines for a dip to get in and partake the merry making based on India's strong fundamentals.. months later(and a few thousand points lower) we still hear about tons of money still waiting on the sidelines.

As anyone and his "wealth manager" can see, value has emerged in most stocks which love "front running" bull markets and seem poised to resume their run into la-la-land and lost glory..but still we spy diffidence on the part of most telly tube experts, financial advisors, stock market strategists and such ( OK partly because some of them are no longer in the employ or severely taken up by praying schedules and realigning their offices for ironing out some bearish Vaastu kinks.. ) , but as we all know it is only a matter of time and soon we will all be joking and laughing about this little correction that temporarily spooked our stock picking genius.

So, what ails the markets.. it is quite simple.. we all know the market experts(voices ), telly pundits, "research heads" of broking houses and other random "analysts" are always right and it pays to listen to these knowledgeables, rather than waste one's emotions on the tragedy the market and other "non smart" money constituents ( you don't want to be seen among these plebs) ..the heartburn these non believers are foisting on our mind.

To sum it .. the experts are right and the India story is intact .. the market is wrong and keeping faith is important.

How, you may ask, can we be so sure in the face of such dismal PMS performances.. well Luddic Research has outlined key observations and reasons in their latest research note to clients :

  • Inflation Concerns: The govt is going all out to tackle this issue especially as it has dawned on them that their election prospects may be hurt more by high inflation figures than by low growth figures. (In fact P.Chidambaram has been warned against making any further public utterances about growth or lower interest rates altogether). The immediate steps being taken :
      • Some key inputs for calculation of inflation were based on prices in 2007 due to lack of fresher govt figures and were obviously no good.. so in an effort to tame the havoc this little figure is playing in the "investor" and vote bank's mind set, the govt has decided to move away from this incorrect input and take 2006 prices as last reliable records to get inflation figure firmly under control.
      • Immediately , a senior group of economists and other govt post holders have been despatched to Myanmar for first hand understanding of how that govt has been keeping inflation, prices, govt and generally the entire country under firm control ( not to mention pesky opposition parties). Multi pronged stability measures are expected to come out of this exercise.
      • The various agencies and various govt deparments involved in calculating(or otherwise influencing) the final inflation figure and various inputs have been provided longer handled brooms to ensure all non cooperating prices of any item be firmly swept under the carpet as far out of sight as these handles will permit..and any deptt lacking carpets be immly provided same before next release of any official figures.
      • In the event the above measures do not control inflation, it is expected the Defence ministry will be calling in all trade bodies and industry representatives to meet and discuss price controls a la Steel and Cement industry in the past to make its message clear.. also it is rumored minister Ramadoss will sit in as an enforcer (owing to his sterling performance at taming AIIMS).
  • Growth story intactness: The second factor which attracts 'investors" (again,mostly male) to the market is the clearly visible and exciting path to riches that make them feel sharp and sexy in a lovely way.. but again the path has to be clearly spelt out and a raging bull market is such a path where most successes are attributed to one's brain while losses are simply "nobody could have predicted this..". Currently , the market is facing a prolonged hiatus in the heady march to the top( in fact some pundits were projecting India to trounce the entire planet in terms of economic promiscuity) and governmental hand holding is already evident to achieve the (clearly visible) glory ahead.. it is destiny that will not be denied.
  • False rumors and irrational fears : The nosy media and the unscrupulous rumor mongers( some say foreign agents ) have been having a field day in blowing up non issues into unwarranted confidence busting agenda unto an increasingly edgy investor pack(already reeling with underwater PMS portfolios and "front runner" holdings ). The ability to see through these agendas and restore "investor" confidence is what separates Luddic Research from lesser shops :
      • Falling RealEstate Prices : This rumor is so obviously a vested interest plant that it is amazing anyone even takes it seriously. Every one knows in India prices never come down.. as surely as there is no house of cards built around real estate speculation. ( Case in point the PE funds and other "smart" money from more developed and more clairvoyant countries are happily pumping cash into this fantastic opportunity )
      • Economy slowing down : The cluelessness of this thought is quickly evident when you note that the currently jetBlack Kamath of ICICI (DRIP hall-of-famer) yesterday scotched any rumor of a slowdown by predicting scorching growth well into his greying years (despite some minor irritants like downgrades of their securitized retail loan portfolios which surprisingly are facing repayment issues).
      • Fiscal gap / current account gap widening : we all love and trust the finance minister and as he said "trust me .. we have thought about all this carefully .." no reason to distrust him now and get worried about Rs.70,000 cr+($17B) farmer loan waiver.. Rs.95,000 cr($23B) fertiliser subsidy.. this govt we love and trust to do magic and keep the growth growing.
Like is evident from all the above .. it is only a matter of time before we resume out glorious bull run which will silence these doubters and weak hands.. in fact our friendly neighborhood PMS manager is especially bullish ( though, worryingly, untraceable for the last 2 weeks).

1 comment:

Anonymous said...

Fantastic Blog!
Excellent satirical writing (but so very true). I was thinking that most of India and the "foreign investors" have been hypnotized by the "India Growth Story"-glad to see there ARE some exceptions who have still both feet on the ground!
Regarding the subsidies and the paycommission payouts-that's nothing compared to the so called "Oil Bond" scam. Rs. 200,000 crore and still counting!
Whoa rupee? How come it still trades at 42 to the dollar?