All Drops !~RBI the Repo ~DMK the UPA~ Markets the Sensex ~Cyprus an Economic Bomb !

Currently the only way to win the Equity Trading & Derivatives Game is by not playing it !

Union Budget 2013 ~ India is a BLESsed Economy

Felt like a stand up comedian as had the house of 400 well informed investors in splits !  when I address and interacted with them on Budget Day Feb 28 evening itself at a Budget Review Event jointly hosted by AIVF,JITO and the BSE Brokers Forum at KC College Auditorium

Gaurav Parikh on Dias before his Humorous Address to 400 in the audience On Budget Day Feb 28,2013

Covered this on our Company website as below :

SCRIP STANDPOINT ~ A View

Slide Share ~ The Presentation at the Event to support the Address & Interaction

Union Budget 2013 ~ India is a BLESSsed Economy…

Enjoyed on the Budget Day Evening itself Feb 28,2013 addressing and interacting with a well informed audience of 400 on the Union Budget 2013 ~ on how the Government plans to make Money to tackle deficits and how we can ! ~ plan to host a few thoughts of my presentation on the company website www.jsalphaa.com and on this blog ~ covered how FM has cleverly and conveniently balanced the budget ~ also covered  the Forward Trends in Equities &  Indices & Gold & Exchange Rate & how Debts & Deficits are forcing Disinvestments & how the malaise continues on our exchanges and it will be some time before the retail investor comes back,if at all ~ spoke on Liquidity,Sentiment,Momentum and Valuation

Felt more like a Stand Up Comedian as the audience were in splits on some of the budget and stock market situations I presented…

Union Budget 2013 Review Event

When Pranab Mukherjee rambled his Union Budget Address mid March 2012,he announced a lower Oil Subsidy Target for FY 13,indicating that  a Price rise in Petrol was inevitable….It’s come a little over two months later just as the Summer Session of Parliament has ended….Petrol from today is in the range of Rs 73 to Rs 81 /litre…up @ 10% overnight…

Now I have an official and more compelling and credible excuse to work from Home !…Did someone say Bus it,Train it,Bike it,Pool it or just walk it ! like Millions do ….in Mumbai !?

Your Office is your Mobile these days….that’s a Virtual Reality…allows one to work from anywhere…by default now from Home too !

Cheers !

They say there is Intelligence leakage when Government keeps defending their inability to find sustainable Economic solutions …I disagree !…there has to be Intelligence in the first place for there to have been any leakage !….pardon me for being unkind here…but it truly is frustrating when India continues to squander it’s resources

Sensex is Low ~ Rupee is Low ~ WE ARE LOW ! ~ Inflation is High ~ Current & Fiscal Deficit is High~ Oil Prices are High….FII and FDI Trust Deficit is High…..and yet the Government continues to be on the defensive and keeps claiming pyrrhic victories of GDP Growth rates and Employment Plans and record Foodgrain Production and High Fx Reserves…and after years now admit Global Macros are severely impacting us !….and our near 80 year old  FM,addressing the Rajya Sabha at length today on the state of our Economy keeps living in the Past, referring to past History of 1948 and 1952 and late 1960s …and that another Committee may be formed to look into current Economic issues !….Good Lord ! yet Another Committee !…suddenly the FM  seems to have realised Stark Reality…talks of being pragmatic,realistic and keep eyes on the ground !….earlier there was a psychosis prevalent…ambitious PSU Disinvestment was budgeted…as were lower deficits and higher growth….none achieved….never would have been,when targeted in the first place !….repeated assurances were given as to India remains a Growth Story and not to worry

Now the Government tells us it is a worrisome and anxious economic situation that India faces….Why could they not have been Honest in the First place rather than giving false reassurances…either it was deliberate or it was a lack of vision and intelligence to realise this !

Where are the selfless Economic and Political Luminaries and Visionaries ! ?…India desperately needs you’ll now more than ever !…to bring back on Track of Economic Prosperity a derailed Economy !

Sensex sinks 2.33% and 395 points to close at 16518  at 3.30 pm,although the adjusted close is down 366 points at 16546…..retracing all it’s misplaced elation yesterday on deferment of General Anti Avoidance Rules (GAAR)

Yesterday the Sensex showed a remarkable bounceback from negative to positive to close near 17000 at 16913 just because FM Pranab Mukherjee announced that he was deferring the GAAR by a Year and putting the onus on the IT Authorities to prove tax avoidance

It was like the FM warning FIIs and those who misuse Double Taxation Avoidance Agreements (DTAA)

” Alright I won’t kill you’ll this year but will do so next year !”

…and the Market responded by applauding this lease of Life for a year more !…pretty misplaced

India has DTAAs with 82 countries….Without hiding behind  any DTAA,especially with the one with Mauritius coming under Review,FIIs are now exposed….having to lose their tax advantage which acted as a strong cushion given they had to contend with the  Rupee Depreciation too

Today reality sunk in and the whole bounce back was retraced back to 16500 levels…helped along also by Deputy Governor of RBI stating that with Oil Prices & Inflationary Pressures remaining high,it would be difficult to lower Interest rates further

All 30 Sensex Stocks closed in the Red with those highlighted in Bold Red Below being the hardest hit and interestingly all favourites too…and that’s an ominous sign for further falls

The May Meltdown is On… !

Expected Weak Weekly Sensex Opening….drops @ 300 Points and struggling to stay over 16500…French Connection ? 

Socialist Francois Hollande has won the French Presidential Elections beating the incumbent Sarkozy….Hollande is against Euro Zone austerity measures and wants to renegotiate the Eurozone Austerity and Bailout Package…seeks to meet Chancellor Angela Merkel of Germany right away as top priority….He’s also going to raise taxes,focusing on the rich

Expect Eurozone to shiver as Hollande ascends Presidency…Keep a watch on USA…Dow too should be impacted

Europe should shrink further and slip into deeper recession…over 20% of India’s Exports flow to Europe…The impact will be  felt strongly….India’s current deficit is a record 4%of GDP….The Pressure on the Rupee will remain strong as our Imports cross US $ 550 Billion in FY 13….they were justa shade below US $ 500 Billion in FY 12…. while Exports,which just managed to cross US $ 300 Billion in FY 12 ,will remain inside US $ 350 Billion….the Rupee has already weakened 6% in April and threatens to cross Rs 54 to the US $ enroute to Rs 57-Rs 60 range

Interestingly hardening macros will mean softening micros…and this means opportunity at lower risk down the line

Sing this to the Tune of Christmas Carol “Jingle Bells”

“Dashing Through the Economy…Printing Currency all the Way !…Oh what Fun it is to ride on a one PIIGS Open Sleigh !… Hey ! Warning Bells ! Warning Bells ! Warning all the Way !…Santa Claus is not Coming riding on a Sleigh !”

Have a Look at this chart below (moneyandmarkets.com)  and see the crazy percentage of  Central Bank Assets as a % of the GDP in that Country

Central Banks of USA,Europe,England and Japan have printed more Currency in the past four years than in the whole of the past 50 years ,prior !….in an attempt to revive their Economies….and the result is simply not showing !…it is a matter of time that the currencies will lose their function as a ‘store of value’ 

You want a figure ! ?..it’s over US $  10 Trillion worth of freshly printed Currency pumped into the Economies in the last four years 

In 2008 USA’s FED  Assets to GDP ratio was just 6% …it’s now a record 20% !…England matches this !

Both,Japan and Europe are even more precarious…the ratio here is an unbelievable 30% !

Dangerous Levels of Printing Money to Fund Economy

PIIGS ~ Europe

Portugal,Ireland,Italy,Greece and Spain….currently the faltering Eurozone Economies…The Quantum in % of Sovereign Bonds of the Total Bonds Issued in the World stands at 40% according to S & P….In Spain the yields on Sovereign Bonds have climbed over 6% while the default hedge cost is now 5% ….The Unemployment rate is a stagerring 22% !….All PIIGS Nations have a dangerous level of Debt to GDP Ratios…Greece’s Debt is 160% of GDP…and all countries are battling recession and struggling to implement stringent austerity measures which is a prerequisite for bailout funding….social tension is the inevitable fallout….riots,strikes,demonstrations….and at an extreme can lead to anarchy…How Long can France and Germany continue to prop up the Eurozone !…they,themselves are answerable and have to counter increasing domestic challenges and arguments and debates to providing sustenance to others in the Eurozone…There is a growing fear of the Collapse of the Eurozone….inevitably countries like Greece and even Portugal may contemplate to exit the EuroZone and revert to their own or new currency and at a new exchange rate….the situation is tense and huge dollops of Bailout Funds are required over a sustained period of a few years…problem is where will such Funds come from !?….Printing Currency was the only Option left,perhaps !….Italy approached China for Funds by soliciting subscription to it’s sovereign bonds….China demanded Tangible Assets and stakeholdings in top Italian Companies !…as Bond Values can substantially be wiped off if economy continues to falter  !

India

Stock Indices are now Flat but threaten to drop…India was a bubbling Soda…which has now lost a lot of it’s Fizz…It too has been resorting to a higher level of  ’printing currency’ ‘ for deficit financing in recent years….but it has the lever of higher GDP Growth Rate…Even in a tough 2011/2 it grew at 6.9% and the RBI’s Balance Sheet Size is in single figure % to the GDP

Yet….India’s Outlook has just been dropped from ‘Stable’ to ‘Negative’ by Standard & Poor’s Rating Group…The Fiscal Deficit has ballooned to dangerous levels of 5.9% of the GDP at Rs 521980 crs in 2011/12 from a targeted 4.6% …largely due to a huge surge in Subsidies (most of it Fuel related as Oil Barrel basket averaged US $ 114 but was budgeted at US $ 90 and we import @ 75% of our requirement) from the Budgeted Rs 143570 crs to a record Rs 216297 crs

This has kept up the Pressure on the Government to Fund the Deficit from Gross Borrowings in excess of Rs 500000 crs…as also kept our Rupee weak…Its again threatening to move towards Rs 60 to the US $…Currently it is a shade below Rs 53…Competitive for Exports but not good for Imports…in 2011/12 Exports were US  $ 302 Billion while Imports were @ US $ 490 Billion….Crude Oil remains our major Import…Domestic Release is @ 38 Million tonnes with Cairns beginning to contribute to the @ 30 Million tonnes from ONGC and Oil India…2012/13 should see @ 45 Million Tonnes with Cairns increasing output…but we need in excess of 200 Million Tonnes to fuelour high GDP Growth rates and with Global Price of Crude Oil per Barrels remaining high over US $ 100 with the Iran and North Korea geo poilitical issues playing spoilsport, you can imagine the pressure on the Indian Rupee and on our Current & Fiscal Deficits

Yet the Government is budgeted a lower Subsidy Level for 2012/13 and a lower Fiscal Deficit Level of Rs 513590 crs being 5.1% of GDP…Government’s mindset and ‘way to go’ to meet these targets is revealed by their intention to tackle this in two specific ways,given the difficulty to increase direct or indirect taxes rates and collection  or reduce plan and non plan expenditure

1. To reduce Fuel Subsidies by allowing a significant increase in the price of Petroleum products
2. Disinvestment Targets are not being met on account of unfavourable Markets….but the Government has another weapon…. TRAI,the Telecom Regulator has just issued a figure for Renewal and granting of 2G Licenses of a whopping Rs 300000 crs + !

I  remain an Optimist…though it’s easy to be a Realist or even a Pessimist given the huge  Domestic &  Global Tension on all Environmental fronts…Economic,Social and Political ….and the acute lack of  Political Leadership or Will to take the Right Decisions

Most Countries have gone or are going into Self Protection or Survival Mode…while China remains an enigma…looked on by some as the Aggressor and by others as the Saviour !……It continues to grow at high GDP rates,despite a slowdown recently…it continues to devour global mineral resources….it continues to grow it’s infrastructure in record time and with latest technology……flexing Economic and/or Military Muscle and Aggressively Acquiring Tangible Global Assets…it continues to control it’s Currency ‘Yaun’ not allowing it to appreciate,but has made recent moves to allow Non Dollar Swaps and bilateral trade in Yuan,  to signal it’s strength and the potential to becoming the world ‘s  reserve currency after the US $ has outlived it’s utility and Oil Trade ceases to be only in Petro Dollars

So that India regains it’s rightful place and glory on Planet Earth with adequate financial inclusion of the  1.2 Billion populace ,it desperately needs a New,Strong,Energetic,Enthusiastic,Decisive,Compassionate,Fearless,Young,Selfless,Intelligent, Incorruptible in Thought,Word or Deed and Forward Thinking Political Leadership to navigate successfully the  tightrope without tripping or  being tied up in knots !…and without the constant refrain of coalition compulsions….How can we ensure this does not simply remain wishful thinking !

S & P retains BBB – Rating for India but downgrades Outlook to Negative from Stable…indicating a possible down rating in the future….BBB- remains the lowest Investment grade Rating,just one notch above BB+ which is the highest Speculative Grade Rating….  I’m finding it difficult to counter as it echoes ground realities of high Current Account and Fiscal Deficits !

Sensex dropped a percent on this news earlier today and has recovered  a bit  to 17150 levels as I blog this just after 3 pm

Nearly Two years ago in May 2010 I had blogged how amusing it was that S & P continued to rate USA  as AAA…India at the time had the same rating of BBB-,as it does now, but with a stable outlook

S & P’s Sovereign Rating of USA remains at Top ‘AAA’….Amusing!

Friday, May 21st, 2010

Here is a selected and grouped compilation of the latest Standard & Poor’s Sovereign Ratings sourced from www.standardandpoors.com…what is interesting is the relatively high ratings to Ireland,Italy and Spain among the PIIGS Nations in context of the recessionary ,high debts and deficits ,low liquidity and survival issues being currently faced in the EuroZone

Selected Countries S & P Sovereign Ratings as on April 25,2012

Given such Macro Negatives can the Sensex hold above 17000 in the short term with even FII Inflows reversing as Government seeks to clarify on tax with a retrospective effect  but instead creates a Fear psychosis,anger,anxiety and frustration with GAAR Measures and it’s targeting Vodaphone ?…In the Jan-March 2012 quarter the FIIs had pumped in a record Rs 41000 crs moving the Sensex from December 2011 Close levels of 15500 to Highs of 18500,only to revert back towards 17000 now

Furthermore,with the Rupee seeking to yet again depreciate further beyond Rs 53 to the US $ and thus keeping the pressure on Inflation and Interest rates, I for one,am finding it difficult to get excited or even remain spirited about macro trends in the  markets in the short term…I remain Hopeful and selective though !

Cheers ! 

Tough Macros are now reflecting in Micros…Signs are Ominous for the Sensex at 17500 and Nifty at 5300 levels…Kindly exercise caution and utmost discretion when taking risks,especially on the long side….stop loss may be triggered….don’t be swayed by the record FII Inflows in the first three Months of Calendar year 2012…Going Short has been indicated for awhile now especially at 18500 levels a few weeks ago…Going Short Now at 17500 Sensex,therefore increases the relative risk as Liquidity Flows props up the Sensex….A Safe and Sensible strategy remains  to wait and watch and stay on the sidelines…go watch the Movies !…take that short break to the hill station or beach and prepare to enjoy the Summer Vacation…the next Four Days give you a long Weekend Break…this year too may not be any different for May…when you Sell and Go Away !

• Global Cues….USA Fed warns yesterday that there may not be a third round of quantitative easing and therefore further Bond buying may be halted…Europe slides further into recession….China Economy decelerates sounding caution…Will it or Won’t it ~ Israel initiate all out Conflict with Iran ! ?…without awaiting USA go ahead !…Watch out for further rise in Oil then !
• Domestic Cues…Financial reforms put on Hold as UPA does not have the Lok Sabha numbers and therefore political will to introduce these…more so as new coalition support partnerslike the Samajwadi party which swept the UP Elections last month weild increasing influence…FCCB Maturities this year may witness defaults…Suzlon,a case in point…it’s CFO just resigned…Crisil just announced that 3.4% of the Companies it covers have defaulted last year on debt repayment in FY 12…that’s  188 Companies defaulting…the highest in ten years….Banks Gross NPAs soared to 2.9% of Advances…Weak Economy and Tight Credit have been the reasons…FIIs and FDI Investments are on hold as there is confusion and lack of clarity on GAAR and the retrospective effect going back 42 years ! been announced for Tax Avoidance and Structuring Deals and issues…Vodaphone deliberating to move the United Nations on this….TCS & L & T Infotech facing huge Class Action Suits from ex employees in USA….Petrol Price Rise indicated clearly in the immediate future as Oil Companies crying Foul,Lower Oil Subsidy provided in Union Budget of FY 13  despite increasing Crude Oil Prices…Increasing fear of Government being Anti Business and keen to protect it’s PSU Fiefdoms…Changing Pricing Basis in Coal India not received well and strongly sparking off  Minority Shareholder Activism….Over 6000 Sub Brokers have not renewed their SEBI Registration….Many Members of Stock, Currency and Commodity Exchanges, who had expanded vigorously all over India and even Overseas are significantly closing or curtaling Operations to contain Costs….Equity Mutual Funds Schemes seeing lowest in Nine years Inflows and high Redemptions and therefore decreasing Assets Under Management…many Mutual Funds looking for Outright Buyers….Rupee Weakening…Interest rates refusing to ebb…Inflation ebbing may just quickly reverse trend as Oil Prices threaten to rise further…SEBI announces that Stock Exchanges can List but not on their Own Exchange and with several complex riders…Of the Nearly 1400 Private Equity Deals in the five period till 2007,not even 400 have managed an exit….the rest are stuck ,awaiting more bullish and suitable valuation times…..living in Hope  

Don’t go crooning  at the Indices,the  Desi Boys Hit  ”You’re My Hero !”

Last but not the least….38 year old BSE Chief,Madhu Kannan has just announced he is moving to the Tata Group shortly….Not sure if this is an Ominous sign though  for the Markets ! …but what is,is a seasoned veteran trader and speculator wanting to work for me,after realising that Wealth Creation and Long term Relations and Goodwill with Clients are build over Years and not just in Bullish Times….If you sustain and hold hands of Clients through difficult times with sound and sensible portfolio advice without focusing on the Fees that they pay you, these Clients will sustain you too…and believe me,with the volatility and swings the markets have thundered on us over the past few years,it’s easy to lose a Client than gain one !…and also a SEBI Top Guy telling me candidly how frustrated and helpless and disillusioned he is when it comes to interacting with Capital Market Intermediaries in India,some even leading..of  falling Ethical Standards…of putting Self before the Investor !…Ominous….

…and what’s not helping is also the fact that in the period 1992 to 2012, Five year Bank FDs renewed in the 20 years have given a higher rate of compounded return than the Sensex !….destroying the ‘Buy and Hold’ Philosophy   

Mid Term Polls look more Likely than Multibaggers this Year !…though I continue to Re-Search for them…the hyphen is deliberate !

Cheers !