Sunday, January 1, 2017

2016: The year that was!

A tough year 2016 gone.
We have gone through many phases in 2016, starting China slowdown worries, commodity melt down, Oil shock and so withdrawal of gulf nations's sovereign fund's allocation in India, Br-exit, Trump Win and then Demonetization.
USA markets performed very well, and doing so on the hope of Trump focus on USA infra, Jobs and migration. Metals have recovered and performed very well in the same period with hope of USA recovery. One of the worst miss for me is, ignoring Vedanta resources at Rs 60-70 (Now 200+ and I do see going it beyond 300-400 in couple of years as commodity cycle turns up) when it was available dirt cheap. Simply, I could not trust Anil agrawal, though he did nothing wrong from shareholder perspective, at the same time, I do trust TATA a lot like any other Indian, who did nothing good for enhancing shareholder value except TCS. These are perceptions and we need to look pragmatically. Opportunities need rational and prepared mind. I learnt the lesson.
We could not see, a secular bull market in India in 2016. Prices keep on moving 20-30-40 higher and then dropped as well because of many variables and reasons just discussed.
Another reason for not a secular bull market in India is, Mr Modi push for economic RESET. This reset process peaked when he took decision of #DeMo. India was like a running Tiger, something like Satyam story, as CEO Raju said that time, "It was like riding a tiger, not knowing how to get off without being eaten." So he maintained status quo, Which ultimately leads to infamous fall of Satyam.
India in Manmohan era was running high on consumption boom. How? Investigate about it with open eyes. Loot at top end of Govt, black money tax by Govt ministers/officers, Dalali in each Govt project, PSU bank lending to unethical builders, corporate; Mafias, NREGA SCHEME and so on. All this leads to higher inflation in unproductive assets like Gold and real estate. Highly inflated real estate become safe heaven for all these black money looters. Inflation become political issue and RBI could just manage interest rates in R Rajan Era and left everything to Govt. Manmohan Singh was Mr Raju of "INDIA".
Mr Modi could have let India run like earlier Govt Or could have press RESET button to push things into structural way and saving Nation from a sudden fall to trigger shock. I am happy, He choose second option for which he was voted by Indians.
But, then, turning a track of high speed train is not possible. Train has to be slow down first and track need to be changed afterward. Precisely happening in my views now. This process will benefit the companies which are ethical, tax payers, adoptable and flexible to change. At other end, it will destroy/damage few dishonest corporates and other unethical businesses. Read here: biggest ever fire sale of Indian corporate assets has begun. Unfortunately, this entire exercise will hurt and stall massive consumption boom which was happening with loot/free/black/unethical money, but hopefully, it will be temporary and new boom will be more structured and solid, which will last longer & sustain. So , We are in massive transition phase. Ultimately, how it will turn out, nobody knows. But at least, we have leadership who has been able to take bold decision. In my views, bold decisions will not stop here, And we will have long due reforms in each sector, provided, We choose Mr Modi again in UP and then in Loksabha elections 2019. The tendency of free money, loot, corruption will reduce and Indians will be asked to Work/Earn/taxed in order to survive & enjoy freedom & democratic Nation.
Can anyone imagine that there are only 24 lakh tax payers above 10 lk income? Then, Who is buying 1-2-5 Cr flats? Is your near by medical + grocery store operator + real estate consultant + Clinics + Hospitals + Jewelers + Paan wala + Saloon + Snacks sellers + traders are paying tax? Ask them, Or you have email id of IT dept now. Go ahead. GST is one possibility to draw them under Tax umbrella. Digitization push will show real potential of Indian consumption + trades. Tax need to be very less but should cover every eligible stakeholder , and that's only way to be it, less. I think, We are in that direction.
This RESET button will damage demand first. We will be regulated, taxed and structured properly. DeMo will lead to more cash into system, Govt while, could not curb black cash directly to come into system, but then, will not let it go back. Govt may keep 2-3 lk cr by not printing that money. This will be start in direction of liquidity boost in the system, and will lead to low interest rates regime sooner than later. Without low rates, a secular bull market not possible. So far black cash is concern, its going to be a ongoing process & Govt has at least now few traces left in the system.
But problems are manifold. Rupee getting weakened as simply $ getting stronger. World after seeing a long period of globalization, now moving towards localization. Economic Growth using GDP growth is not a very sensible formula to measure progress, and it will not be endless in broader sense. Growth pace is slowing down in developed economies. So Nations are choosing protectionism in order to prosper their own citizen. We may see, Localization as trend for coming decades. So, India needs to stand on its own feet than mere looking at FDI/foreign money.
FII are continuously pulling money back in last couple of months, still Nify/Sensex is not butchered deeply, simply, because, Modi has hit hard on STORED, UNPRODUCTIVE ASSETS + BLACK CASH, and its now getting distributed and diverted to financial instruments slowly. We need to find our potential, Indians need to be motivated to contribute into productive assets, that's only way to survive. We can not look at easy foreign money like beggars, We need to show our potential of our own wealth used in productive task, enterprising skills, bold reforms, then only, Foreign money will come for long term. Actually, nothing has happened in this direction with clear vision in last many decades, simply, because, We have not chosen, a Govt with full majority, a leader with vision and execution skills, both simultaneously.
But with few more painful incident first, We MAY be moving into altogether different orbit of sustained economic development. It will not be linear, will have hiccups but direction will be clear. And if this do not happen in a bad case, We with a 125 Cr population, will a ticker bomb than anymore demographic dividend!
Fingers crossed! Good Bye 2016! Welcome, 2017!

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