| Who ends up buying when no one else is? |
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In this issue:
» India's investor of the last resort
» India among the most vibrant job markets
» The game changer in India's credit card industry
» Indians figure in the list of world's richest
» ...and more!!
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We have all heard of the 'banker of last resort'. Central banks, like India's Reserve Bank of India, can lend to those whom no else will. As we found out from the bailout program, central banks can and will rescue firms who simply cannot be allowed to fail.
What if we told you that in India, we also have an 'investor of last resort'? LIC. Let us explain. Recently the government came out with the NMDC FPO. It is part of the government's disinvestment program. By selling some of its stake in valuable companies, the government can raise funds quickly. Given the buoyancy in the share markets, it hopes to realise a good price for these companies. But as we highlighted in our view on the issue, the prices were rather high. As a result, the issue received a poor response.
So, it turned to the giant among domestic institutional investors - LIC. And being a government enterprise, it is sensitive to the government's needs. As reported by a leading business daily, LIC has emerged as the largest bidder in the NMDC FPO. Participation by FIIs, high net worth individuals and retail investors has been negligible. So there. LIC may end up virtually underwriting the issue. Just like it bailed out the NTPC issue. We have nothing against government issues or LIC's investment capabilities. But the question to be asked is - Just because it is a state owned insurer, is it right to nudge LIC to bail out issues that others find unattractive? Luckily, as individual investors you can act on your own sweet will. Our advice to you is to invest in promising, well-managed companies at reasonable valuations.
Source: The Economist
The state of the job market often acts as an accurate indicator of a country's economy. Hence, it should not come as a surprise that employment outlook is the most robust in countries where economic activity has rebounded the strongest from the financial meltdown. Manpower, an employment-services firm which conducted a survey, found that employment outlook is the strongest in Asia and the weakest in Europe. As today's chart of the day shows, India is among the top countries where employers who plan to hire outnumber those who plan to fire in the coming quarter. Little wonder then that news about pay hikes and attrition are grabbing headlines everyday of late.
| 01:33 |
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Speaking of attrition, how flexible are Indians when it comes to changing jobs? Very, if a survey conducted by Ma Foi Randstad, the country's largest HR (human resources) services company is to be believed. This survey has thrown up some interesting results. Indians apparently are more open about shifting their jobs in the next six months. India's mobility index is the highest at 140 in the world, followed by Mexico, China and Turkey. However, in India, the study has found that highly qualified people exhibit lesser inclination to move. Not just that, those enjoying higher salaries are also content to stay put. Not surprisingly, economic slowdown in India of late meant that mobility across ranks considerably reduced. But we wonder whether increased mobility in India means that the people here are just not finding their jobs challenging enough to stick around.
| 02:17 |
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India's industrial output eased marginally in January from the December 2009 levels. It recorded a growth of 16.7% on a YoY basis as against 17.6% YoY growth recorded in the month of December. Thus, for the current financial year, the growth now stands at 9.6% YoY. The industrial sector, we should say, has filled in quite well for the subpar agricultural output of the country and has played a stellar role in ensuring that India's GDP manages to grow at a decent pace. Of course, the Government's stimulus measures also played their part in propping up the industrial sector. Going forward though, some amount of slowdown is likely to take place as higher prices on account of the recent budget measures could dent demand for goods. Furthermore, the threat of RBI hiking interest rates in order to tackle the rising inflation also looms large. All in all, looks like the 16%-17% growth that we have seen in recent few months could well be a thing of the past.
| 02:58 |
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It's nothing less than amazing how quickly India and Indians have begun making their mark in almost every area of any significance. Take those hallowed 'World's Top Ten' lists for example. Forbes latest 'world's top ten richest people' list is out. While the top spots are occupied by the usual suspects, Indians have now come uncannily close to the top. The fourth richest person in the world is now our very own Mukesh Ambani, right after the likes of Warren Buffett, who occupies the third spot. It doesn't end there. Right after Mr. Ambani comes steel baron Lakshmi Mittal sitting pretty at the fifth spot. Interestingly China's denizens stand conspicuous by their absence amongst the top. The dragon nation has only one in Asia's top 25 billionaires.
| 03:22 |
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After home loans, if there is any financial product that was the worst affected by the subprime crisis it was credit cards. Not just in the US, but even in India where credit card penetration is abysmally low, banks saw a meteoric rise in credit card delinquencies. This was particularly thanks to a trend of distributing free credit cards started by the country's largest private sector lender ICICI Bank. After two fiscals of very poor performance on the asset quality front, the bank is set to undo its mistake. ICICI Bank's latest act of restarting to charge annual fee on credit cards is expected to be such a game changer in the industry that other players are expected to follow suit. We believe that given the rise in NPAs on credit cards from 8% in FY08 to 20% in FY09, it certainly makes sense for banks to filter their customers for such products.
| 04:14 |
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The common man has been affected by high food prices for almost a year now. However, we are finally seeing a change. The food inflation for the week ending 27th February has come in a tad lower at 17.81% compared to 17.87% register in the previous week. While the prices of essential commodities are still high, the rate of increase has declined. However, a new problem is rearing its ugly head. The budgetary increase in excise and customs duty has led to a 6% increase in petrol prices on a weekly basis. The fear of fuel inflation resulting in a broad based increase in inflation is coming true. RBI expects overall inflation to be in double digits by the end of March. While this would make all commodities more expensive for the common man, it also makes a case for tightening of monetary policy for the government. This would make capital more expensive for companies. We believe that this would put pressure on economic growth going forward.
| 04:38 |
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Meanwhile, after starting the day's trade on a positive note, Indian stock markets could not sustain the gains and plunged into the red during the day. At the time of writing, the benchmark index, the BSE-Sensex was down by around 39 points. The BSE-Smallcap and the BSE-Midcap indices were also down by around 0.2% and 0.1% respectively. Stocks from the energy, metal and auto sectors were amongst the top gainers today, while those from the realty, capital goods and power sectors were amongst the top losers. Other Asian markets closed the day on a mixed note. While the Japanese markets traded in the green, their Chinese counterparts closed below the dotted line.
| 04:56 |
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Today's investing mantra |
"It does not take genius to be a successful value analyst, what it needs is, first, reasonably good intelligence; second, sound principles of operation; and third, and most important, firmness of character." - Benjamin Graham
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| 1 Responses to "Who ends up buying when no one else is?" |
Prem Singh Dhankar
updated Mar 12,
2010
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Excellent reading.
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