Where will your money be safe? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Where will your money be safe?

Aug 3, 2001

‘Everything in India has become dysfunctional’, read the headline of an interview with Mr. Arun Shourie (on an internet site) the Union Minister of State for Divestment. He said that divestment is at the mercy of procedural delays. That’s bad news for the stock markets. However, the minister did not give any figure to the amount of divestment that would be achieved by the end of this fiscal and described the figure of Rs 120 bn as indicative. Very closely linked to this figure is the fiscal deficit. Therefore, it is quite doubtful if the fiscal deficit will be down to the targeted 5.1% of the GDP in FY02. The figure might close at 5.4% of the GDP. The fiscal deficit could be even higher due to the slowdown in the global as well as the Indian economy. This would result into lower exports and lower corporate earnings. Consequently, the tax collections could be lower than expected. However, the impact of the exports would be marginal as compared to the impact of dip in corporate earnings. And of course the expenditure is on the rise as the government keeps on bailing out efficient institutions like IFCI with Rs 10 bn packages.

Therefore, government will fall short of spending (as usual) its money where it should for development of resources that will benefit the economy in the future.

To quote John Maynard Keynes, “ The important things for government is not to do things which individuals are doing already, and to do them a little better or a little worse but to do those things which at present are not done at all”. And that is what the central and state governments have been doing; wasting in such proportions that we cannot dare to imagine. To quote Mr. Shouire again “In the 9th Plan, the states were to contribute only Rs 38 billion out of an outlay of 1,350 billion. We are in the final year of the 9th Plan. They have contributed minus Rs 1,150 billion!”

But the fundamental question is where will the growth come from; if the government can’t do it can the private sector? No it can’t. Unfortunately the Indian industrial sector is heavily reliant on the government spending for its growth. Thus, the government needs to spend on critical areas like infrastructure. And the only place it can get money from is divestment. This has become a vicious circle.

The private sector can do its bit too. We need more of Naryan Murthy’s to start with organisations that have sales of a small Rs 1.2 m in their first year of operation and then grow to earning Rs 19 bn two decades later. And where do you come in? Dreams like these will require money to be a reality, which of course is with you. Investing has to be looked on as becoming a part owner of these dreams that come from warm hearts but cold heads.

The cover of an investment related magazine screamed middle class India’s worry where do I invest my money safely? The government after the UTI’s ‘dazzling’ performance is no longer a safe option. The answer is quite simple: in clean managements that know what they want to do and where they want to go. US slowdown will come and go, stock market scams will come and go, but there will always be some managements that work very hard to create share holders value. There lies your top pick for the day, the month and the year. But the word of caution here is that when you enter into such investments keep an eye on the valuation.

Equitymaster requests your view! Post a comment on "Where will your money be safe? ". Click here!

  

More Views on News

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

ONGC to NMDC: Here are 5 Stocks Value Investors Should Closely Track (Views On News)

Nov 26, 2021

Before investing in value stocks, research the company and gain insight into why the market is discounting it.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

Equitymaster's Top 10 on YouTube. Watch Now (Views On News)

Dec 4, 2021

Here, we look back and share our top 10 videos.

Watch This Before You Buy NBFC Stocks (Fast Profits Daily)

Dec 3, 2021

My view on NBFC stocks.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Dec 3, 2021 (Close)

MARKET STATS