|» INVESTING IN INDIA|
The election season has begun.
We have heard the speeches; we have heard the abuses; we have heard the allegations; we have heard the counter-allegations. Now the time has come to cast the vote. To make the decision.
Just as managements with fancy power points and high-profile investment bankers aim to pick your wallets. You can let them play on your greed or stop them.
----------- Grab our FREE report on Multi-bagger MidCaps -----------
Picking stocks and backing managements is an imperfect science.
The uncertainty principle
In the financial markets we have enough examples of Heisenberg's uncertainty principle at work: you cannot identify the position and momentum of the managements, a party, or a politician at the same time
The multinationals continue to fool us that they bring ethics to business and that they will enhance the life of the Indian population once they are allowed to enter India.
Witness the buy-out offers of minority shareholders and the threat to enter India with 100% subsidiaries if the multinationals cannot buy out the Indian shareholders.
The difference between the Somali pirates and the multinationals is that the Somali pirates probably have the quiet backing of their government, whereas the multinationals have the explicit backing of the Indian government.
The multinationals have adopted a position that is legally correct, but their momentum occupies a space in time that is immoral.
Or take the case of the ethically correct business leaders in our country: HDFC and Tata. Two groups that I respect and have, in the past, maintained are as valuable as gold.
Their position on principles is fantastic and yet, in their desire to grow assets for their AMC businesses, have they let the momentum take over? They are beneficiaries of the distribution-led, asset gathering business in India.
It took the launch of the Quantum Mutual Funds - the 29th fund house in India and the smallest in terms of size - to question the practices of the accepted, distributor-led model which the Goliaths blindly followed.
The regulator, SEBI, has now made it clear to the industry what is acceptable and what is not. So the industry will toe the regulatory line, not because they chose to.
Globally, the financial crisis was also a reinstatement of the Heisenberg uncertainty principle.
The BJP states they are not against Muslims - yet they have no explanation for the recent ranting against Muslims by Varun Gandhi.
The Congress claims that it represents everyone - yet it took a shoe thrown at the bemused Home Minister to make the party reconsider whether they should anger the Sikhs by giving a ticket to Tytler.
The CPI (M) - alas - fails the uncertainty principle. That is because they are less of a political party, and more of a collection of thinkers who will try their best to blot out the ills of communism from our history books.
A few months ago, I asked some friends in the media to encourage their publications to do a fairly simple exercise to help voters make a more informed decision.
Why not ask every sitting MP who is standing for re-election the following questions:
And for the politician seeking to unseat the incumbent elected, the same five questions with question 1 and 2 being modified to:
The local questions
The quest of any election should be to rid the electorate of Heisenberg's uncertainty principle and to know, at any point in time, what we can expect from the MP's we have elected.
As a fund manager, we have a pretty good idea of how the managements of the companies in which we own stocks will behave under varying economic and business conditions. We are buying into their thought process and their ability to deliver - knowing that they work in an uncertain world.
Sometimes we get it wrong: like the behaviour of the founder shareholders of Ranbaxy when they struck a lucrative deal for them with Dai-Ichi and left us all to rot in the stock market.
Many times we get it right: buying HDFC, but avoiding ICICI Bank.
Voting, like investing, requires some research into the realities and the track record.
Otherwise, keep voting on slogans.
Just as you invest in companies run by crooked managements who will steal from you the first chance they get.
Of that, there is no uncertainty.