|» INVESTING IN INDIA|
When you land in China, they send 2 teams of medical crew wearing spotless white attire from head to toe, looking a bit like astronauts heading towards the rocket for a lift-off.
The silent crew parade the aisles, examine your eyes and flash a beam on your forehead to check your temperature. They are looking for symptoms of swine flu.
Only after every passenger has been checked and approved, they allow the pilot to move the plane to the parking gate and offload the passengers.
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You land in India and we are back to Indian-ness: passengers coming down two escalators and one flight of stairs quickly fill up a make-shift queuing system. Within minutes, the continuous stream of people coming down the escalators cannot get off - the space ahead of them is a stationary wall of people. A lady on crutches falls - the escalator blades disappear from under her feet and she has nowhere to stand.
Once you get to the people behind the desk with your medical form, they stamp it - without even looking up. You then proceed to immigration. And soon you are cleared to officially enter India.
If you had swine flu, the Chinese would catch you.
China, said a friend, has learnt from its mistakes.
Do you think, my friend continued, it is a coincidence that WHO is the only international body that is now run by a Chinese? China really wanted their nominee as head of WHO - Dr. Margaret Chan. And, within China, there are only two ministries that are run by people who are not from the Communist Party: the Ministry of Health and the Ministry of Science & Technology.
Having made a mistake, the Chinese gulp a bit - and then go on to ensure it does not happen. So China will have fewer cases of swine flu, I guess.
Pigs on the wing
The "P-Note" investors - the sub-set of foreign institutional investors (FIIs) who have caused havoc in the Indian stock markets on the way up in the year 2006 and 2007 - and on the way down in the year 2008.
And, no, "P" is not an abbreviation for "pig". J
These flows (Table 1 above) represent the total net foreign money entering the stock market. On average, the foreign money flows are 4x those of the money flows from the domestic mutual funds.
However, we don’t know what percentage of this foreign money flow belongs to "P-Notes".
The P-Notes are a strange animal in the Indian capital markets.
As an Indian, if you want to buy shares, the government wants to know everything about you.
But if you are a P-Note holder, heck no one wants to know who you are!
Foreign investors who have a long term interest in investing in India - and by "long term" I mean a minimum 5 year time horizon (if not twenty and thirty year time horizon) - have not yet come into the Indian stock markets in a big way.
Can your paanwallah vouch for you?
Imagine an airline crew in Shanghai airport vouching that the passengers are not affected by swine flu - and signing the form on their behalf. The Chinese would take the crew out of the plane and shoot them or send them to the hinterland.
In India, we worship these unknown pools of capital - and shoot ourselves in the foot.
Finance Ministers of this country have, time and again, made trips to Tokyo, Hong Kong, Singapore, London and New York to pay homage to these great hedge fund and P-Note owners.
Rather than being suspicious of short-term money, India welcomes it. We don’t seem to understand that we need pension fund money to build India’s economy over the long term.
Our Indian ministers have probably never visited many of the pension funds. They generally don’t sit in exciting cities. And the brokers don’t really want those pension fund folks investing in India. Because they buy shares and hold them for 5 years or more, the brokerage commissions will collapse and the brokers will be out of jobs.
As was yesterday, so will be tomorrow
When questions are asked about P-Notes, the treatment is similar to that of the ambulance incident with the SARS affected patients.
Our intellectuals mislead us and get caught in their own web.
After the election of the Congress-led coalition, many commentators and representatives of the intellectual community came on TV and said, "We hope this new government will allow higher foreign equity ownership in insurance companies".
Why? Pray, why?
Because, they said solemnly, India needs long term capital to sustain its development.
I was laughing - and crying.
It is true that India needs long term capital.
If Axa owns 51% of the Indian joint venture - it only means that Axa will now get 51% of the profits of the joint venture. It has zero - yes, zero - impact on how much extra premium Bharti-Axa can collect from its Indian clients.
See how they have spread a lie with their constant TV chatter?
And then - this same set of people - go about saying that banning P-Notes is a bad idea.
On the one hand, they say India must have long term capital and yet - with a very straight face - they want the Indian stock markets to be reliant on short term capital via unknown pools of P-Notes.
Having seen the Indian election results, the P-Note owners are now ready to head back to India to ride the gravy train - and add their own flavour to it by sloshing around playfully with their gambling money.
P-Notes need to be banned.
Dr Reddy was out of the RBI in September 2008.
We are back to the future, and looking at an ugly past
Maybe, but what difference does it make if speculators in their greed did not discover that Unitech can trade at Rs 550?
Speculation and price discovery is not an end in itself.
And, yes, India should not change its foreign ownership limits of insurance companies - at least not with the false argument that it will help generate more long term pools of capital. Call a spade a spade and say that India should allow Axa to enjoy the fruits of its joint venture with Bharti.
But, in India, we will continue debating and discussing and throwing intellectually stimulating arguments to explain why what we did in the years 2006 and 2007 was not wrong - and therefore there is no need to learn from the past.
Because the "past mistake" was not a "mistake", it was just an event in time that occurred and had to do what it had to do.
I stand by what I said in October 2008 - and reiterated again after May 15th - one can make a case for the BSE-30 Index to head back to a new peak of 21,000 by June 2010.
A better economy, better company results - and higher FII flows are all positives for the market.
But if P-Notes are a part of that rise - god help us. Because some event in the US will frighten the owners of short-term capital and then we will see how pigs can flap their wings.
Swine flu or swine flew - I don’t know which one is more frightening.