Modi's Invisible Brooms - The Honest Truth By Ajit Dayal
Investing in India - Honest Truth by Ajit Dayal
Modi's Invisible Brooms A  A  A
21 OCTOBER 2014

Prime Minster Modi is at it again.

After humiliating the archaic, disoriented, lost-in-space, fill-my-pockets, and arrogant Congress Party in the recent Lok Sabha polls by proving that an ordinary chaiwalla's Chai pe Charcha is far superior to high-flying speeches from the wine-and-cheese brigade, Prime Minister Modi quickly outclassed the Nehru tag-along mafia with his immaculately styled khadi colour combinations.

After having proved that chai is superior to scotch and woven khadi superior to the dirty white political attire made infamous by a generation of selfish politicians, Prime Minister Modi has now converted the lowly broom as the new social yardstick for India's super elite. From sportsman to actors, from businessmen to those who own sportsmen, from politicians to those who own politicians, everyone is sporting a broom. Rumour has it that Cartier and Swarovski are planning a "Broom-Line" collection of diamond and platinum jewellery for the wives of the ultra-rich to wear when they rush for their photo-op "I am clean" contribution to the Swachh Bharat revolution.

While I am not privy to the details of the Broomstick Revolution, it seems to be a simple, 4-step, sign-on process which would make a social media site envious:

Step 1: All brooms have to be of equal size, shape, and colour. No discrimination will be tolerated.
Step 2: There has to be a social media avenue to flag the "brooming" exercise.
Step 3: With every stroke of the broom, the smile must widen.
Step 4: The Sign-On page must be clearly filled in with a commitment for the next "brooming" session.

Learn from me, my brothers!

While we are all aware of the very visible Broom Revolution, there are a few invisible brooms that the Prime Minister is using with great deft and way below the radar of the lap-dog media.

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In addition to the cleaning up of India, Prime Minister Modi has put his RSS into a quandary. His clean brush strokes have paved the way for a M. F. Hussain to walk barefoot on the streets of India again. Maybe Prime Minister Modi will condemn the passing on of the cultural wildman in Dubai in exile - banished by his own country for interpreting the Hindu deities as only a free-spirited Hussain could. (By the way, I am not a fan of his acclaimed works.)

Prime Minister Modi's neat broom strokes also proves to the RSS that a 5 a.m. dress-up in badly tailored shorts to pledge their loyalty to Hindutva is hardly inspirational for the aspirational young. By sticking to a fasting schedule during a recent visit to the White House and setting the pace for a World Yoga Day, Modi has got more tweets and twits on his side than the RSS could ever imagine.

He has even changed the definition of good Chinese food. For long, Indians - tired of suffering from the side-effects of MSG in their food - sternly warn every waiter in a Chinese restaurant "No MSG". Now, the Indians want MSG in everything because that is the new abbreviated buzz word for Madison Square Garden, the venue which had 16,000 non-resident Indians (and 41 Members of the US legislative fraternity) surrender their hearts and souls to the Magic of Modi.

And - talking about Imagining India - some of the new "I am ModiFied" followers wear clothes (if you can call them that) which would leave little to the imagination. So, while members of the BJP-ruled Goa cabinet and power clique are fretting about bikinis on the beach and women visiting bars, Modi is able to mix the vodka-shots-at-night crowd with vegetarian food and Yoga as easily as he was able to sweep the Congress into a deep dark cliff. This Man has it all. A GQ cover story is in the offing.

Clean up, clean up!

But there is the Ultimate Invisible Broom which Modi does not speak about and which is sending a chill down the chiefs of corporate India. Many wonder whether the Man They Helped Win with Big Media Dollars is trying to help them - or plotting to wipe them out. As these business barons - or members of their family - stand with broom in hand and wait to be appointed as Head Cleaner of District Baramati, they have a sense of deep unease in them. Their fear is similar to the fear felt by many honest bureaucrats who tried to fight the twisted ways of these barons to win favours and money: no bureaucrat knew when the axe would fall and transfer orders would be placed on their desks.

On May 16th - the day of the incredible Modi victory - the stock market took a step up to acknowledge the landslide win and the arrival of Modi on the national stage. Shares of many companies surged much more than that of the Index (which gained +1.1%). However, from the closing level of the market on May 16th, 2015 till September 30th, 2015 the Ultimate Invisible Broom seems to be taking its toll. Share price movements are not what many people expected them to be on May 16th. They are wildly different. There is a strange pattern of "winners" and "losers" in a period when the market has gained +10.6%. Is the market trying to tell us something? (See Table 1)

Table: 1: Cleaning up expectations?
Is the market changing its tune and telling us which groups
may NOT benefit from a Modi government?
NSE Price (Rs) on May 16th, 2014 NSE Price (Rs) on September
30, 2014, change from May 16thclosing
CNX Nifty 7,203.00  (+1.1%) 7,964.80  (+10.6%)
M. Ambani Group
Rel. Indus. Infras 452.80  (+3.1%) 498.55  (+10.1%)
Reliance 1,079.25  (+2.5%) 945.70  (-12.4%)
Anil Ambani Group
Reliance Capital 454.10   (+10.6%) 455.35  (+0.3%)
Rel. Infra 626.25   (+6.9%) 585.45   (-6.5%)
Reliance Comm 129.10  (+4.5%) 99.00  (-23.3%)
Reliance Power 78.25  (+4.1%) 70.30  (-10.2%)
Adani Group
Adani Enterprises 529.70  (+5.8%) 470.70  (-11.1%)
Adani Ports 225.00  (+2.1%) 277.55  (+23.4%)
Adani Power 55.60  (+1.2%) 43.40  (-21.9%)
Sesa Sterlite 214.95  (+11.0%) 272.50  (+26.8%)
DLF 169.70  (+6.1%) 150.85  (-11.1%)
ICICI Bank 1,465.30  (+5.0%) 1,433.55  (-2.2%)
Pantaloon Retail 130.60  (+4.4%) 128.90  (-1.3%)
Suzlon Energy 14.60  (+1.4%) 12.90  (-11.6%)
Dancing to a different tune?
Bajaj Auto 1,931.7   (-1.0%) 2,351.60  (+21.7%)
HDFC Ltd 885.8  (-1.9%) 1,055.25   (+19.1%)
Infosys 3,177.6   (-2.9%) 3,747.75  (+17.9%)
Source: Bloomberg

Well, looks like India may be cleaned up in more ways than one: and about time!

Yes, Doc, I like Modi for his subtle, almost invisible, brush strokes.

But I need some comfort on the fact that you can drink whatever you want, when you want, with whom you want, with whoever you want.

Whether your drink is water (that's what I drink - to set the record straight), a chai, or vodka.

But I don't wish for you to confuse my warming up to Mr. Modi with my cooling off with Mr Market.

The ever-hopeful stock markets are waiting for another Modi magical broom: the long-awaited sweeping reforms. So far, this is invisible.

So far the stock market is being held up by events in international arena:
  1. Oil prices are down 20% from their peak. That helps India's import bill and cost of production for industry - and even allows us to free diesel prices. Will the government stay with the policy if oil was to surge by 20%? That will be a true test.

  2. Gold prices have been soft helping the Indian import bill and keeping the trade account deficit in check.

  3. Commodity prices are low and all our peer economies that compete for global capital have been badly affected. Brazil, China, Russia, and South Africa are all hurting and India is the only economy within the BRICS group that benefits from declining commodity prices.

  4. Foreign flows into Indian debt and Indian equity have been over USD 31 billion this year - a record. Still the INR is 7% away from its all-time low of August 2013. What if there is a global hiccup? Will the RBI's reserves shelter India from the storm? For how long?
If Prime Minister Modi can deliver an India with a 6.5% rate of growth in GDP with less corruption and more growth by small and mid-size firms, that will be far superior than a 8% rate of growth in GDP where a few biggies get bigger.

As of now, the stock market is waiting for some Modi Magic. And if there is no Sweeping Reform Broom, get ready for a weeping stock market!

Meanwhile, I wish all of you a very Happy Diwali and may the light of goodness always shine on your family and you.

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.

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2 Responses to "Modi's Invisible Brooms"

Ralph Rau

Nov 8, 2014

"Modi will condemn the passing on of MF Hussain in Dubai in exile?"

This particular write up has some glaring factual errors and poorly drafted English

Hussain acquired Qatari and not UAE nationality. What are we trying to say here in plain English ? Should Modi comdemn the passing away or passsing on or just condemn the bigotry of the nationalist right-wingers ?

"to sweep the Congress into a deep dark cliff." Did the writer actual mean to say swepp Congress into the deep dark abyss ?



Oct 21, 2014

your honesty and truth has atleast started calling him prime minister modi. your ever critical attitude on this common man turned saviour should recognize that much of the beta in ur quantum funds r because of him than ur stock picking abilities.
as the saying goes , people like u know the price of everything , but a trillion people of this nation have found value in someone

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