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Commentary

The Last Week in India: Sep 5-9 2011

I write at Yahoo about the previous week in Indian Business, in a commentary piece designed to entertain as much as inform:

The week of September 5 to 9 has been a week of high expectations but very disappointing delivery, much like everything else in the country, with the honorary exception of Delhi rains. People in Delhi overloaded web sites with mobile-phone photos of water and cars and trains, jammed till kingdom come, while people in Mumbai wondered what the outrage was about. Let us ignore this and turn to the world of business, markets and economy.

Headed by the suave Montek Singh Ahluwalia, the Planning Commission suggested that India build a $10 billion sovereign wealth fund, to invest in energy and mining assets abroad. Perhaps the thinking is that after the mismanagement of energy and mining assets in India, our government has mastered the art enough to mismanage such assets abroad as well.

On Tuesday,  a horrific blast in the Delhi High Court at the peak hour of 10 AM, killed 13, and injured many more while an outraged nation watched condemnation, excuse and promises from the government. Parliament shut itself down for the whole day in response, while the high court, the very place the blast had occurred, resumed work after two hours.

In stock news, Reliance Communications received an order of 1,400 cr. from HDFC Bank for building a data center, prompting people all over the country to consider moving to a different bank, just in case they get disconnected while making an important transaction.

Inflation is now sick of rearing it’s ugly head and has decided to play loud, distracting music instead, to keep telling us that we need to please shut up and listen.  The week saw primary articles inflation go back up to 13.34% after recent lows of 11%, with the “food” part of the inflation still at 9.55% despite what the Met department concedes is a normal monsoon. With no excuses left, the government is considering blaming foreign forces for our inflation.

India’s exports grew 44% while imports were up 41% in August. Considering the rest of the world is going to hell in a hand basket, it’s not very clear who is buying what we make but the US and Japan do phone in quite frequently to request for some of our inflation.

Auto sales numbers seem to have hit a speed bump in what SIAM revealed was a 5.87% lower growth for passenger vehicles over August 2010. Commercial vehicles grew at 17% while exports went up 36%, which could mean that we are more keen on selling our cars abroad and driving trucks locally; the state of our roads completes that logic.

Cement makers were pulled up by the MCA and the Competition Commission for rigging prices and creating artificial supply shortages as a cartel. This is the only explanation why, after careful experiments involving hammers and nails, you will find that apartments have walls plastered with sawdust.

The Comptroller and Auditor General (CAG) produced a report to Parliament that Reliance Industries was inflating costs on the KG-D6 gas field and not adhering to the production sharing agreement. Reliance thinks it’s just gas.

International: This was “big talk” week as everyone who was anyone was making a speech. Ben Bernanke spoke on Thursday, and after careful analysis it was revealed that he had said nothing of importance,  so the US stock market immediately tanked. For this year, it’s Down Jones.

US President Obama spoke later, and promised $450 billion in a plan that includes cutting payroll taxes, increased school funding, higher unemployment insurance allocations and mortgage relief. This is likely to be a good plan if a) the members of Congress stop slinging mud on anything proposed and b) most of the jobs thus created are not in India or China.

Greece, as usual, appeared unusually distressed (or is that “distressed as usual”?). Their 2 year bonds quote at a steep 57%, which is now close to the levels that Indian colleges call “first class”. Their one year bond is at 98%, where an IIT degree is more or less guaranteed.

In Europe, the top German official at the European Central Bank (ECB) resigned , stating disagreements with the bond-buying program of the bank, which German voters have recently been concerned about. The fate of the Euro is at stake, and US stocks fell another 3% in protest.

Markets

The week was a mixed bag, with a net move of just 0.4% on the index.While the index has recovered from recent lows, the price looks weak, with a near 20% drop from the highs. The 5,000 number of the Nifty seems critical as is the 17,000 number on the Sensex (which is at 16,867).

The Last Week in India: Sep 5-9 2011

Looking at sectors, the biggest high this week was metals, and the biggest gainer was Auto. While midcaps staged a comeback, the recovery has not been enough to inspire confidence.

The Last Week in India: Sep 5-9 2011

Volumes on the markets were higher, as an average, for September:

The Last Week in India: Sep 5-9 2011

Alongside, FIIs and DIIs have shown a strong affinity for one of Newton’s New Laws of physics: Every FII action has an equal and opposite DII reaction

The Last Week in India: Sep 5-9 2011

Stock Action

Everonn Education fell 36% in the week after a promoter was arrested on a charge of bribery and tax evasion.

GTL rose 40% to Rs. 70 in the week after news that lenders had approved debt restructuring deals. With more than 12,000 crores in debt between it and the GTL Infrastructure subsidiary, it’s unlikely that the restructuring will yield wonders, but then, the stock has fallen from the Rs. 400 levels, so the rise is just a whimper of a recovery.

The owner of Casino Royale in Goa, Delta Corporation, was up 19% in the week, as global players see Goa as a gaming destination and appear to want a stake. The stock, though, is extremely volatile and has big names behind it, each of whose opinion drives the stock up and down imaginary walls.

Exide Industries fell 7% on either the fact that passenger car sales are slowing, or that they are cutting prices, or both. No one really knows, but everyone pretends to, so we’ll just leave the field open.

What About Next Week?

In the buildup to RBI’s mid-quarter policy review, we will see monthly inflation figures for August released on Wednesday. RBI’s review meeting itself is next Friday. Industry wants RBI to stop raising rates, after the last hike of 50 bps. Much of that depends on what the August inflation figures turn out to be. Interest rates are not matters to be taken lightly, as the difference between 8% and 8.5% can turn media commentators crying blue murder on TV and the internet for months to come.

We have recently seen the arrest of various key personalities in various unrelated scams, from the Reddy brothers in Karnataka, to Amar Singh for buying votes, to various bigwigs of industry like Sanjay Chandra of Unitech and Shahid Balwa of DB Realty. Every week sees a new set of scams, and it’s very likely we’ll see yet another one.

Next week is also a week for advance taxes- on Sep 15. Much will be made of companies that paid higher or lower taxes in advance, a figure that is often quoted in the news and used to determine market investments.

Internationally, more developments in Europe and the US, specifically on the global slowdown, will continue to cause concern locally. These will introduce some volatility in the markets, and with increasing volume it’s likely to go much further away from current levels.