A home-grown scale for measuring fundamentals, technicals and valuations is helpful in analysing markets like India.


A P: The FTV framework

Business Standard

After a hectic three-week phase of protests, fasts and litigation, the contentious issues related to the Sardar Sarovar dam's height and rehabilitation aspects are back on square one. Six years ago,

Truce, for the moment

Australia's St George Bank is planning to transfer jobs to India. 


Australia's George Bank to outsource to India

Press Trust of India

Arcelor-Mittal was pushed under the spotlight in the last few weeks for the wrong reason, when 41 people died and hundreds were injured in a deadly methane explosion in its coal mine in Kazakhstan. In

The hazards of scale

In its first five years in office, the Manmohan Singh government of the United Progressive Alliance (UPA-I) gave the country an unprecedented run of an average annual growth rate of around 9.0 per cent. In its last year in office, the economy slowed to a GDP growth rate of less than 7.0 per cent owing to the trans-Atlantic financial crisis and the consequent global economic slowdown. After that the Indian economy has not been able to cross the 9.0 per cent threshold.

The new normal?

The Union ministries of commerce and health have set themselves an identical goal of putting in place a system whereby every package of medicine (bottle, blister, vial) can be monitored under a system of tracing and tracking, preferably using two dimensional (2D) bar-coding technology.

Kill substandard drugs

After conducting flawless elections in difficult terrains like West Bengal (against organised violence and booth capturing) and Tamil Nadu (against money power), the reputation of the Election Commission of India is sky-high &mdash; a reputation it had established earlier when voters in Bihar were able to ring in change despite the lawlessness there not so long ago.

Mr Quraishi's wisdom

Policy confusion has once again created uncertainty in cotton trade. Cotton prices have plunged by more than 30 per cent in the past couple of months and inventories of both cotton and cotton yarn have begun to pile up. Little wonder then that a section of the cotton ginning industry recently went on strike and spinning mills downed their shutters for a day in protest against the government&rsquo;s apathy towards their plea that cotton and cotton yarn exports be further liberalised. The entire quantity of 5.5 million bales of cotton that the government had allowed to be shipped abroad has been fully dispatched. Sizeable stocks of cotton are either lying unsold with farmers or awaiting processing at ginning units. The spinning industry has, for the time being, decided to cut down production by one-third to prevent yarn inventories from increasing any more.

Cottoning on to a problem

It appears there is some light at the end of a very long tunnel. Hopes have been revived at the World Trade Organisation (WTO) with Director-General Pascal Lamy coming forward with a new &ldquo;multi-speed&rdquo; offer that should enable the fast-trackers and the laggards to remain on board before a portmanteau deal is struck. No one seriously expects the US to sign up on any real hold-all deal till the next presidential elections are over and a new administration takes charge in the winter of 2012-13. Given India&rsquo;s commitment to multilateralism in trade and its stake in a successful outcome of the long-delayed Doha Development Round, India should accept the three-speed option of driving fast, slow or at medium speed to the final destination.

Doha lite offers light

The time has come for the rest of the world to let Europe know that its time is over as far as running the International Monetary Fund (IMF) is concerned. Several spurious arguments have been put forward in support of a European, indeed a French, successor to the disgraced former managing director Dominique Strauss-Kahn. First came the dubious argument that since Europe is now the IMF&rsquo;s biggest borrower and is passing through a difficult economic phase, the Fund should be led by a European! This nonsensical view was rejected outright. If Asians, Africans and Latin Americans could supplicate before European bosses to borrow money from the Fund, surely their roles can be reversed in the new world? Then came the argument, supported by even US Secretary of State Hillary Clinton, that since Mr Strauss-Kahn departed ingloriously after behaving badly with women, and since this seemed to be part of an IMF male tradition of harassing women, the next IMF chief should be a woman.

Try Tharman or Indrawati

Swami Agnivesh with his Swami Vivekananda-style turban, Anna Hazare with his Gandhi cap, Baba Ramdev with his yogi&rsquo;s beard...Who next? Time for a Maulvi? The voices from India&rsquo;s civil society are getting curiouser and curiouser. Time was when gurus and yogis like these worried about the after life, or about the environment and vegetarianism. But today they have come to the centre-stage of Indian politics. Is it a sign of the reduced credibility of elected politicians? Is it a sign of the increased power of religion and semi-religious platforms? Is it just that most people think that the more spiritually-oriented are likely to be less materialistic? There is no simple answer. The late Sathya Sai Baba advised prime ministers and chief ministers, lived a lifestyle that was larger than life, but offered solace to millions. Baba Ramdev advocates yoga, but flies in a private jet.

Swami, Anna and Baba

The decision of the Securities and Exchange Board of India (Sebi) to allow the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) to set up exchanges aimed at micro, small and medium enterprises (MSMEs) is laudable since an exchange aimed at the MSME sector can potentially circumvent an important constraint on MSME growth in India. The key criteria of the decision are: no need for a three-year track record to reduce entry barriers, half-yearly reporting to reduce reporting costs, a minimum lot size of Rs 1 lakh to limit individuals from undertaking risky trades, and a maximum issue size of Rs 25 crore to prevent larger firms from entering. Accessing risk capital with low reporting requirements and transaction costs will benefit MSMEs in many ways. The first is the obvious one of there being another source of funds. The second, perhaps more important, is that it will enable venture capitalists (VC) to have an exit option that was hitherto missing.

A medium for the small

When Vayalar Ravi, with his socialist credentials, was appointed minister for civil aviation, replacing the business-friendly businessman-politician Praful Patel, there was great hope that the troubled state-owned Air India would finally begin to implement a revival plan that had been in the works for some time. More so because the long-standing complaint of successive airline managements has been that there is too much political interference in managerial decisions pertaining to the airline. It was certainly the case before, what with Air India being dragged into debt on the back of huge and unsustainable aircraft purchases. But it would appear that the appointment of Mr Ravi has done little to improve Air India or get the turnaround plan off the ground.

No flight plan

Corporate results for the January-March quarter have been a disappointment, but there may be worse in store. For the 2,526 companies that have declared their results, quarterly sales were up a healthy 23 per cent, but net profits were up only 14.6 per cent, year-on-year. At a time of rising input costs, companies have either not been able to pass on the higher costs, or chosen not to do so in the interests of growing sales volume. The drop in profit growth is striking, when compared to the October-December quarter which saw profit growth of 24 per cent, and the quarter before that with 39 per cent. The squeeze on margins is evident, with operating profit margins and net profit margins shrinking by 44 basis points each, year-on-year. Indeed, the latest results have been made respectable by just five high-performance cases &mdash; Tata Steel, Sterlite Industries, Bajaj Auto, Bharat Heavy Electricals and NMDC.

Change of mood

However much you may criticise the government&rsquo;s actions in disrupting &ldquo;Baba&rdquo; Ramdev&rsquo;s meeting in the Capital, the controversial step should result in lowering the decibel level of the yoga guru&rsquo;s relentlessly noisy campaign, ostensibly aimed at attacking corruption. Mr Ramdev is stuck in remote Haridwar, the Uttar Pradesh government has refused to let him enter the state, and Congress-ruled Haryana is certain to do likewise if asked. Delhi, therefore, is out of reach, and the garrulous guru is all dressed up in women&rsquo;s clothes but has nowhere to go. However much the Bharatiya Janata Party may try to make capital out of the episode, through absurd comparisons with Jallianwala Bagh and the Emergency of 1975, the temperature in Delhi is likely to drop.

Confused and rudderless

The Securities and Exchange Board of India (Sebi) chairman, U K Sinha, has come out strongly against rules that restrict or disallow pension fund investment in equities. This has been a matter of personal faith for Mr Sinha from his days as the head of UTI asset management. Since he is now the capital market regulator, his views need closer examination. Now, as before, he is driven by a desire to see a less volatile and deeper equities market where domestic institutions counter-balance foreign institutional investors which enter and exit quite rapidly in times of uncertainty. He has pointed out that there is perhaps no other significant country in the world that has the kind of restrictions as exist in India on investment in equities by pension funds. His point is that if an investor herself wants her pension fund to get into equities, regulation should not stand in the way.

Hasten slowly

Given the unchecked proliferation of central agricultural development schemes (totalling more than 50), Krishi Bhawan&rsquo;s move to condense them into a few programmes, while leaving greater operational say to state governments, seems well-conceived. The Planning Commission has done well to readily agree to such a shift in approach from the 12th Plan, which starts next April. In fact, when Krishi Bhawan launched its flagship programme, the Rashtriya Krishi Vikas Yojana (National Agricultural Development Plan, or RKVY) in 2007, several schemes in operation then were merged into it. However, the multiplication of schemes is a seemingly unstoppable process, considering that every annual Budget moots new programmes to showcase the government&rsquo;s commitment to development. The current year&rsquo;s Budget, predictably, was no exception.

Consolidating the gains

The interesting discovery, if you trawl through the disclosures on their assets filed by politicians and now civil servants, is how little of their money is invested in the stock market &mdash; in stocks or in mutual funds. By far the most preferred investment turns out to be real estate. This, despite the innate problems of poor liquidity when you compare with stocks, the prevalence of unaccounted cash in most transactions, the chunkiness of each investment, and much higher transaction costs. What is true of people in public life would appear to be true of wealthy Indians as a whole. A study put out earlier this week said even the very richest Indians hold more of that wealth in the form of real estate than stocks. And the skew is likely to get worse, it would seem.

Not a retail market

India and Pakistan might be tracking different trajectories, from politics (democracy vs army rule, secularism vs theocracy) to economics (rapid growth vs mediocre growth), and from social trends to international postures (Security Council aspirant vs exporter of terrorism). Pakistan&rsquo;s GDP growth next year is slated to be only 4.2 per cent, about half India&rsquo;s; and inflation is expected to be much higher at 12 to 13 per cent. But beneath these obvious differences, there is a surprising similarity on the key issues. For instance, both countries had among the highest tariff levels in the world before both began their economic reform programmes at roughly the same time &mdash; launching tariff cuts, privatisation, fiscal correction and other familiar initiatives. Even Bangladesh had a contemporaneous switch in policy, and the adoption of similar economic reforms, sometimes with greater success than India.

Sub-continental verities

The national small savings system is no longer what it set out to be. It was meant to attract financial savings from those at the edge of the market economy and pass on the proceeds as loans to the central and state governments. The rural savings part of it was &ndash; and still is &ndash; in large part administered through the postal system, reaching people and places commercial banks do not. But bank nationalisation, branch expansion, rise of regional rural banks and importance of tax-incentivised savings like the Public Provident Fund Scheme and National Savings Certificates have reduced the role of both rural savings and the post office in the overall picture. What is more, with successive finance commissions addressing the resource needs of the states, they are no longer as dependent on loans from small savings as they used to be.

Who needs small savings?

The monsoon has set in relatively early this year. So have the seasonal diseases associated with it. Earlier, diseases caused by food contamination, such as cholera, typhoid, gastroenteritis and jaundice, used to afflict the masses during the rainy season. Drinking of unclean water and lack of general hygiene were the main causes. Now, many dreaded vector-borne diseases, some of which were unheard of until a few decades ago, have become a major threat. These include dengue, chikungunya, meningitis and viral fever, apart from malaria. Though their outbreaks are usually predictable and largely preventable as well, these recur with unfailing regularity year after year. Health authorities, regrettably, rarely wake up before people actually begin to die of these ailments. Even in the metro cities, where municipal authorities are supposed to be more watchful, hundreds suffer every year from these illnesses during the rainy months.

Monsoon woes

Incisive columns and editorial comment by top opinion leaders

Page 399 - Editorial Comment