Greece's NO

The  NO voters of Greece sure are very happy at the the result of the referendum voting held Sunday.. The result showed a clear victory for the present Govt. which has been favouring a NO vote which , on the face of it, authorises Greek Prime Minister Mr Tsipras to continue to take a hard stand on Greek's creditors. This in practical terms means not meeting it's debt obligations.

Is that going to be easy ?  Far from it. People on the other side also have their reasons to be hard.  After all, for how long  can others keep bailing out Greece. There are many other countries also which are likely candidates for debt default sooner or later. Will those countries be bailed out as and when situation comes. From where are the funds going to to come from. Is printing money going to be a panacea for all financial ills. And why should prosperous countries fund lesser ones and promote inefficiency.  What if the IMF or the ECB stop lending any further. Same goes for Germany and France what if the also stop lending.. These are few questions whose answers will be keenly awaited. Its no brainer what the fate of Greece will be. I can't imagine how Greeks are going to survive without any money. Cyprus has shown the world what scenarios play out in such situations.

It will be interesting to see how Greek leadership manages to keep the country afloat.

But there is more to it than just wriggling out financial deals.with creditors. The economic quagmire that Greece is in is just the tip of the iceberg. At he moment there are indications of a repeat of a global financial crisis. Right now world's second largest stock market, Chinese stock market has crashed by more than 20%. resulting in wiping out something like $3 trillion of paper wealth. Can the Worlds largest stock market i.e. US continue to go up.  But what is worrying is that efforts are being made to prop up the stock market. Which means it is not in a position to recover from the fall in the normal way. Crude also has corrected severely, Similar is the situation for commodities.  

On the domestic front, nothing much has changed for the better. Corporate earnings continue to remain  void of any impulse.as had been expected a year earlier. Further any adverse global event is bound to have its share of impact on our markets.

It is time to start cashing out of equities gradually.

More in my next

Happy investing

Basudev

                                             
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10000 point cheer for the good days

Indian market's benchmark index Nifty 50 reached another  milestone today. It reached 9000. Thirty share sensex is also close by trying to scale 30000. Around mid september 2013 the indices took a decisive turn in reposing faith in the markets with  Mr Narendra Modi as the Prime Minister. Prior to that there was a phase of de-growth  lasting about 4 years mainly due to inflation playing havoc and rising  interest rates.

From then the sensex has risen by 10000 points from 19600 around mid september 2013 till date.. In percentage terms that is 51% over a period of around 1 1/2 years. For a market which had been eroding investors wealth such improvement has helped shore up their finances and even allowed them to profit.

Where from here.

 By now and after the recent budget presentation, it is becoming clear that the present government is serious about walking the talk. Things are beginning  to take place on the ground. Govt has embraced digital technology . This will bring in much needed transparencey. It will help  introducing procedures to plug leakages, monitoring  results etc. Various auctions through e-tendering have already been seen and direct transfer of benefits  into bank accounts are already taking place.

Govt has given emphasis on industrial production particularly in defence sector and has invited the world to invest in India. For that it has given a call for improvement in "ease of doing buisiness" i.e. cutting on red tape and procedural delays. This can have a huge impact considering that India is a huge importer of defence equipment and any savings on import will be immensely beneficial to the counrty's finances as also generating employment..

Govt has made enhanced allocation for infra spend. Toilet for all will also see spending hitherto unknown.

On the taxation front reduction in corporate tax by 5% has been promised over a period.  Corpotates profitability will shore up which has been severely hurt during the past few years due to high interest costs. Personal income tax will also follow suit as it is expected that it will not remain higher that corporate tax. This will put extra money in peoples hands which in turn fuels consumption.

So far corporate earnings  have not justified the rise in the market. The rally has been fuelled by foreign inflows on the back of vastly improved sentiment and global liquidity. Corporate earnings  will have to do a catch up.

Getting Indian Companies on the world stage is going to be a tall order, what with high fund costs. No wonder inspite of  having a sound ability to manufacture, we import a great deal from China. Pharma industry is one example. We have good number of pharma companies which have been globally successful but have miserable dependence on China for many essential drugs. We will also have to work a great deal to formulate labour policy acceptable to foreign investors. Such invigorated labour policy will benefit Indian industrialists also.

A begining has been made at least. We will have to wait and see. Till then there is going to be a consolidation at this level untill there is a clearer picture of earnings pick up.

Global events, as usual, will be important. Flight of capital will be equally fast and merciless. Investors should therefore remain careful. Those who are not invested should wait for corrections to enter the markets as equities will be the best asset class in the coming years. They should therefore build a portfolio gradually Those who are invested should not be tempted and should review after another 150-200 poits on the Nifty.

Until my next, Happy investing

Basudev  .