5% GDP is enough to get rid of this mess

"I believe that India is better placed than any of the leading economies of the world to recover from the mess that the world economy has got into because of a very simple reason. We are primarily a domestic economy focused nation. Our fundamentals are good. Our productivity is improving. Our major power is our in house growth; India is a country which is now dependent on its domestic growth rather than the downfall of Dow Jones. I agree that still we fall like anything when Dow closes in negative but I am sure that days are ahead when we will move in opposite direction, just we have to wait for the next first half of newt year means at the end of H1 we may see a strong pullback in Indian economy.

Let’s have some look at the below data:
Year GDP Rank
2004 8.3% 16
2005 6.2% 43
2006 8.4% 24
2007 9.2% 23

It recorded a GDP growth rate of 9.1% for the fiscal year 2007–2008 which makes it the second fastest big emerging economy, after China, in the world at this rate of sustained growth many economists forecasted that India would, over the coming decades, have a more pronounced economic effect on the world stage. Despite this phenomenal rate of growth, India's large population has an estimated per capita income of $4,659, measured by PPP, and $2,978, measured in nominal terms, as of 2007.

Now every finance pundit is forecasting India’s GDP growth for this fiscal year. Someone is saying that it will sustain 7%, somebody saying other things. Day after Day they are changing their maths to calculate, this actually creates panic over short term. Lets forget all things and assume that we will grow by 5% over this year (Here I am also downgrading India’s growth), But open your eyes and see what is happening in other countries, USA, EUROPE are fighting with sustain in even in positive growth. When everyone growth is dipping in negative rates then if India could maintain even 5% growth then imagine where India will be among its peers. India is going to prove the king in world in regards to economy growth this year. And if that happens I feel in heaven assuming the amount of in flows from across the world. Recently we have witnessed all new 24 FIIs from Mauritius; I think they have predicted that India is going to be the Ace in coming years.

All the large economies of the world, US, Europe, Japan seem to be in greater economic distress than the emerging markets. India and China are mentioned most often as possibly helping the world out.

My concern is only that we should not panic like everyone; if you have a long term goal then this is the right time to hunt for value picks. In my opinion if anyone is having 2 lakhs he can make fortunes now, but he may have to wait for two years.
I am dreaming of a big bull rally after we come out of this mess. Most of the stocks are available at attractive valuations.

Good time to invest in equities: Vallabh Bhanshali

Vallabh Bhanshali, Chairman of Enam Securities, sees no serious selling and feels this is a good time to invest in equities. He feels that the volatility in the market is reducing and that has prevented investors from buying. He said that concerted global monetary and fiscal action was a positive cue. He added that costs and working capital have fallen drastically and that was another positive cue for the market. He believes prices have become very attractive from a long-term perspective.

Bhanshali said that the company was very confident about investor-fear giving way to evaluation and added that he has not changed his long-term fundamental view about strong companies.

Bhanshali feels that short-term investors would continue to be cautious.

Bhanshali fears that projects stuck half way are going to suffer but said that planned projects would do well. He added that big companies would find it easier to tap capital in the next few months. He feels companies are confident about managing their bottomline due to falling costs.

Here is a verbatim transcript of the exclusive interview with Vallabh Bhanshali on CNBC-TV18. Also watch the accompanying video.

Q: What was the mood like today? Did companies sound cautious and circumspect after the kind of numbers which have been tumbling out these last few weeks?

A: Actually the companies that were present today were very confident. Investors had an open mind. The fear is starting to give way to evaluation. The companies seem to look at the world in a very micro way. the long-term view has not changed at all and they seemed all set on going ahead with their expansion and being well-funded.

Q: What did you hear from the investors? Has the mood stabilised somewhat because last three-month everybody has been completely frozen with the kind of price action that’s been on the screen – has that given way to some kind of rational thought where people are looking at individual valuations and they are even considering putting some money back to work or that stage hasn’t arrived yet?

A: Investors were conscious that volatility is coming down. There was an unprecedented volatility over the last five-six weeks which would prevent the best of people to do anything at all. So with this lower volatility, a lot of confidence is coming back relative to what we had seen earlier. Monetary and fiscal action has begun action and is just not stopping. China has kicked off a big programme and others are expected to follow.

A lot of good news that came in the last few weeks has not been noticed but is now being noticed by the intelligent investors. The cost and working capital both have come down dramatically as material prices, whether petrochemical, chemical or metal, are down 50% to 75% and in some cases as much as 90% and this is very good news for consumers and for companies. There is so much that has to get adjusted in this quarter that people will see price to start normalizing in next quarter onwards generally speaking.

Q: Just on that subject of investor climate right now, are people willing to go out and make capital commitments to this market, or do you think they are going to wait and watch a while and perhaps as you indicated money flows can only be expected starting next year?

A: We are seeing long-only funds starting to get committed. They are choosing their companies carefully and they are starting to invest in it. I think this process from the longs point of view has already begun.

People who have a shorter-term outlook or no steady pool of capital to back them, will probably be more cautious. But the longs and the pensions and people like them are definitely starting to buy, and we can see it all around in several stocks.

Q: There was a tremendous global response today to what happened in China. Is that the shape and form you think policy action will begin to take now and can that be replicated in India in any form?

A: I think so. One has to see the quantum of it. We also have an election year ahead. Each country has its own set of issues. But generally speaking the Brics and the countries in Asia will probably pass the stimulus programme of this kind.

I also think the officers committee, which has been appointed by the Prime Minister, will come up with recommendations like that. Unofficially we hear that a lot of ideas are being talked about quite seriously already.

Q: You meet a lot of different kinds of investors at such conferences. Do you get the sense that most of the forced deleveraging or the redemption led pressures have begun easing somewhat or are they expected to continue for another 3-6 months?

A: I met lots of investors who said that they had no serious redemption pressure at all. We had insurance companies and others also. The theme was pretty hopeful that the worst is over in terms of investor sentiment and particularly in only equity schemes. Various schemes have balanced schemes and other criterias may be different. This is not the time to exit equities; if at all it's time to enter that.

Q: What about availability and access to capital, what did you hear from companies about how worried they are about accessing capital to grow next year and your own sense of whether this will be a big constraint for growth or things will start improving in FY09?

A: A couple of things will happen. Those who are stuck up halfway in their projects and had not finished raising equity capital will be in for some difficulty. But those who were announcing programmes that were going to start only a year or two years down the line may be looking at growth plans themselves and therefore may not be concerned.

Then there are companies that are able to calibrate their existing cash for the projects on hand. For example, one of the companies said that they expect the capex programme to benefit by 20% because of whatever has happened. They said that all the building blocks have gone down and 50-60% of every project is fabrication and those fabrication costs will benefit tremendously from what is happening in the world. So, you are going to see one category of companies getting affected. Others will do all right.

Q: Aside from capital rising, how concerned are these companies about maintaining the revenue growth cycle they have got growing until now because in the previous few quarters the hiccup actually showed up on the bottom line and now the fear is that sales growth might slow down quite considerably?

A: Yes; most companies feel terrible about the current quarter but they think that the imperative for growth will not be as much as it was last year. When costs are going up the only hiding place is growth. But as costs are coming down even if the topline isn’t growing they still will be able to manage bottomlines, so that’s an interesting insight we picked up. As far as sales growth is concerned, it’s something that we will have to wait for a few quarters and begin the journey again on that path.

Q: How are you characterizing on what we are seeing in the market right now, is this just a big bear market relief rally or is it more than that, what do you think?

A: Prices have become very attractive from the long term point of view. No serious selling can take place now and there is serious buying opportunity now. You can buy as much as you want in a calibrated manner but such large buying opportunity will start receding in a couple of months time.

Profit Booking suggested at every rise in Nifty/Sensex- For Short Term Traders

RBI surprised everyone by throwing in rate cuts SLR by 1%, CRR by 1% and Repo Rate by 0.5% over the weekend.

Inflation numbers are now improving on a weekly basis from at11.07% to 10.68%. One should not be surprised to see a single digit inflation numbers within November itself. Thanks to the cooling off of the various commodities and the crude prices.
Ealrier, last week FED reduced its interest rates from 1.5% to 1%. Indian Stock Market gave a big Thumbs Up to all the positive news across the globe of rate cuts and inflation control in India.
Q2 September results are showing weakness and are being declared with a cautious future guidance. Goverment has accepted the fact that the growth will be slow and earlier projections of 9% GDP growth are just dreams now. Pink slips could be issued all across the industries is being predicted by the Assocham. However, goverment has now gagged the Assocham :-)
After a long time we have finished a week positively (substancially). Nifty closed @ 2885 gaining 301 points or 11.67% and Sensex closed @ 9788 gaining 1087 points or 12.49%. Remember last week was only 3 day trading session and an hour of Muharat Trading on the auspicious occassion of Deepawali. FII's were still the net sellers worth 2085 Cr and Mutual Funds House ended up buying 1145 Cr.

Crude Oil is now around $65 per barrel.

US $ to Rs is now around 49.30

So is the worst in the Indian Stock Market over and have we bottomed out?

No this is just an interim rally for the excessive selling that has happened in the deadly month of October. Due to RBI steps, one can see another 5-10% rally from here. But there is no way that the market has bottomed out. I believe that there is still more pain left in the Indian share market.