Right time to invest in BANKS!!

With Moody degrading Indian banks and S & P upgrading credit risk portfolio of Indian banks by one notch, lot of investors do suspect what is COOKING! Ofcourse Sept qtr FY12 results of banking behemoth SBI were extraordinary both in terms of profitability and higher provisions for Non Performing Assets. But if you check out, YES BANK had Net NPAs around 0.25% of its assets. Around 30% of it's income was fixed - fee basis , so that rules out the possibility of interest rate exposure. With 22% ROE and >20% growth rate over successive years, Yes Bank surely demands higher valuation than the present P/E of 10. Normally, P/B is the parameter to judge valuation of banks. It's book value has consistently increased by over 20% YoY, so that indicates where the price should go. Latest move of offering 7% interest to CASA account holders will only strengthen the roots to take advantage of high interest rate lending scenario. Net Interest margin is close to 2.8% which may increase following halt by RBI in increasing repo rates.
In the present scenario; capital goods, metals and realty sector really doesn't look like worth investing. But given the shallow valuations and decrease in EPS already factored in the current prices, not much downfall is expected. Over the next quarter, rate sensitivity will maximise its effect and then begin to subside. RBI's sole purpose to control inflation was to not compromise with India's GDP growth. Given the sorry state midcap and even some large caps find themselves in, interest expenses must decline.
In the Indian equity market, defensive sector like FMCG can't hold on for too long. It's already trading at a P/E multiple of more than 30, which defies logic. I don't see even big FMCG companies increasing EPS by more than 20% in a year timeframe. Increasing competition in the industry may just as well lead to some consolidation moves. White label consumer goods and private behemoths are readying up to take on the likes of HUL, ITC. Decreasing food inflation may just force them to increase the quantity in their packaged eatables.
Lots of brouhaha over rising NPAs have seen PSU banks going down like a knife! But the worst is over as claimed by SBI (3.5% Net NPA) and seems similar for UCO Bank (~3% NPA). UCO has plans for increasing it's CASA ratio to 35% from present 23%. That will help in increasing NIMs. Allahabad Bank has been consistent in it's growth over the past quarters with comparatively lesser NPAs(~0.7% of Net Advances). Speculations are rife on sectors to which banks are lending major chunk of funds. Power sector - which is unable to recover the costs is the main culprit followed by Capital Goods - battling decreasing growth in order books due to recessionary feeling.
All this is bound to change once Inflation subsides. Compared to 2011, this year's demand is on the lower side. See it by jobs at MBA colleges, results expectations of evergreen sector like IT or expansion plans of biggies like Reliance, L & T - you will realize the mood quite well. So see lesser hikes this year, lower spending and yes inflation at 5-6%. Then watch banks reach the pinnacle.

Aaj...Yun hi

Aaj yun hi...is zehen me uthi ek baat..

ek chanchal sa ehsaas..kuch gehre, bhule bisre alfaaz..

kya zindagi se yahi chaha tha maine..kya khud se yahi manga tha maine??

in sawalon me jujhna nahi chahta main...in dayron me simatna nahi chahta main...

par inke saath chali aati hui un yaadon ka bhanwar...kuch thode se nam, thode manoram..

un kaagazon ke purzon me na jane kitne sapne range the meri syaahi ne...waqt ne jaise unhe mitaane ki saazish si chali ho...

sangeet ke un chhe chhandon ko apni dhuno se sawaanra tha maine..mere nishan abhi bhi hain unme...meri goonjen abhi bhi samayi hai unme..

kya maine khud ke iraadon se kiya hai chhal...kya maine khud ki koshishon ka kiya hai aatmghat..

na chahte hue bhi fansta sa chala raha hun in sawaalon me...jinke jawabon se bachata aa rha tha khud ko..

sach se ru ba ru hone hi ghadi phir chal padi hai..phir ghanseet rahi hai mujhe in sawaalon se duur..

phir kuch der ke liye ye dhundle saayon ki tarah kho jayenge kahin...kabhi aur aisi tanhaaiyon me meri ruuh to sateyenge..

The DRAMA of CRISIS!!

If the first crisis was not enough, in came the second one. But this was not a fresh one, in fact the ‘beginning of the end’ courtesy Mr. Jhunjhunwala of first crisis. The bailouts, the easings are showing their side effects. It looked similar to a disease which was not strived to be cured, in fact it looked like the doctor kept the patient comfortably on respirator till his condition worsened.

Quantitative Easing – the word draws attention but it’s simply fusion of fresh money into the US market by selling government bonds. QE1 and QE2 tried to elongate the sluggish economy on respirator. Heart rate showed improvement for a while and people rejoiced that the disease is over. As long as the patient’s treatment(US economy) was funded by the wily zamindar(China), patient hoped for a recovery.

But the deteriorating mechanism was not helped by the employed population. The very factor that make US happening – extraordinary care of it’s citizens has instilled an idea into it’s working class. An idea that we are privileged to be here, we are not going to compete with people from emerging economies. We do best whatever we do. This attitude justifies the numero uno position US has been precariously holding onto somehow. But the writing is clear on the wall. They may not be able to sustain it. They should not for the benefit of THE WORLD. Whenever US is in trouble, it seems the world is about to end. Such centralization points to the feeling that we all are subjects of a single patriarch.

Going back to the patient analogy, he is showing no urgency in exercising his moving parts. High unemployment rate suggest that US has hardly been vigilant about it’s own intra-structure. Why US citizens are not preferred for jobs ? What extra they demand as compared to their peers? Why Indians and Chinese are hired by US companies ? If the patient is happy by borrowing help from more active patients then God knows how long he’ll live. Interestingly, this situation arises when people are staring down at the end of their life.

As I write this, QE3 will be ready for launch. It will be interesting to see how long this will go on. For sure, US government debt will increase beyond limitations. Credit rating may come down to A+. More mayhem is possible at the Wall Street and emerging markets. FIIs, the overseas investors are credited with driving the Indian Stock exchange. Its during these crisis, they ‘astoundingly’ decide to withdraw funds from India to save their face in their origins. We all agree that there is a lot of cushion for growth in India. Had Indian investors been intelligent enough to park their funds in equity, these situations would have been avoided to some extent. But the saving habits have denied that decoupling. Saving is understood by many as the money lying idle in CASA bank accounts. Of course, that’s true. Then you ask yourself if you need that fund in near future. The answer is – NO, I don’t think so. So what am I getting with this money ? A 4% annualized return!!! HAPPY ??? If you believe that you will earn more in future, then believe that the companies will do better. There is SCOPE in India for growth in MULTIPLES. Who will drive that ? COMPANIES…GOOD COMPANIES. How to identify them ? See past numbers…Profit Margin, Sales Growth, ROE. Should I become it’s shareholder ? Analyze the industry sector, EPS, see if it’s undervalued (P/E). Buy CHEAP, sell EXPENSIVE – a basic principle taught in NURSERY. Read management discussion in annual reports to get an idea about it’s future plans.

In fact, investment in equities (for sufficient time period, diversified portfolio) is saving in stricter sense which also gives higher average returns. But the drama of a collapse, the panic created especially to trigger downward run has prevented many to show the courage to invest when the bear is in motion. It’s only when the bear stops and FIIs come over again, the Indian investor feels comfortable to enter.

This attitude demands change, if we expect to be self-sufficient in any time horizon. These external forces can’t be dismissed, but their powers can be tamed if we understand the market. Speculation or intra day traders are also the culprit when it comes to misleading genuine investors. Relying purely on the technical analysis is not recommended for people who aim to ‘SAVE’ money through investment in equity.

ANNA and BEYOND!!

As this 'Lokpal Bill' movement continues, I have a feeling that it will fail. My experience comes from previous protests I have participated in. There were similar issues we were fighting against. But those at the helm of affairs exercised great restraint in catering to any demands. All they came up was 'GLOBAL' gyaan session. I am sure Prime Minister is doing the same in his speech at IIM Calcutta.

Actually this movement was necessary to test the intolerance of 'WE, THE PEOPLE' against corruption. The idea of Lokpal doesn't seem feasible to me as it forms a parallel body to CVC and may lead to confusion of authority. I believe it tries to prevent corruption, not cure it. There is a big question mark over the selection of right individuals under Lokpal ambit. Whenever there are people involved, corruption sneaks through. Like Mahatma Gandhi led the movement with his team, hoping that they will take care of India; Anna is doing the same. But there is no guarantee that the functioning will be as desired in long term.

Further, if there are so many 'honest' people in India; there is a better solution which will work for atleast 5 years. Let TEAM ANNA form a political party and run it 'corrupt-free'. As far as funding for functioning and mobilization is concerned, we are there to help them. If we can follow them in Ramlila ground, we can surely give financial assistance in hope of an end to corruption. I am sure if SOUL is left in INDIA, they will win many seats in next Lok Sabha elections. They will get many intelligent fellows for support; who will devise high tech ways for promotion. Things will work out in the right direction.

Eradication of CORRUPTION is a long term exercise. First we have to move ahead of those people who are involved in corruption and holds comfortable position either as ministers or beaureaucrats. It will be foolish to think that PARLIAMENT will pass a law which threatens to jail majority of it's members. It will not be passed. Even if it will be, there will be sufficient loopholes. Result - a BIG ZERO after all these protests.

So the bottomline is - this movement should give birth to a political party with a mission to give India a 'CORRUPT FREE' environment.

Enchanting Glorious Uncertainties

India may have won the first T20 world cup... they might had come close to lifting the ICC World cup in 2003.. but still the form i always liked more to watch was the longer version.. which they call a "real test". In the earlier days of my upbringing , there was no cable connection in the house.. so i used to watch the highlight packages or video snippets in news. Although i was too young when tendulkar sizzled in perth, i recall hearing the heroics of sourav ganguly in first 2 tests. Finally, the first series which i watched live was Ind-SA Test series in 1996. Alas! that was the complete blunder for the team India. I still recalled india bundling out for 100 and 66... and first time i saw the helplessness of indians on a bouncing deck.


Later in the ganguly era, some respect was restored, but still we were not able to dictat the terms on foreign soil , moreover so in south africa which remained a bogey-land for team india. So this team when the team crossed the pacific ocean, everyone was nervous, how would they perform, can they justify there no 1 tag, which is challenged brashly by their counterparts. They almost do a dis-service to their fans when surrendering meekly in centurion. Although little master added yet another milestone to his already glorified CV.. still it was a rout, to say the least.


Boxing day, as the next day after christmas is referred to, generally marks the last test of the calendar year. This time there were 2 tests. One where Australia was finding their gears to stage a comeback in Ashes.. and another in kigsmead durban , where south africa is going gaga over the plantation they have made on the playing surface.


But this indian team is known for turnarounds. Earlier they win the first match to lose the advantage in further outings. This team knows to bounce back , and to their believers they have done the impossibles this year. In SL, VVS Laxman played an incredible knock to secure a drawn series when the chips were down.. and then in mohali, he even surpassed his legend. If my heart needs the check-up for its cardiac health that match has certainly provided it. I remember being glued to the TV set. Every run scored by VVS was like gold-dust. Again the kid was back in me. Again i was shouting,yelling and dancing as if the on-field players are looking at me.


As the story goes, my mom used to told me that while watching a Ind-NZ test match in my younger days (mind you those matches started at 3 AM).. i used to shout a lot.. doubting my neighbors of a burglary in my house. And that day my mom told me that i was almost repeating my performance of the younger days.


So why this all now.. because once again my favorite format is back, once again batters are facing music.. once again bowlers looks like tanks on mission.. once again VVS showed why he is dreaded in opposition dressing room, and once again i am shouting, screaming , praying, dancing. I forgot i am 25 years old.. i forgot my examinations are going on.. its test cricket at its best baby... you better remember it.


P.S. Keiron Pollards and Dwayne Bravos of world may get unbelievable auctions in IPL, VVS is priceless, damn you lalit modi.. you put a knight among the pawns of T-20 circus.