Indian Economy: News and Discussion

[Haldiram]

What does baba Ramdev do? He writes 0% Cholesterol on all of his products.

Well, there is 0% cholesterol in shampoo, so he's not wrong

 

[IndianHawk]

Indian stock market expressed in dollar currency.

View attachment 37719


If an American fund had invested 100$ in Sensex in 2007, and remained invested for 12 years, his value today would be..100$.

It had crashed 10 years ago and never really recovered from the 2007 highs. The 90% appreciation in the Index from 2008 (19k sensex) to 2018 (39k sensex) was only a reflection of rupee devaluation from 39 to 75 (which is around 90%).

We have been in a decade long bear phase in real value terms.

Dollar is not the real value term or is it?

Indian economy has expanded by almost 2 trillion dollars since 2007 when it was just 1 trillion dollars.

Domestically anyone who invested in share market has profited over past 10 years.

Sensex was at 10k in 2009 after recession jolt and now is at 30k. For domestic investor who has no dollar expense this is tremendous profit.

Also rupee has gone down against dollar as have majority of currencies world wide but it has gone up against a lot of other currencies . Just looking at dollar terms is not accurate.

So your hypothesis is not accurate. An extra strong dollar is after the end of quantitative easing has been a problem but it can't last forever.

Govt is holding rupee back from bouncing against dollar by buying dollars to add to foreign reserve. Rupee will bounce back very soon as our current account deficit is under control now.



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[Haldiram]

Dollar is not the real value term or is it?

Use rolling returns to calculate returns from an asset class. Rolling returns for equity over 2 full decades have been similar or lower than rolling returns from Bonds (i.e non investors) in the same time frame. Rolling returns takes 12 months X 10 years = 120 data points and accounts for bottoms and peaks and everything in between. Don't make wishful calculations from a bottom to a peak. Either calculate from bottom to another bottom or from a peak to another peak. That shows the returns for that duration. In this case, a peak to peak calculation shows 0% movement since 2007 in dollar terms. WHY dollar terms? << scroll to the last paragraph.

Still to humor your best-case scenario of someone who bought lumpsum at the bottom in 2008 and sold at the peak at 2018, all the other assets (and lifestyle costs) outside of equity have inflated proportionately, so it has affected Indians who have no USD exposure. For example the house which costed 30L in 2008 is now at 90L. The 3X that an investor would have made in equity is balanced out by proportionate increase in other asset prices. It's not a real gain in purchasing power terms. He is not in a position to buy 2 houses, or even to outbid a non-equity-investor (i.e a Bond fund/gold investor) for the same house. Everyone grew equally rich, and no one grew disproportionately richer than other asset class investors. If the market went 3X in a decade, from 10k to 30k, then gold in 2008 was around 11k, 2018 it was 33k.

No point comparing peaks from one asset class to the bottoms of the same asset class. It's like a person racing against himself. Compare the mean/or rolling returns from one asset class to the returns from people who invested in other asset class to see if you've outran them in real-world purchasing power terms.

Otherwise Equity investors will keep getting 9%, Bond investors will keep getting 9%, Gold investors will keep getting 9% and Real Estate investors will keep getting 9% and each of them will claim to have made super gains. This 9% cagr each asset class investor is touting is nothing but GDP+inflation for that decade.

If A grows 9%, B grows 9%, C grows 9%, then relative growth w.r.t each other is 0%.

If a stock investor liquidates his stocks, he can afford to buy the same house he was eyeing in 2008. If that house owner decides to sell his house, he can buy the same number of stocks he could have acquired in 2008. Both have run up parallel to each other, no one has run ahead of the other. All of them have "run up", only because the rupee has run down w.r.t a third party benchmark, i.e USD. It doesn't matter if the USD is not being used in India. It's only a stationary benchmark. A Dhruv-tara of sorts to benchmark other asset classes.

 

[Mikesingh]

Forex reserves at new life-time high of $430.57 billion

Imran Khan's reaction after seeing this...

 

[IndianHawk]

Use rolling returns to calculate returns from an asset class. Rolling returns for equity over 2 full decades have been similar or lower than rolling returns from Bonds (i.e non investors) in the same time frame. Rolling returns takes 12 months X 10 years = 120 data points and accounts for bottoms and peaks and everything in between. Don't make wishful calculations from a bottom to a peak. Either calculate from bottom to another bottom or from a peak to another peak. That shows the returns for that duration. In this case, a peak to peak calculation shows 0% movement since 2007 in dollar terms. WHY dollar terms? << scroll to the last paragraph.

Still to humor your best-case scenario of someone who bought lumpsum at the bottom in 2008 and sold at the peak at 2018, all the other assets (and lifestyle costs) outside of equity have inflated proportionately, so it has affected Indians who have no USD exposure. For example the house which costed 30L in 2008 is now at 90L. The 3X that an investor would have made in equity is balanced out by proportionate increase in other asset prices. It's not a real gain in purchasing power terms. He is not in a position to buy 2 houses, or even to outbid a non-equity-investor (i.e a Bond fund/gold investor) for the same house. Everyone grew equally rich, and no one grew disproportionately richer than other asset class investors. If the market went 3X in a decade, from 10k to 30k, then gold in 2008 was around 11k, 2018 it was 33k.

No point comparing peaks from one asset class to the bottoms of the same asset class. It's like a person racing against himself. Compare the mean/or rolling returns from one asset class to the returns from people who invested in other asset class to see if you've outran them in real-world purchasing power terms.

Otherwise Equity investors will keep getting 9%, Bond investors will keep getting 9%, Gold investors will keep getting 9% and Real Estate investors will keep getting 9% and each of them will claim to have made super gains. This 9% cagr each asset class investor is touting is nothing but GDP+inflation for that decade.

If A grows 9%, B grows 9%, C grows 9%, then relative growth w.r.t each other is 0%.

If a stock investor liquidates his stocks, he can afford to buy the same house he was eyeing in 2008. If that house owner decides to sell his house, he can buy the same number of stocks he could have acquired in 2008. Both have run up parallel to each other, no one has run ahead of the other. All of them have "run up", only because the rupee has run down w.r.t a third party benchmark, i.e USD. It doesn't matter if the USD is not being used in India. It's only a stationary benchmark. A Dhruv-tara of sorts to benchmark other asset classes.

Your thesis now is that market has not outgrown other asset classes. Fair enough.

Herein lies the paradox of developing economy. All assets classes are growing fast with an expanding population and ever faster economic expansion.

Still anybody who has surplus to invest in an asset class now has more money at disposal.

This money may provide similar return as any other asset classes ( gold and real state in your example)
or alternatively is used for consumption ex. Buying a car , buying electronic gadgets etc , monthly expenses etc. Now the return is visible .

It's only stagnant against other assest classes .
In other words markets has kept up with real state inflation and gold price jump( which is recent due to increased global uncertainty.)

How is this bad? People can chose an asset class to invest. When all assets classes are growing at the same rate . It's still growth.

Unless one has never planned to consume the investment and is looking at a perpetual cycle of assets to assests investment one is getting profit.

Real state prices are artificially high in india with black money and land legislation complexity.

Gold has only jumped recently because of clouds of Iran war and trade war related slowdown.

Market on other hand has been very consistent on growth since last recession.

So even though at this moment other assets class look as attractive as market in actuality they are far more volatile.


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[Haldiram]

Your thesis now is that market has not outgrown other asset classes. Fair enough.

Misreading on your part.

The market has not outgrown other asset classes AND it hasn't outgrown consumer inflation either. If 1L rupees could buy you certain things in 2008 (rent, food, electricity), then you need 3L to afford the same now. The Index will appear to have 3X in numerical terms, but in real purchasing power terms, the inflation in commodities have outpaced that growth. Net net, there is no gain in purchasing power terms, just a nullification of inflation by a whisker.

This money may provide similar return as any other asset classes ( gold and real state in your example)
or alternatively is used for consumption ex. Buying a car , buying electronic gadgets etc , monthly expenses etc. Now the return is visible .

It's only stagnant against other assest classes .

Consumer products are also getting costly at the same rate at which assets are getting inflated so the growth is stagnant even against consumer goods and monthly expenses :

Compare 2019's per unit electricity tariff rate with 2008's per unit light rate.

Everything is going up at 9-10%, including stocks, bonds, land, gold, price of consumer products, energy cost, food inflation, cost of living.

All asset classes are designed to grow at a similar rate on a long term basis. The society has a corrective mechanism where people spot newer opportunities in other asset classes on a perpetual basis and the money keeps flowing such that no single asset class remains an undisputed champion over a decade. This is called arbitrage.

First 5 years equity will rally, then the money will shift to bonds, then bonds will rally and equity will stagnate for the next 5 years. Net net, in that decade, a person who invested in equity and another person who invested in bonds will get the same CAGR on a decadal basis. On a longer term, the co-relation is even higher. Only on a shorter term it appears that one asset class is zooming. None of them are zooming, they are all barely tracking inflation +/- 1% over the long term. That 1% is our gain.

There is no superior asset class. The only ones making gains are ones who are doing asset allocation and shifting around their money by booking profits from one asset class and putting it in another asset. Even that is not an exact science. Sometimes timing goes wrong and one ends up underperforming even the Index.

 

[Haldiram]

If gold does well, people will book profits from equity and migrate there, causing a stagnation in equity. If bonds do well, people move there, causing a stagnation in other assets. This constant shifting in asset classes ensures that no single asset class zooms past other assets in any significant manner. Every asset class grows at 9-10% over long term and inflation also keeps pace*. That is why people play the arbitrage game otherwise if it were obvious that one asset class perpetually does better than the other, then everyone would be parked there for life.

There are people who invest in neither stocks, nor bonds, nor gold, nor land. They retain their money in fiat format in their banks. These are the ones who are becoming poorer by -9% yearly. If an investor (in any asset class) compares himself with a non-investor after a decade, this perceived difference makes it look like he has done well compared to a non-investor. Whereas, his investments have merely nullified inflation, not beaten it by a margin greater than 1-2%. (Multibaggers are a different story. Those are one-off outliers. Such events occur in land and precious metals too.)

Moral being : an investor will outpeform a non-investor, hands down, but he will not outperform inflation, or other asset classes, but merely manage to nullify inflation.

 

[Haldiram]

Nifty adjusted for inflation tells the same story as nifty adjusted for USD because the inflation (RBIs rate changes) correlate to US FED rates :

 

[afako]

Your thesis now is that market has not outgrown other asset classes. Fair enough.

Herein lies the paradox of developing economy. All assets classes are growing fast with an expanding population and ever faster economic expansion.

Still anybody who has surplus to invest in an asset class now has more money at disposal.

This money may provide similar return as any other asset classes ( gold and real state in your example)
or alternatively is used for consumption ex. Buying a car , buying electronic gadgets etc , monthly expenses etc. Now the return is visible .

It's only stagnant against other assest classes .
In other words markets has kept up with real state inflation and gold price jump( which is recent due to increased global uncertainty.)

How is this bad? People can chose an asset class to invest. When all assets classes are growing at the same rate . It's still growth.

Unless one has never planned to consume the investment and is looking at a perpetual cycle of assets to assests investment one is getting profit.

Real state prices are artificially high in india with black money and land legislation complexity.

Gold has only jumped recently because of clouds of Iran war and trade war related slowdown.

Market on other hand has been very consistent on growth since last recession.

So even though at this moment other assets class look as attractive as market in actuality they are far more volatile.


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Market is actual growth whereas gold and real estate have more speculation and other factors.

Choose your horse for the next decade.

 

[Haldiram]

Market is actual growth whereas gold and real estate have more speculation and other factors.

Choose your horse for the next decade.

Everything has speculation. Even stocks grow on the basis of future speculated growth.

This is the 40 year chart of Nifty, in inflation adjusted terms. It stagnates for goddamn 10 years before there is an eventual breakout. Every up and down in between that 10 year period is speculation of the breakout.

We have been rangebound since 2007's peak in inflation-adjusted terms. If it gives a breakout, Nifty will sharply rally to 17k in 24 months and create a new range for the next decade. It could happen in 2020, or 21, 22 no one knows. We are in a consolidation phase. @Bhadra ^ this chart is why it is recommended to stay invested through the ups and downs for at least 10 years. That's the average gap between big breakouts. Everything in the 10-year consolidation phase is just noise. It keeps doing 30%+ 30%- like a serpent for a decade before it flies off.

 

[Haldiram]

• Biscuit maker Parle could lay off 10,000 workers amid slowdown: Report
• Britannia chief had said last week "people are thinking twice even before buying a 5 rupee biscuit pack".

 

[fyodor]

It is my hunch that the talk we are hearing about "economy in doldrums", "economy crashing" etc is half just hot air and half real issues.

For ex:

• Britannia chief had said last week "people are thinking twice even before buying a 5 rupee biscuit pack".

Maybe they are not spending 5 Rs because the consumer is getting smarter? It can be because they desire better quality or they are increasingly health conscious of the pernicious effects of sugar.

India Inc has become intransigent. Most of them are set in the old ways of doing business but we have a great churning going on which they are failing to capitalize. In a country like India, with so much yet to be done, there are huge opportunities everywhere. They are totally impervious to those opportunities.

Not saying that Govt. of the lore and present has not done its part to bring the situation where it is now. But we have to see Govt and the big businesses as two sides of the same coin. The corporates are the mirror image of the Govt. They have used the same rotten system to become what they are now. But the system is taking its own toll on these corporates where they have started to reflect the same ossified thinking.

"If you stare into an abyss, the abyss stares back at you"
- Nietzche

 

[Haldiram]

It is my hunch that the talk we are hearing about "economy in doldrums", "economy crashing" etc is half just hot air and half real issues.

For ex:

• Britannia chief had said last week "people are thinking twice even before buying a 5 rupee biscuit pack".

Maybe they are not spending 5 Rs because the consumer is getting smarter? It can be because they desire better quality or they are increasingly health conscious of the pernicious effects of sugar.

India Inc has become intransigent. Most of them are set in the old ways of doing business but we have a great churning going on which they are failing to capitalize. In a country like India, with so much yet to be done, there are huge opportunities everywhere. They are totally impervious to those opportunities.

Not saying that Govt. of the lore and present has not done its part to bring the situation where it is now. But we have to see Govt and the big businesses as two sides of the same coin. The corporates are the mirror image of the Govt. They have used the same rotten system to become what they are now. But the system is taking its own toll on these corporates where they have started to reflect the same ossified thinking.

"If you stare into an abyss, the abyss stares back at you"
- Nietzche

7% is the base rate of growth of our society. We've grown at that rate even when there is an inefficient government, even during the 2008 recession and we'll grow at that rate even without a government. Anything above or below 7% gets ascribed to the government. The government took the risk of taking the blame for the slip when they introduced GST and bankrupcy law and went after defaulter NBFCs. I don't think they should be faulted for that. To that end, I think promoters sending out sighs every week could tone it down a little. These corrective measures were necessary for the nation, they are bound to cause some short term pain for a few quarters. The private companies have the luxury of firing people and cutting their own losses. The government doesn't have that luxury. They have to contend with riots and crime in the streets if the nation's balance sheet is not well managed in the long run.

All these surgeries should have been done in 2012 when the economy was smaller, but the Congress postponed it fearing public backlash and went for 'bandaid' solutions like MGNREGA. Anyway, better late than never. There was a parallel black economy running before GST, now GST invoices have made it hard to operate in cash. That part of the economy is seeing some pain. It will heal in a year.

 

[Haldiram]

Modi talking about @Indx TechStyle Bittu's favorite topic, wealth distribution.

 

[sorcerer]

India clocks M&A deals worth $9.8 billion in July: Grant Thornton


New Delhi: India recorded 110 merger and acquisition (M&A) deals worth 9.8 billion dollars in July, which is three times the deal values but 10 per cent short of deal volumes as compared to June, according to a report by Grant Thornton India LLP.

The tax and regulatory environment in India continues to be conducive for enhanced private equity (PE) deal activity, said the report. In particular, the liberalised external commercial borrowings framework widens the foreign source funding options for economically-distressed business units.

While telecom, start-up, energy and infra sectors attracted high-value deals from both strategic and financial investors, IT, pharma and banking sectors remained active pushing the deal volumes during the month.




Read more at: https://www.sify.com/finance/india-...nt-thornton-news-corporate-tiusMHihhfjcj.html

 

[arya]

Market may go down as few were talking ....

 

[Indx TechStyle]

Modi talking about @Indx TechStyle Bittu's favorite topic, wealth distribution.

1. He's emphasizing about wealth creation with "mentio" of wealth distribution.
2. I advocate for keeping people above a definite poverty line (which should be revised eventually) to maintain living standards. Not exactly commie style robinhood way of redistribution. This wealth for people at lower levels won't come at cost of higher levels.

 

[Suryavanshi]

1. He's emphasizing about wealth creation with "mentio" of wealth distribution.
2. I advocate for keeping people above a definite poverty line (which should be revised eventually) to maintain living standards. Not exactly commie style robinhood way of redistribution. This wealth for people at lower levels won't come at cost of higher levels.

Wealth Creation through job participation and business ecosystems promotion is what I desire the most.

Don't just give away money for free.
The money that is used to Relieve farmer loan is the biggest blunder policy that Indian government nurtured.
And yes I don't fully blame the farmer for this, Both Famer and government is responsible for this.
Some 60% of the population depends upon farming directly or indirectly. This is too much for a large nation like India.
Its not even like we are exporting large amount of food grains for profits. Its a sector that is only capable of meeting nutrition recruitment of the nation, in which we fail there too.
This is creating a farmer vote bank that must be catered to at all cost even at the cost of already burdened middle class taking all the load.
No more than 10% of the nations population should depend upon farming for their livelihood.
Government should create more service, manufacturing sector to shift more and more people away from farming.

I would have let the Businessmen keep their wealth but make it mandatory for them to invest back into the country to create more jobs and develope infrastructure.

Also people don't mind taxes as long as the money is being put to develope country. Seeing all the hard earned money go into the pockets of politicians discourages tax payers.

 

[Suryavanshi]

This right here is our problem.

That oliver region should be reduced and region above them be increased.

We have african nations a market of 1.5 billion people, Myanmar a nation woth 80 million population right next to us. Latin countries of some 150 million population amd south Asian market of 500 million people. There is still place for manufacturing and Service sector to grown.
But this is our last shot we can expect no more after this.
We can sell our cars, electronics, furnitures, machines over here.

 

[Haldiram]

I would have let the Businessmen keep their wealth but make it mandatory for them to invest back into the country to create more jobs and develope infrastructure.

They do this almost on autopilot. But they invest in automation and machinery and similar things which keeps the human involvement low. There was a period of 9% GDP growth between 2003 to 2007. ZERO jobs were created in this period.

Gormint wants that instead of hiring 1 highly skilled employee to run an automated factory and paying him 20L/pa, the business must keep doing things the stone age way and hire 5 people at 4L/pa. This is apparently to keep the burden of job creation off the gormint's back. That is why the businesses appear reluctant to spend but in reality they are happy to keep reinvesting the money (what will they do by keeping it in cash and letting inflation erode it anyway), but they want to reinvest in tangible assets. Employees are not seen as assets. They create unions and other troubles; They are hard to fire due to labor laws.