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Subject: One Key Takeaway from the Modi-fied India Story
Date: January 25, 2016 at 11:18PM
5min Responsive Mailer Not able to view this mailer properly? See here: Desktop | Mobile One Key Takeaway from the Modi-fied India Story Mon, 25 Jan 2016 In this issue: » Has India's Pied Piper Lost His Mojo? » Indian stock markets shed initial gains » ...and more! Mondays tend be a bit slow for me after a relaxed weekend. But today is different. My mind is bubbling with ideas and inspiration. If you attended the Equitymaster Conference on Saturday, I'm sure you can relate. By the way, if you missed the big event, here is your chance to get online access to the video recordings of the Equitymaster Conference 2016. We all have questions about the state of the global and domestic economy... What's really happening out there? Where is the Sensex headed? Has the Modi magic disappeared? How should one go about investing in the context of changing economic dynamics? Well, these are the very questions some of the most respected experts in the industry tried to answer on Saturday at the Taj Mahal Palace Hotel in Mumbai. I was inspired. I could fill pages with all the ideas and insights that occurred to at the conference. But today, I want to focus on my one key takeaway from the Equitymaster Conference 2016. And it comes from Ajit Dayal's (Founder, Equitymaster) keynote address. Narendra Modi has become synonymous with the India story over the past couple years. So it makes sense to evaluate the Indian economy and stock markets in that context. Then, in September 2013, the BJP announced that Narendra Modi would be their candidate for prime minister in the 2014 Lok Sabha election. Mr Market was enthralled by the idea of Modi as PM...and the end of the lame duck UPA-II government. By the end of October 2013, the Sensex was above 21k. As the general elections drew closer, and the Modi magic story gained popularity, the markets inched higher and higher. Then, as we all know, the BJP had a historic win in May 2014, and Narendra Modi was anointed India's Prime Minister. Here are some market statistics after the Modi victory... 24 May 2014: The Sensex stood at 24,693, and oil prices were still above the century mark at US$ 104 per barrel. But the Modi magic wand strengthened the rupee to Rs 58.4 per US dollar. A year later, on 23 May 2015, the Sensex was close to 28,000, and the rupee had weakened to Rs 63.5 per US dollar. But oil prices had crashed more than 40% since Modi became PM. Has India's Pied Piper Lost His Mojo? The markets set high expectations from the Modi-led BJP government. Expectations of big bang reforms...'minimum government and maximum governance'...a friendlier business environment...accelerated GDP growth. But what really happened? The economic growth rate is nowhere close to the anticipated 8%+ growth rates (as per the old data series). Capital expenditure is sluggish at 1.7% of GDP, meaning government investments have yet to pick up pace. Passage of many key reform bills are in a state of limbo. And the markets are reacting accordingly. Of course, there have been lots of big plans...lots of slogans...Make in India, Clean India, Digital India, Skill India, Start-up India, among others. The globetrotting PM has visited 28 countries, aggressively selling the India growth story to the world. And we give full marks to him for that: He has certainly tried to lure foreign investment into the country. But whether you are marketing soaps or a country, you need to have a solid product in place. So, while Modi has done a great job of selling the India growth story to a global audience, the reality on the ground back home leaves a lot to be desired. The government may take all the credit and say that the Indian economy is in a much better shape now than before it came to power. But there is an important piece of information missing there. And here is the key takeaway: It is not because of Modi, but because of the crash of commodity prices, particularly crude oil. As a big importer of crude oil and gold, lower commodity prices have been a big boon to India. The credit for lower interest rates and the improving current account and fiscal deficit is due to the oil price crash. Of course, we are not writing off the Modi government just yet. We are still hopeful that the big plans and reforms do materialise and revive the India growth story. But as investors, we need make sure our expectations are in line with reality. Stay focused on facts and on-the-ground economic realities. Don't fall for media propaganda. Have you modified your expectations for the India growth story? Let us know your comments or share your views in the Equitymaster Club. Advertisement Modi 2016: An Agenda For Revival The landslide victory of 2014 handed Modi more than just a clear mandate...It handed him immense responsibility of a nation dreaming of great progress.From the euphoria of Achche Din the mood in India has swung to cautious disappointment and now we are in 2016...Who will answer the question how Modi can turn this ship around and get India back on track?Vivek Kaul has the answer and he has put it all down, along with his deepest thoughts on the challenges India faces, in our latest special report titled - Modi 2016 - An Agenda For Revival.And the best part is that he wants to give you this special report for free!So, don't delay...Click here to download this special report right away! After opening the day on a firm note, the Indian stock markets have shed most of their initial gains and are trading marginally above the previous closing level. At the time of writing, the BSE-Sensex was trading higher by about 58 points (0.24%), while the NSE-Nifty is trading higher by about 18 points (0.25). Most sectoral indices are trading on a positive note with metal and consumer durables leading the gains. However, auto and capital goods indices were trading in the red. The S&P BSE Midcap and S&P BSE Smallcap indices are trading higher by about 0.22% and 0.99% respectively. Today's Investing mantra "Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant." - Warren Buffett Editor's note: There will be no issue of The 5 Minute Wrapup on 26 January 2016 on account of Republic Day. Comments on this edition of The 5 Minute WrapUp: Post a comment | Read comments This edition of The 5 Minute WrapUp is authored by Ankit Shah (Research Analyst). The Premium edition is authored by Radhika Pandit (Research Analyst) Today's Premium Edition. The Impact of China on India's Tyre Industry Indian tyre industry wants higher duties imposed on cheap radials dumped by China into the country. Get Instant Access to this and all future editions of The 5 Minute Premium. Click here for details... Recent Articles How to Move Beyond Good Companies and Spot the Great January 22, 2016 This is one parameter that will help you separate the best companies from the good ones. How to Win Your Fight against the Stock Market January 21, 2016 There are certain strategies investors can use to be successful in the stock market. We lay them out for you... Where Is the Sensex Headed Next? January 20, 2016 Is predicting the next Sensex level relevant? Are We in a Bear Market? January 19, 2016 Have Indian stocks already entered a bear market in 2016? DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 INTRODUCTION: Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537. BUSINESS ACTIVITY: An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes. DISCIPLINARY HISTORY: There are no outstanding litigations against the Company, it subsidiaries and its Directors. GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT: For the terms and conditions for research reports click here. DETAILS OF ASSOCIATES: Details of Associates are available here. DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST: 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report. DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION: Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report. GENERAL DISCLOSURES: The Research Analyst has not served as an officer, director or employee of the subject company. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company. Definitions of Terms Used: Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service. Feedback: If you have any feedback or query or wish to report a matter, please do not hesitate to write to us. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Use of the information herein is at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any recommendation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an "As Is" basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services. Please read our detailed Share Trading Guidelines here. You're receiving this email at RH@ignition.bz. If you have any questions about your subscription, or would like to change your email settings, please contact Equitymaster at +91 22 61434055, Mon-Fri 10.00 AM to 6.00 PM (IST) and Sat 10.00 AM to 3.00 PM (IST). If you wish to contact us, please click here. To unsubscribe from The 5 Minute WrapUp, click here. If you would like to report any mail delivery problems, click here. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537. Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. | Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
Subject: One Key Takeaway from the Modi-fied India Story
Date: January 25, 2016 at 11:18PM
5min Responsive Mailer Not able to view this mailer properly? See here: Desktop | Mobile One Key Takeaway from the Modi-fied India Story Mon, 25 Jan 2016 In this issue: » Has India's Pied Piper Lost His Mojo? » Indian stock markets shed initial gains » ...and more! Mondays tend be a bit slow for me after a relaxed weekend. But today is different. My mind is bubbling with ideas and inspiration. If you attended the Equitymaster Conference on Saturday, I'm sure you can relate. By the way, if you missed the big event, here is your chance to get online access to the video recordings of the Equitymaster Conference 2016. We all have questions about the state of the global and domestic economy... What's really happening out there? Where is the Sensex headed? Has the Modi magic disappeared? How should one go about investing in the context of changing economic dynamics? Well, these are the very questions some of the most respected experts in the industry tried to answer on Saturday at the Taj Mahal Palace Hotel in Mumbai. I was inspired. I could fill pages with all the ideas and insights that occurred to at the conference. But today, I want to focus on my one key takeaway from the Equitymaster Conference 2016. And it comes from Ajit Dayal's (Founder, Equitymaster) keynote address. Narendra Modi has become synonymous with the India story over the past couple years. So it makes sense to evaluate the Indian economy and stock markets in that context. Then, in September 2013, the BJP announced that Narendra Modi would be their candidate for prime minister in the 2014 Lok Sabha election. Mr Market was enthralled by the idea of Modi as PM...and the end of the lame duck UPA-II government. By the end of October 2013, the Sensex was above 21k. As the general elections drew closer, and the Modi magic story gained popularity, the markets inched higher and higher. Then, as we all know, the BJP had a historic win in May 2014, and Narendra Modi was anointed India's Prime Minister. Here are some market statistics after the Modi victory... 24 May 2014: The Sensex stood at 24,693, and oil prices were still above the century mark at US$ 104 per barrel. But the Modi magic wand strengthened the rupee to Rs 58.4 per US dollar. A year later, on 23 May 2015, the Sensex was close to 28,000, and the rupee had weakened to Rs 63.5 per US dollar. But oil prices had crashed more than 40% since Modi became PM. Has India's Pied Piper Lost His Mojo? The markets set high expectations from the Modi-led BJP government. Expectations of big bang reforms...'minimum government and maximum governance'...a friendlier business environment...accelerated GDP growth. But what really happened? The economic growth rate is nowhere close to the anticipated 8%+ growth rates (as per the old data series). Capital expenditure is sluggish at 1.7% of GDP, meaning government investments have yet to pick up pace. Passage of many key reform bills are in a state of limbo. And the markets are reacting accordingly. Of course, there have been lots of big plans...lots of slogans...Make in India, Clean India, Digital India, Skill India, Start-up India, among others. The globetrotting PM has visited 28 countries, aggressively selling the India growth story to the world. And we give full marks to him for that: He has certainly tried to lure foreign investment into the country. But whether you are marketing soaps or a country, you need to have a solid product in place. So, while Modi has done a great job of selling the India growth story to a global audience, the reality on the ground back home leaves a lot to be desired. The government may take all the credit and say that the Indian economy is in a much better shape now than before it came to power. But there is an important piece of information missing there. And here is the key takeaway: It is not because of Modi, but because of the crash of commodity prices, particularly crude oil. As a big importer of crude oil and gold, lower commodity prices have been a big boon to India. The credit for lower interest rates and the improving current account and fiscal deficit is due to the oil price crash. Of course, we are not writing off the Modi government just yet. We are still hopeful that the big plans and reforms do materialise and revive the India growth story. But as investors, we need make sure our expectations are in line with reality. Stay focused on facts and on-the-ground economic realities. Don't fall for media propaganda. Have you modified your expectations for the India growth story? Let us know your comments or share your views in the Equitymaster Club. Advertisement Modi 2016: An Agenda For Revival The landslide victory of 2014 handed Modi more than just a clear mandate...It handed him immense responsibility of a nation dreaming of great progress.From the euphoria of Achche Din the mood in India has swung to cautious disappointment and now we are in 2016...Who will answer the question how Modi can turn this ship around and get India back on track?Vivek Kaul has the answer and he has put it all down, along with his deepest thoughts on the challenges India faces, in our latest special report titled - Modi 2016 - An Agenda For Revival.And the best part is that he wants to give you this special report for free!So, don't delay...Click here to download this special report right away! After opening the day on a firm note, the Indian stock markets have shed most of their initial gains and are trading marginally above the previous closing level. At the time of writing, the BSE-Sensex was trading higher by about 58 points (0.24%), while the NSE-Nifty is trading higher by about 18 points (0.25). Most sectoral indices are trading on a positive note with metal and consumer durables leading the gains. However, auto and capital goods indices were trading in the red. The S&P BSE Midcap and S&P BSE Smallcap indices are trading higher by about 0.22% and 0.99% respectively. Today's Investing mantra "Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant." - Warren Buffett Editor's note: There will be no issue of The 5 Minute Wrapup on 26 January 2016 on account of Republic Day. Comments on this edition of The 5 Minute WrapUp: Post a comment | Read comments This edition of The 5 Minute WrapUp is authored by Ankit Shah (Research Analyst). The Premium edition is authored by Radhika Pandit (Research Analyst) Today's Premium Edition. The Impact of China on India's Tyre Industry Indian tyre industry wants higher duties imposed on cheap radials dumped by China into the country. Get Instant Access to this and all future editions of The 5 Minute Premium. Click here for details... Recent Articles How to Move Beyond Good Companies and Spot the Great January 22, 2016 This is one parameter that will help you separate the best companies from the good ones. How to Win Your Fight against the Stock Market January 21, 2016 There are certain strategies investors can use to be successful in the stock market. We lay them out for you... Where Is the Sensex Headed Next? January 20, 2016 Is predicting the next Sensex level relevant? Are We in a Bear Market? January 19, 2016 Have Indian stocks already entered a bear market in 2016? DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 INTRODUCTION: Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537. BUSINESS ACTIVITY: An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes. DISCIPLINARY HISTORY: There are no outstanding litigations against the Company, it subsidiaries and its Directors. GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT: For the terms and conditions for research reports click here. DETAILS OF ASSOCIATES: Details of Associates are available here. DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST: 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report. DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION: Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report. GENERAL DISCLOSURES: The Research Analyst has not served as an officer, director or employee of the subject company. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company. Definitions of Terms Used: Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service. Feedback: If you have any feedback or query or wish to report a matter, please do not hesitate to write to us. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Use of the information herein is at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any recommendation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an "As Is" basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services. Please read our detailed Share Trading Guidelines here. You're receiving this email at RH@ignition.bz. If you have any questions about your subscription, or would like to change your email settings, please contact Equitymaster at +91 22 61434055, Mon-Fri 10.00 AM to 6.00 PM (IST) and Sat 10.00 AM to 3.00 PM (IST). If you wish to contact us, please click here. To unsubscribe from The 5 Minute WrapUp, click here. If you would like to report any mail delivery problems, click here. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537. Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. | Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
