Friday, May 25, 2012






1.       NEWS :-Goldman Sachs, Merrill Linch and Morgan Stanley have downgraded their estimate of the growth (GDP) of India very sharply from 7+% to 6+%.Some of the reasons in the Economic Times Headlines story today are – (i) fiscal deficit, external imbalances, lack of reforms-the biggest concerns;(ii) Poor sentiment has hurt investments (iii)Fiscal Slippage, worsening Eurozone Crisis could lead to More Downgrades; (iv) Monetary Measures will not be of much help at this Juncture, supply side reforms needed (v)(v)Petrol Price reform is a good start

VIEWS :- God, give me the wisdom to do what I can; and forget what I cannot. The Government must have this vision very clear in its mindset. About Eurozone Crisis- India can do nothing about it, except insulating itself from its negative impact as best as it can. On Fiscal deficit – you can either cut allocations, or at the minimum, ensure productivity of a clearly, visible nature. At the moment, in many cases, it is partly a dole, and partly siphoned off. In other words, a risky scheme making agricultural labour very costly and fueling inflation and doing nothing else.

Monetary Measures are not enough, supply side Reforms are needed – Yes. Inflation cannot be tamed by RBI alone. Every time RBI announced a repo rate hike, this Blog consistently pointed out this, several times. The irony was- every time RBI announced repo rate hike, Government was busy fueling Inflation with some measure or other, instead of taking supportive measures. Supply side Reforms were CLOSE TO ZERO. We needed adequate, appropriate type of closed storage facilities for all types of agri commodities and products 50 years ago. But, Government was saying all through last 2 years that Walmart will build them, if it comes with FDI retail. It is farfetched. We must build them – for our self, in the way we need them, for next 50 years. It can be built on PPP basis. User builds them and Government also contributes a part. Both are entitled to use them. Government can permit the farmers also to use them. Or, a farmer’s co-operative contributes a part, and Government the rest. Many Models are possible. The will has to be there. The storage facilities can come up in less than a Year. Enhancing the area under cultivation – needs concerted measures on the part of central and state Governments. But, what we find is area under cultivation is shrinking. Agricultural science seems to be the concern of only Shri Swaminathan, the famous Agri Scientist and none else in the country. Where are any concerted efforts by Agri Universities and Labs to bring about another agri revolution? Where is Government resolve for it? Population is the only thing which is growing by leaps and bounds, and requires efforts to reduce – not just control – as it is already too, too much. No Political Party seems to have the resolve – to even talk about it. At the simplest level, imports of commodities under Inflationary pressures must be done quickly. Even that is not happening. On would wish, the Government discusses these aspects in seriousness and adopts the supply side reforms quickly, which alone can lead to LOWER INFLATION RATES.

But, all this is NO REASON at all, for RBI to keep to a HIGH INTEREST RATE REGIME – because GROWTH has  gone up for a toss already – for a washout – and the Global Banks are merely stating the obvious fact. India needs a drastic cut in Interest rates, which can fuel Growth rates immediately. RBI must leave Inflation control to the Government now; surely, RBI can urge them to undertake supply side reforms, but RBI must go ahead with MORE REPO / CRR RATE CUTS. Growth cannot be allowed to suffer at the stage at which India is.

Government must come out of its Policy and performance paralysis – now that everybody, including the Global Banks are talking about it. With stalwarts like Sri Manmohan Singh and Pranab Mukherjee at the helm, this should not be difficult. But, the leader must tell his colleagues – on what they must do. And, the colleagues, even if they are coalition partners, must be told to perform. Being Coalition partners does not make them independent of the Prime Minister’s authority. All Coalition Partners must understand this. Else, the Nation must become wary of the non-performing coalition Partners.

2.       PETROL PRICE HIKE -  A hike of Rs.7.5 is too steep for the public to bear. The Minister is,  as usual, expressed unwillingness to roll back. 

VIEWS : Hon’ble Minister must also tell us of the cost-cutting measures within the OMCs. When International prices go up, Petrol Price goes up in India. But, when International Prices go down, why are the Indian prices NOT GOING DOWN?  What are the prices in Pakistan, Bangladesh and Sri Lanka? Please do compare with retail prices in other countries and tell us, how this steep price hike is justified. Let us not compare with International crude prices alone. Let us compare with international retail Petrol prices. And, let us know, if  and why we are charging more than others.

3.       ITC RESULTS : In Q4,Net Sales has risen to Rs.6861.35 Cr ( Rs.5836.26 Cr)- up by 17.6%.Net Profits have risen to Rs.1614.36 Cr (Rs.1281.48 Cr)-up by 26%. For the full year NPT has grown to Rs.6162.37 cr-up23.6%;Net sales has grown to Rs.24798.43 cr-up 17.2%.Other than Hotel segment, all others recorded impressive Growth Rates. 

Views : Some Analysts feel cigarettes business will feel the pinch of higher taxes this year. Usually smokers in India feel the pinch for a week. I have no hope that Indian smokers will quit smoking – until they are on the verge of a Big Health problem. And, if cigarette manufacturers assure that their products pose no problems, or very less problems, they will merrily go ahead.  Therefore, it is business as usual. FMCG will grow from strength to strength. But Hotels will pick up if the UPA II gives a semblance of taking decisions and confidence of other countries returns. ITC is a good bet for medium/long term investors.

4.       KARUR VYSYA BANK : The Private Bank has performed well. Net profits amount to Rs.146.79 Cr (Rs.115.29 Cr) in Q4 ; and Rs.501.72 cr for FY2012(Rs.415.59 cr). EPS  for FY2012 stands at Rs.46.81 (Rs.44.90); % of net NPA is quite low at 0.33%.CRAR14.33%; ROA :1.56% Deposits and Advances have both grown impressively in the year. But, as in the case of many other Banks, Provisions has grown steeply to Rs.93.76 cr against Rs.39.31 Cr last year.

VIEWS :  Karur Vysya is also a good Bet for medium / long term Investors.

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