David Fuller and Eoin Treacy's Comment of the Day
Category - India

    The India Report by Deepak Lalwani

    My thanks to the author for his informative letter published by LALCAP.  Here is a brief sample:

    Despite the sharply slowing economy there are many success stories. One of them is unlisted company, Micromax. It has become India's No. 2 smart phone brand in just five years after selling its first handset. It started in business selling a cheap $ 30 made-in-China mobile phone. It is now on track to cross $ 1 bn in sales for the year to 31 March 2014. Micromax built up its business by selling basic and cheap handsets in a very price sensitive market among the masses. It was able to gain rapid market share by introducing a cheap model which could take two SIM cards. Hence, users could take advantage of bargains from competing mobile line providers. It has "moved up the ladder" by selling smart phones starting at just $50. This is almost half the price of a comparable Samsung. About 250 mn handsets are sold annually in India, about a fifth of which are smart phones. Among all types of mobile phones, Micromax ranks third after Nokia and Samsung. The company now wants to tap overseas markets like Russia and Romania.

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    The India Report by Deepak Lalwani

    My thanks to the author for his latest informative report, published by LALCAP.  Here is a section:

    The biggest win, however, was for the Aam Aadmi Party (AAP) which was born only a year ago out of an anti-corruption movement. It shocked both the main parties by winning a close second place in Delhi with 28 seats. This is not far behind BJP's win of 32 seats. The AAP is led by a mild-mannered former civil servant, Arvind Kejriwal. His aim is to end the grip of the two largest parties, Congress and BJP, on Indian politics. And, in the process clean up the rotten elements of Indian politics. Kejriwal was fighting the current Congress Chief Minister, Mrs Sheila Dixit, in her own constituency. He won more votes than Mrs Dixit and Congress combined. The challenge ahead for the AAP is to grow the movement nationally in time for national elections. Even though it has 309 committees across 22 out of 28 states in India this is a tall task. Kejriwal promises transparent political funding in a country where funding for parties often comes from dubious sources. And where parties have offered populist policies in the past to secure votes. One internal survey ahead of the Delhi elections found about a third of the party's supporters wanting Modi as Prime Minister. If the AAP, at national elections, is able to continue its current success, it may become an important voice in any coalition. With its strong anti-corruption stance, it would mark an interesting phase in Indian coalition politics.

    Could Modi, if elected Prime Minister at the general elections, be a "game changer" for the Indian economy and markets? Very possibly. In the short run, BJP's win is positive for the market. The SENSEX closed at another new all-time high today of 21, 327, and the Indian Rupee touched a four-month high. This marks an astonishing turnaround compared to June-August when India seemed trapped in its worst economic crisis since 1991. Foreign investors abandoned Indian markets. This led to steep falls in the stock markets and the Indian Rupee. So far in 2013 FIIs have invested $ 18.1 bn, the third highest ever in the 20 years they have been allowed to invest in Indian shares. Not bad, considering 2013's plethora of bad news.

     

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    The India Report by Deepak Lalwani

    My thanks to the author for this informative report for anyone interested in India.  It is posted in the Subscriber’s Area but here is a brief sample:

    Narendra Modi, 63, BJP's PM candidate has portrayed himself as a "man of the people", rising from humble roots. He wishes to appeal to masses, especially the crucial rural vote of 600+ million. His father was a tea vendor or "chai wallah". He is Chief Minister of Gujarat since 2001. He has promised quick reforms and an early end to policy paralysis that has contributed to the sharp economic slowdown. Modi is widely seen as a business-friendly reformer who has attracted major investments to Gujarat. And boosted economic growth along with badly needed jobs. Modi's political campaign focuses on Congress' failure to control inflation (especially high food prices which hurt the poor), the sharply decelerating economy which touched a decade-low last year, a lack of job creation and poor governance. He urges people to dream of a better future. However, nationally Modi remains a divisive figure tarnished by riots 11 years ago. He strenuously denies failing to stop the violence, and a Supreme Court inquiry found no evidence to prosecute him.

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    Sensex Record on BJP Election Wins as Investors Cheer Modi

    Here is the opening of this latest report from Bloomberg:

    India’s benchmark stock index will climb as much as 6 percent to a record by year-end if state election results this weekend confirm gains by the nation’s main opposition party, according to a Bloomberg survey.

    Victories by the Bharatiya Janata Party in four of five states that held elections over the past month, a prelude to national voting next year, would send the S&P BSE Sensex index to almost 22,200 from its closing level of 20,957.81 yesterday, according to the average of 10 estimates compiled by Bloomberg.

    An exit poll Dec. 4 signaled the BJP, which picked Narendra Modi as its choice for prime minister, will win four states.

    Modi’s home state of Gujarat has recorded annual economic growth of 10 percent, lured investments by companies from Ford Motor Co. to the Tata Group and raised power generation capacity more than fivefold since he became chief minister in 2001.

    India’s economy posted its slowest growth in a decade last year and suffered its worst power crisis in July 2012, eroding investor confidence in the leadership of Prime Minister Manmohan Singh’s Congress party.

    “Investors are extrapolating what Modi did in Gujarat, betting he will be able to replicate that at the national level,” Paras Bothra, vice president for equity research at Ashika Stock Broking Ltd., said in an interview yesterday.

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    BJP India Opposition Set to Win State Elections Before 2014 Vote -

    Here is the opening for this interesting report from Bloomberg

    India's main opposition party is set to win four of five state elections held over the past month, wresting power from the ruling Congress party in one area and giving it momentum ahead of national voting next year.

    The Bharatiya Janata Party, which picked Narendra Modi as its choice for prime minister, is set to retain two states, take power from Congress in another and win the most seats in the capital New Delhi, according to an exit poll yesterday conducted by C-Voter and broadcast on the Times Now television channel. Official vote counting in the states, home to about a sixth of India's 1.2 billion people, will take place on Dec. 8.

    "The exit poll results indicate there is strong anger against Congress for its failure to check price rises and corruption," said Satish Misra, a political analyst at the Observer Research Foundation, a policy group based in New Delhi. "It seems this trend will be reflected in the general elections, and the BJP will have some edge over Congress."

    The state elections are the final test for India's two major parties before a national vote that must be held by May 2014. Prime Minister Manmohan Singh's Congress-led coalition has seen corruption scandals, elevated consumer inflation and the weakest economic growth in a decade erode its popularity.

    BJP victories in Rajasthan, Madhya Pradesh, Chhattisgarh and New Delhi may boost Indian stocks, according to Deven Choksey, managing director of Mumbai-based K.R. Choksey Shares & Securities Pvt. The benchmark S&P BSE Sensex, which has climbed 6.6 percent this year, fell 0.7 percent in Mumbai yesterday.

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    Deepak Lalwani's India Report

    My thanks to the author for his informative report published by LALCAP. It is posted in the Subscriber's Area but here is a brief sample:

    The Indian economy grew at 5%, a decade low, for the fiscal year to 31 March 2013. Growth slowed even further to 4.4% in Q1 (April-June 2013) of the current fiscal year to 31 March 2014. The Q2 (July-September) GDP figure is expected on 29 November, and fears remain that growth back to 5% looks optimistic. Investors are increasingly concerned that India is stuck in a stagflation (stagnant growth + high inflation) environment. The wholesale price index (WPI) rose to an eight-month high of 7% year-on-year, driven by more expensive energy and manufactured goods. At the heart of India's inflationary pressure is a sharp rise in food prices which are threatening re-election prospects for the ruling coalition Government, led by the Congress party. Food inflation in October rose 18.2%. In the last 60 months food inflation has averaged over 12% per month. Onion prices have risen from Rs 20 per kilo last December to Rs 100 per kilo last month in Delhi and Bombay. The price of salt has rocketed in East India from about Rs 18 per kilo to well over Rs 100 per kilo. With five state elections in progress, the humble onion's power in toppling past Governments is focussing minds.

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    Today's interesting charts

    The best way to keep up with market action is by viewing price charts.

    Onions Bring Tears to RBI's Rajan as Prices Surge

    This article by Unni Krishnan and Prabhudatta Mishra for Bloomberg may be of interest to subscribers. Here is a section

    The RBI has said that it faces an unenviable task of trying to address the slowest economic expansion in a decade while tackling the fastest price gains among the largest emerging markets. Local newspapers have reported scuffles at vegetable markets in eastern India and food inflation is set to dominate state elections being held through Dec. 4. High onion prices were cited for the Bharatiya Janata Party losing a 1998 vote in New Delhi.

    °We do not see any scope for rate cuts, said Leif Eskesen, HSBC Holdings Plcs chief economist for India and the Association of Southeast Asian Nations. Underlying inflation pressures are rising. The RBI has to maintain a hawkish stance and stand ready to tighten further, if needed.

    Food articles, including fruits, vegetables, milk and eggs, accounted for 47 percent of the increase in the benchmark inflation gauge, the wholesale price index. The measure rose 7 percent in October from a year earlier, compared with 6.48 percent the month before and exceeding the 6.95 percent median estimate of 40 economists surveyed by Bloomberg.

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