Is India a Bull Market ?

The Indian stock market has been relatively weak for the last couple of months due to China factor. Also the fact that the ruling party BJP lost a crucial state election to an alliance of strong regional parties added to disappointment.  The regional parties managed to win as they combined forces against the BJP. Prime Minister Modi had personally campaigned extensively, but it failed to reap electoral dividends. This was the second major political loss (first being State of Delhi), after Modi's tremendous win in the national elections in 2014.  There are fears that the economic reforms might get slowed, as the government might have to focus on populism. Nonetheless, soon after Bihar elections, the government announced increased FDI limits in 15 sectors , signalling that it will not slow down on its economic reforms agenda.

A few reasons to remain bullish on the India stock market is given below:

1) Best among Emerging markets - India remains the most attractive emerging market. Brazil has gone into a meltdown mode due to the commodity price crash and the weakness of the current government.  China's economy remains extremely troubled, with growing credit stresses and slowing down of GDP growth. Massive overcapacity is leading to corporate defaults. Russia is not only seeing a GDP decline due to economic sanctions and lower oil prices, but will also have to pay large military costs now due to its war in Middle East. Compared to the other major emerging markets, India is a highly attractive destination. It's massive market, stable political situation and strong growth is already attracting a large number of investors.

2) Structural reforms - Make in India campaign- Changing a country with 1.2 billion people is not an easy task.  The government has been implementing major structural reforms (such as GST, etc) that are slowly starting to show positive effects. India is cutting down red tape and inviting investments from foreign investors. Foxconn recently announced $5 billion investment and other multinational investors are also increasing investments in India's manufacturing sector. The good thing is that the corruption has significantly reduced under the watch of Modi.
Next budget has to be closely watched as wit is expected to introduce a new bankruptcy law and reduce the corporate tax rate . The financial sector is seeing massive changes, with the central bank giving licenses to several new organizations. This will increase competition and improve financial inclusion in a country, where millions do not have a bank account. The defence sector is seeing massive interest, as the government has opened it to the private sector. The roads and ports sector are also humming, with the government increasing capital spending on infrastructure.

3) Falling Commodity Prices - India imports billions of dollars of coal, crude oil and natural gas every year.  The positive effects are already showing in increased profit margins of companies, as well as increased spending on cars and durable goods by urban consumers. Despite a poor monsoon, India's economy is all set to expand by 7%. With commodity prices not expected to bounce back any time soon, India will continue to save more than $100 billion a year from low oil, coal and gas prices. India remains one of the biggest beneficiaries of the global commodity price crash. With such reduced import bills, it is a possibility that Indian Rupee may appreciate as well in the near to mid-term!

Of course, there are a few risks, which we will discuss in another blog. 

Golden moment for Greeks

Finally, thanks to the left leaning Govt of Greece, the voters of Greece got an opportunity to wean away from the burden of Euro. The referendum on 5^th July 2015 is anxiously awaited by the financial world, especially those in Europe. The hyper volatility of European stock markets in these days evidences and captures the mood.

 

Financial thoughts have opined as far as three years back why Greece should get out of Euro, which is created to favour the dominant nations of Euro zone.

The basic reason for the instability is the lack of cohesion i.e. the attempt to have common monetary policy without uniform fiscal policies. Well, since Financial thoughts have mentioned about the same in another blog, we will not dwell much on it now. (Interested readers may please visit   http://www.financialstrategyonline.com/2012/02/lamentations-of-greece.html)

 

The real beneficiaries of Euro mainly includes Germany – who although lost two world wars has won the economic war in Europe just as Japan did it in Asia. The Euro is good for the large business houses of the Europe as it eliminated the foreign exchange risk and brought in more predictability to the turnover and profits.

 

Also for some, it gave a pleasure of a Europe Empire united under one currency, which is something Napoleon Bonaparte planned in early 1800s. However, let the practical considerations prevail rather than the romantic ideas of a United Europe – a Europe united under one currency.

 

Now the common man in Greece, Portugal and Italy is suffering under the burden of the colonial Euro.  Under normal circumstances, Greece would have devalued its currency and attracted more exports (more foreign currency) or tourism mainly from the same Euro zone countries that would flock to Greece to enjoy sun and historical moments. Rest of the world would also flow into Greece. Now the rest of Europe has no added incentive of a devalued currency to plan a trip to Greece. A trip to Greece almost costs the same as a trip to France! This would not have been the case, if Greece have its own currency.

 

Hence, let the Greeks snatch the opportunity to obtain freedom from the yoke and tyranny of EURO.  Any such decision would lead to some financial turmoil; however it is worth it. Of course, many people in the rest of Europe may wish that Greece continue in Euro; however a wise decision may not be satisfying others wish; at the expense of yours.

Disclaimer: Our opinions are based on economic and other conditions now and such conditions may change significantly over relatively short period of time. Should circumstances change significantly after the issue of this report, the conclusions and opinions expressed herein may require revision. The statements and opinions expressed in this report are for academic purposes only and to provoke the thoughts of the reader.

Power of Vision & Mission Statement

Dubai is a fascinating city- a true oasis in the middle of Middle Eastern desert. It hosts all nationalities and the local UAE nationals are always ready with a smile and hospitality - unlike what you may experience in Saudi Arabia.

 

In today's blog, we will speak about Dubai Metro and how it shares some common features with yet another successful business story of GE.

 

Today at 9.30 pm I was sitting at Dubai metro, Burjuman station and it was crowded, which tells about the success story of the only metro in the Middle East. Copying Dubai, some of the GCC countries are trying to implement the metro, however it is slow and time consuming process. Nobody can repeat the speed and efficiency of Dubai.

 

My thoughts fly back to the days when the metro project was announced. It was the first such project in the Middle East. Many doubted its viability. Typical to UAE style, (Dubai in particular) it was built quickly and launched at the middle of the 2008 crisis. Even the promoters stated at the time of launch on 09-09-2009 that it may take more than a decade to see the metro profitable. However, the number of travellers in 2014 was around 160 million per year. Assuming average revenue of AED 10 person, it is whopping revenue of AED 1.6 billion per annum. Surely, the venture might have achieved the break-even levels already. No doubt, Dubai Metro is a thumping success and a winner. How has it achieved this? Amongst several other factors, let us focus on the ‘Vision and Mission’ that was set by RTA, under whose umbrella, Dubai Metro falls in.  

 

Vision & Mission

 

What is Vision and Mission? Is it so important? This was the question asked to me by some of the senior executives of a Singapore listed company on behalf of whom we conducted an internal strategic review of their operations in the UAE. Yes – they are now convinced based on our advice and they have moved ahead on this. We have not only provided them with a Vision that will take the company to fulfil its aspirations, but also prescribed mission, values and behaviours as well as an evaluation platform for senior management, who are in charge of implementing them.

 

Who is the best person who can describe the Vision and Mission? The best advocate of this is Jack Welch, who has been given the title “Manager of the Century” by Fortune Magazine. For those who do not know Jack Welch, he was the longest serving CEO of GE from 1981-2000. During his tenure the market capitalization of GE grew by USD 400 billion, making it the world’s most valuable corporation. How he did it? He changed the Vision and Mission after he became the CEO of GE.

 

A strong mission statement is not a mere announcement – it is a powerful tool for companies to make choices about people, investments, and other resources, and prevents them from falling into the trap of committing their resources into less fruitful ventures.

 

So let us see the Vision of GE put forth by Jack in early 1980s.

 

“The most competitive enterprise in the world”

 

This was an inspirational vision put forth by Jack in 1980s, when its market value was 1/30^th of the value in early 2000 when he retired.

 

So, how this vision was going to be attained? He defined the Mission

 

“By being No. 1 or No. 2 in every market— fixing, selling, or closing every underperforming business that couldn’t get there”

 

And both worked for Jack – and he created the most valuable company on earth when he walked out as the CEO in the year 2000.

 

That should silence the critics who may criticize the Vision and Mission is high sounding hollow words.

 

Vision & Mission of Dubai Metro

 

Another best example is the Vision and Mission set forth by RTA for Dubai Metro. Let us see the Vision & Mission Statement of Dubai Metro.

Dubai metro is a proof of Jack Welch’s belief in Vision and Mission statement.

You can also see the vision and mission displayed at almost all metro stations.

Spend 30 mts at 9 pm at Burjuman on any day to see the Vision and Mission of Dubai Metro in action.

Transcend Consulting, helps its clients to set our clear vision, mission, values, behaviours and strategies to become winners in the chosen field. To know more please contact at cj@consulttranscend.com or admin@consulttranscend.com  or call us on 00971-56-4805552