….Titanic still not drowned

We are sitting in a middle of a turbulent ocean, and no one knows if the ship will survive the storm, or everything will be finished by the time, things ease out. Every financial institution is looking closely at the liquidity requirements and leverage ratio at which they are operating, plenty of small I banks and small private housing loan firms have closed operations or have been acquired at cheap prices by big names of which, we already had two cases of Bear Stearns and Lehman Brothers. Both the firms had adequate cash, however, Bear Stearns was reported to have $18 billion of cash reserve when the speculation of liquidity crunch for the financial giant started at the Wall Street, I wonder how the CFO of the Company had reacted when he saw the stock at NYSE came down significantly for no valid reason.

Various exchanges have banned short selling {naked shorts} to protect institutions from Wild animals at the trading floor, who knows when these animals start speculations which draws fresh blood at Wall Street. Yesterday Dow Jones Industrial had its biggest absolute fall, around 778 points, and NASDAQ close to 9%, I have never seen these mature markets falling so much, ever since I started watching equity markets. However, yesterday when everyone was watching closely at Citi’s and Wachovia’s deal, suddenly the price at Google finance for Wachovia displayed 500, enormous rise of 4,900% , I don’t know what made the analyst at Google finance think about this,  the market cap for Wachovia was shown 1,000 billion which is far more than the Bailout package of 700 billion USD. There is very thin space between rumours and news, and Google should think before displaying something like this  - 

Meanwhile when lawmakers and Henry Paulson is busy making new alternatives which could help capital markets and the economy in the US. I wonder if 700 Billion USD stand sufficient for an economy which is operating close to 17 Trillion USD. However, when the US Congress rejected the Bailout package, I heard a fund manager saying “….these people are playing with fire…”. Everyone has its own story, when asked to comment on why the plan was rejected by the Congress! Few of the members still believe it was partial for Lehman and Washington Mutual, when they had not been bailed out and Fed / Govt let these institutions filing Chapter 11 protection.

Surely, we will see more of such things in coming future, however everyone has fingers crossed, on what is happening in the US and how deeply it will impact the emerging markets and south Asia.

Vivek Misra

Wild animals at the Wall Street…

Wall street has wild animals, everyone is looking for fresh flesh, funds flow, in last two weeks – I have seen two of the cases when these wild cats ate up three financial institutions, Freddie and Fannie fell more than 85 % in a day, then Lehman fell more than 45%. Yesterday, I was thinking about my good old college days when everything was booming like anything, the real estate prices in big cities went up 300%, I banks at wall street were making record net profits, Indian capital markets were touching new highs everyday….eventually one of the old phrases came true “Brighter the light, darker the shadows”

Yes, still the clouds of recession for the US have not departed the territory, analysts across have one same view, worst is still not over. Lehman brothers, one of the oldest Investment banks at Wall street, might have to sell off its Investment bank arm, which is however, termed among the prestigious I banks at Wall street, an year ago. They are also planning to spin off their real estate mortgage arm to reduce the losses from adjustable rate mortgage portfolio. Given all these rescue plans, Lehman is doing its best to convince people out there, that they have something left and will not collapse. However, the Indian office of Lehman might have to reduce head-count for the simple reason, there will be no business going forward, and might be after third quarter, Lehman might have to close offices in south Asia.

After Lehman what next ? Across the globe people have been speculating the future of economy in the US, everyone has its own story, my personal opinion which I mentioned sometime back, this is second leg of recession, first was Bear Stearn’s bailout by the Fed. However, the movie does not end here, still bad news is in the system, might be after looking at third quarter results we might form a more conclusive statement for the economy!

Vivek Misra

Sachin Tendulkar Vs Shahrukh Khan: Bigger source of revenue for India

Sachin Tendulkar and Shahrukh Khan are among the most popular names across, I wonder if there is any continent where people don’t know who these guys are, however, I am not much sure of far south America where Indian movies and cricket has far less impact. Sachin and Shahrukh are legends in this part of the world, billions of fans, both have bought huge revenue to Indian economy in past 15 years.

Lets talk about Sachin 1st, he is a legend of Indian cricket, not only a batsman, he is a belief, a motivation – his mere presence brings so much to Indian dressing room. Sachin stands tall when it comes to records on he sits on, he holds the records – most number of runs scored in ODIs, most number of centuries in ODIs, holds the records of most number of runs in world cup, most number of 100s and 50s in world cup. However, people always tend to forget his efforts when it comes to his recent relatively bad form. I believe Sachin is God, if cricket is a religion, for many reasons – one reason is he has earned huge revenue for Indian economy. Some 15 years back, when Indian cricket board now known as BCCI was among the ordinary spots institution, is now the richest board across, and the influence Indian board has over ICC is huge – one example is IPL 2008 tournament, ICC is thinking to create bracket for IPL every year.

A very big share Sachin has, when anyone starts to estimate the kind of money flow took place in recent years on Indian Cricket. Sachin has fans everywhere in all continents, he has more number of endorsements than anyone else in Cricket. I would say BCCI is lucky to have someone like Sachin who stands very humble, when it comes to fame and money.

On the other hand Shahrukh khan is one of the biggest movie star – Indian film Industry has produced, he has the record of holding most number of awards (including all categories), Shahrukh has earned huge revenue for Indian film Industry. In last decade he has so many movies which are huge hit overseas, has done some good business. Shahrukh also brings a brand name, he has big endorsements under his belt, also has some big upcoming projects, simply he is the costliest star India ever had.

If someone asks me to compare Shahukh and Sachin in terms of capital they bring for Indian economy I would say Sachin gets an upper hand, for the simple reason, Shahrukh has acted in some 15-20  hit movies which are successful overseas, just to point out I have overestimated the number of hits he has acted in. On the other hand, Sachin has far more popularity, far bigger revenue base, than his competitor, Sachin has ruled cricket in Europe, Australia, Asia, Canada and even in South America. The number of fans he has, and given he has played 416 ODI matches, I don’t remember the number of tests he has played – the number of fans comes every time to watch Sachin batting is enormous.

Just to have a small Idea, Sachin has played around 250 matches in India, Indian grounds have an average seating arrangement of 30,000 – average ticket is around 1,000. This comes close to 750 Cr, which is excluding the matches he has played abroad, and of course the earnings outside India. Given that matches in UAE, Canada, Australia generates more than 10 times the revenue generated at home in India. A rough estimate could show up a brand value of Sachin to be close to 3,000+ Cr. This comes close to 1% of Indian GDP / BSE market capitalization. A single person has earned close to 1% of Indian GDP (2007), which is a significant contribution for a population of 1 Billion.

Shahrukh Khan stands little behind, in the comparison, his Om Shanti Om, did a business of 175 Cr, which was however the biggest hits he has acted in after DDLJ probably, a rough estimate, if Shahrukh’s 15 hit movies have generated 100 Cr on an average then his brand value stands close to 1,500 Cr, I will add up another 750 Cr for the endrosements he has, and other revenue sources. Even then he stands around 700-800 Cr short of Sachin. However, his contribution to Indian economy cannot be denied.

Vivek Misra

Trader Vs Investment Banker : Difficult to compare…

There has been always misconception among every student at Campus, that life of a Trader is very much chill compared to some I banker who is working Syndicated finance or M&A division. I wonder if anyone ever tried to compare facts, how buisness in both division operates, people tend to follow things, however, I believe traders’ life is much more hectic than I banker – both of them fall in same roof that’s Corporate and Investment Banking. 

Lets talk about numbers, a big I bank executes around 178-190 deals in a fiscal year (example – JPMorgan Chase, Bank of America), among these many deals, 30-32 deals are M&A, probably 15-16 are LBOs /MBOs, given that – I understand a person involved in 16 odd deals need to grind for 15 hours for a couple of months, however on an average there is no single team in I banking section, which spends 15 hours for whole 6 months – leave alone 12 months for the time being. For relationship deals, same person will spend probably just 3 hours and that too bank meeting. Just to point these numbers (178-190) is for big I bank – small I banks get to execute 50-55 deals in an year! (probably even less or more, this could be a good average)

Above example illustrates that time, – when we had bull phase, the “good” time, when borrowers were in need of capital for a growing Industry and economy, however now the things have changed a lot, when everything has slowed down, the number of new issuance has reduced, and deals in pipelines are not being executed – resulting steep decline in business for I bankers working in Syndicated Finance, ABS / MBS, M&A – you might have read how many of big arms have slashed a lot of headcount in recent months. Just to point out, last 6 months is only one example, this is what happens when economy takes downward direction (slowdown), which had happened previously as well.

Lets talk about volumes, for an I banker – one month stands a small timeline from getting a mandate till deal execution, and even then if it is best efforts, probability of raising money stands bleak – given present market conditions. However, no one could expect that I banker working in 9 to 5 working zone for a longer duration - however, I disagree to the statement “Trader works far less than some I banker – in Syndications / Mergers and Acquisitions sector”.

It is difficult to generalize things, that someone in M&A has more working hours compared to a trader in Sales and Trading. Let me quote an example, A trader wanted to take position in debt markets, after some research he did, he realised that taking position in FCCBs issued by Indian companies since 2005, will provide better opportunities than investing in emerging equity markets. If someone checks on Bloomberg he would know there are around 250 such FCCBs issued by 184 companies. After working with these 184 companies, it was concluded that investing in 12 such companies will provide the opportunity the trader was looking for. It might look simple to read that 12 of 184 he shortlisted, however it involves much more due diligence, than someone had did in deciding pricing for a LBO.

However, we always tend to forget the effort people take up, which eventually do not add up to the revenue of the institution. Traders are no different and same is for I bankers, getting a mandate, analyzing a screen for a prospective deal, which might get executed…however it is certianly a countable effort that some I banker does. But on the other hand a tarder does so many things which are not counted.

Now for the Trader working under same roof, dosent get the same liberty – he has to measure risk involved, he still has the responsibility to track back the exposure and limits assigned to various brokers (example Lehman has the biggest share in brokerage across). Even when the economy has slowed down, the work a trader has does not get reduced – it is however increased. “A trader is different from a Broker”.

Trading arms of these I banks have various line of businesses, they have Strategic Capital arm, Distressed debt / securities – Special Situations group, Risk group for Credit / debt / equity markets. Believe me it involves a lot of work. When it comes to I banking everyone is just gets one thing in mind M&A, which is not the end of the road – however things start from that very point !

Dont confuse traders with Brokers – a Lehman Trader could be equally ranked person like Managing Director / Vice President in Syndicated Finance, however a broker who only works in market hours is only a contractor working for the institution.

Vivek Misra

Most Influential Personalities – Face of India

A day before there was a healthy discussion - “Who is the most influential politician, worthy for Prime Minister after next General Elections!”

For a country like India, given we have so many political parties, so many regional leaders, coalition governments in regions – and then there are MPs and MLAs who change hands with ruling / opposition in critical situation. One example – recent UPA confidence motion in Parliament. To start with I have few names,  -

Manmohan Singh – 17th Prime Minister (2004-2009) – Manmohan Singh, an economist by profession, worked for the International Monetary Fund in his younger days. Dr. Singh is known to be an unassuming politician, enjoying a formidable, highly respected and admired image. Due to his work at the UN, International Monetary Fund and other international bodies, he is highly respected around the world. He was awarded the Outstanding Parliamentarian Award in 2002. Before becoming Prime Minister, he served as the Finance Minister under Narasimha Rao.
{I guess he is definitely a good economist, however, not a good leader, he has been more a puppet of Sonia Gandhi & Indian National Congress}.

Mukesh Ambani – Chairman Reliance Industries – Mukesh Ambani joined Reliance in 1981 and initiated Reliance’s backward integration from textiles into polyester fibres and further into petrochemicals. In this process, he directed the creation of 60 new, world-class manufacturing facilities involving diverse technologies that have raised Reliance’s manufacturing capacities from less than a million tonnes to twelve million tonnes per year. He directed and led the creation of the world’s largest grassroots petroleum refinery at Jamnagar, Gujarat, India, with a present capacity of 660,000 barrels per day (33 million tonnes per year) integrated with petrochemicals, power generation, port and related infrastructure, at an investment of Rs 100000 crore (nearly $26 billion USD). Mukesh Ambani set up one of the largest telecommunications companies in India in the form of Reliance Communications (formerly Reliance Infocomm) Limited. However, Reliance Infocom now is under Anil Dhirubhai Ambani Group post the brothers’ split.Had the two brothers not split, and Mukesh being the president , his net worth would have been around $85 billion ,making him the richest man on earth ever by a huge margin.
{Mukesh Ambani has driven Reliance Industries to 300,000+ Cr enterprise, almost double of where his father left the company with – his Reliance petroleum is among top 10 companies, surely he has leadership skills, I doubt if he is a good politician, however he has good sneak in political arena}

Abul Pakir Jainulabdeen Abdul Kalam (Former President) -Kalam is the Fourth President of India to have been honoured with a Bharat Ratna before being elected to the highest office, the other three being Sarvepalli Radhakrishnan ,V. V. Giri and Zakir Hussain. He is also the first scientist and first bachelor to occupy Rashtrapati Bhavan. Referred to as the “People’s President”, Kalam is often considered amongst India’s greatest presidents, going on to win a poll conducted by news channel CNN-IBN for India’s Best President. Kalam’s belief in the power of science to resolve society’s problems and his views of these problems as a result of inefficient distribution of resources is modernistic. He also sees science and technology as ideology-free areas and emphasizes the cultivation of scientific temper and entrepreneurial drive. In this, he finds a lot of support among India’s new business leaders like the founders of Infosys and Wipro, (leading Indian IT corporations) who began their careers as technology professionals much in the same way Kalam did.
{He is certianly face of this nation – however, he is not a politician, everyone will be more than happy if he leads India for next five years, however, there is very bleak probability that he would actually ever become even President – thanks to Indian Politics!}

Lalu Prasad Yadav (Leader RJD – regional party) – He ruled Bihar for 10 years, in a span of 10 years, he became a formidable force in Bihar State Politics. During the Indian general elections in 1989 and state assembly elections, he successfully led the National Front coalition in Bihar. It was, therefore, no surprise that he was elected the Chief Minister leaving behind Ram Sundar Das, a former chief minister from Janata Party when the Party came to power in the 1990 Assembly elections. The World Bank lauded his party for its work in the 1990s on the economic front. According to the BBC, the police unearthed a Fodder Scam in 1996 worth Rs 950 crore (US$ 267 Million) in Bihar (dating back to the previous Congress Government) which allegedly involved Lalu and the State’s leading bureaucrats and politicians, albeit the probe itself was ordered by him. Prasad was elected to the 14th Lok Sabha from Chhapra and Madhepura seats of Bihar. He was named as the railway minister in the UPA Government. Later, he gave up the Madhepura seat.
{He is a very strong politician – his recent hard work when he arranged numbers for UPA coalition is one example, however I doubt if he could be national leader, I definitely will not like to see him as a PM of this nation}

Rahul Gandhi (Gen Sec of Indian National Congress) -In March 2004, Rahul Gandhi announced his entry into politics by announcing that he would contest the May 2004 elections, standing for his father’s former constituency of Amethi in Uttar Pradesh in the Lok Sabha, India’s lower house of Parliament. Before that, his uncle Sanjay held the seat before a plane crash. The seat had been held by his mother until she transferred to the neighbouring seat of Rae Bareilly. The Congress had been doing poorly in Uttar Pradesh, holding only 10 of the 80 Lok Sabha seats in the state at the time.At the time, this move generated surprise among political commentators, who had regarded his sister Priyanka as being the more charismatic and likely to succeed. Party officials did not have a CV ready for the media, such was the surprise of his move. It generated speculation that the presence of a young member of India’s most famous political family would reinvigorate the Congress party’s political fortunes among India’s youthful population. In his first interview with foreign media, he portrayed himself as a uniter of the country and condemned “divisive” politics in India, saying that he would try to reduce caste and religious tensions. His candidacy was greeted with excitement by locals, who had a long standing affinity with the family’s presence in the area. He won with a landslide majority, retaining the family stronghold with a margin of over 100,000 as the Congress unexpectedly defeated the ruling Bharatiya Janata Party. His campaign was directed by his younger sister, Priyanka Gandhi Vadra.
{He is for sure a candidate fom Congress for the seat of PM, however, he is not a strong politician, and I doubt if he has strong leader ship skills, he could be a stronger politician, some 10 years down the line}.

Lal Krishna Advani (President, BJP) -Advani is credited with turning the BJP into a significant force in Indian politics by undertaking the Ratha Yatra (Chariot tour) to mobilize support for building of a temple dedicated to Lord Rama in Ayodhya, believed to be his birthplace. At Lahore, he inaugurated the renovation of the Katasraj Temple, an ancient Hindu temple in Pakistan. Early in 2007, Advani met with archaeologists from Pakistan who had been visiting Indian temples to acquaint themselves with Hindu architecture. Advani made the positive gesture to Musharraf in a letter to the Pakistani leader in which he was effusive in his praise saying: “I wish to express my deep appreciation for this (the restoration of the Katasraj temples).” Elsewhere, he congratulated Musharraf for visiting the Shiva temple in Karachi in November-2006. “The people of India have also welcomed your visit to the Shiva temple in Karachi in November last year”, he wrote in the letter.
{Advani is among the biggies in Indian Politics, he has been nominated as next PM candidate from BJP, given his long political exposure, he is surely a big bet for PM – if BJP gets into power}

I couldnt think of other names, there are so many small names, who have been trying for PM – I would say they being very ambitious, Mayawati is one example. As far as my personal choice goes, I would like to see Mukesh Ambani as a PM – or someone like him, who could drive India’s growth rate to double figures and take strong decisions, when needed. Certainly after the horse-trading thing happened in Parliament, no one wants a politician to be a PM of this country.

Cheers,

Vivek Misra

UPA vs NDA : Cheap Politics and Costly Politicians

Today happens to be the D-day when the ruling coalition UPA will test their strength on the floor, however last one week has been an extensive display of dirty politics, MPs forming new coalitions, few going for the govt and few against. Money and power was flowing like nothing before, so many convicts – who should had been hanged long back, are now sitting in parliament, being respectable Members of the ruling government.

What else one could ask for, when so much has happened in last 7 days, everyone has been speculating government’s number on the floor, does anyone ever thought (read politicians) how much benefit our country will extract from the Nuclear deal – if it goes through. Even if the deal gets green signal from the Parliament, it will take at least 2 years down the line to start power generation, which will only cover 6.0% of total power requirement of this big population.

And even if the Government manages to stay in power with thin majority, chances of Insurance and Pension bills to passed in parliament seems bleak, however, none of the ruling government or opposition is bothered of any reforms, they are betting on their future, election fund, and allocation of seats for coming election. Deployment of Insurance funds and Pension funds is extremely important when one takes huge inflation in consideration.

Yesterday, I was watching a private news channel, where someone quoted price of a sngle MP to be close to 100 Cr, I wonder who has sponsored so much money and from where it suddenly came from? India’s Fiscal deficit is close to 4.0%, Inflation is all time high, atleast 4 states are facing drought, and MPs are floating on huge money, just for a vote – and that too when everyone knows we will be having elections in November this year.

If someone has calculated the election expenditure for next General Elections, it should be close to 3,200 Cr for Election Commission, which is excluding what various other parties will be spending for campaign and other things. Do these politicians take note of small taxpayer, who has been waiting so anxiously to see inflation dropping below 7.0%, who has been looking at government to bring out reforms, to make sure that we have not lost 9.0% growth path we are supposed to follow.

Vivek Misra

India’s Nuclear deal and its consequences

There has to be a discussion on Nuclear demands of India and its consequences, before actually the day comes when India’s PM signs Nuclear deal with G8 nations.

India is not as rich / developed nation when compared to the US, and we all know US always had an upper hand when it comes to decision in various International conferences, let it be G8, G5 or any other summit. For India, Nuclear deal is very important at this stage (my personal opinion) -

- India is the second fastest growing economy in the region after China, and we all know China has recently enhanced its Navy depolyment in Arabian Sea and its Nuclear weapon expenditure / depolyment. Not signing nuclear deal will not help India, since India falls far behind China on Nuclear weapon technology / volume front. It is strategically important for India to get a bigger shoulder from someone like the US.

- India’s GDP is little less tha $1,000 billion and we are growing at 7-8% YoY, given the Crude is heated to $140 levels, it is difficult for small companies in India to compete with their Chinese and Asian counterparts. Crude will certainly show its impact on private Oil companies and energy companies and growth will be hampered to a good extend in coming quarters. Nuclear energy will help India to maintain 8% growth rate, and will also help Crude to cool off in India (which happens to be among the biggest consumer market in South Asia) and in the region.

- States like Orrisa, eastern Maharashtra, Eastern MP need more power plants, and growing population should correlate to that. However, our country does not have a better mechanism, other than nuclear energy. It is high time for India, which is among the fastest grwoing nation to replace coal plants to nuclear power plants as soon as possible.

- In a sea, a small fish cannot survive unless it has big crocodiles its friends, India cannot survive, if sanctions are imposed like US has done to Iran.

US being an international leader – given it always had a big say when in all major world issues. When it comes to Global warming and pollution US has been a bigger fish polluting the pond. The G8 meeting, however, will only end up with nations shouting against US, but nothing will happen eventually (US emits 4 times more harmful gases than China, on a per capita basis).
India, presently, is not in a condition to bear sanctions from US and UN-bodies, given we are heavily dependent on them.
- US has the biggest stake {~27%} in Indian exports.
- US ’s FII has biggest stake in Indian capital markets {~16%)
Nuclear deal in its present form will hamper India’s Nuclear weapon program, but that can be scarificed, given we will get shoulder of a bigger nation, which could help, India strategically in the region.

Global warming and pollution is bigger issue, but unfortunately double standards by developed nations dosent help India, lets take it this way, India has to choose between bad and worse, I believe I would go for bad than worse (A personal opinion).

Vivek Misra

Global Warming – Contribution of developed nations!

When it comes to enviroment, developed nations have double standards, nuclear non proliferation deal is one example. On an average the United States does around 36,000+ nuclear tests every year, which is far more than any country, however CTBT and NPT has different norms for other nations. I wonder how many sea animals are killed every year when such a huge number of tests are conducted, if even 1% of these are conducted in sea, and not on ground.

China is not far behind when it comes to pollution, the crude oil consumption is second largest when it comes to China after the US. (US eats up 25% of Crude). US leaders always blame south asia for pollution, inflation, consumption of food and all other things (terrorism as well !). Deos anyone know what was the immediate need for US to invade Afganistan, the war destroyed whole nation, just to catch someone who was blamed for 9/11. The war expenditure was huge, obviously people died on both sides, which is a different thing, apart from that, huge money flew away from the US, which could had been used to build a whole new country, better than what we have presently. Today when US economy is on the brim of recession and everything seems slowing down, inflation is at higher side, US un-employed data is at all time high, banks going bankcrupt..and so many other things going side-by-side. I imagine if there was no war in last 5 years, it could had been a differnt story altogether.

Enviroment is for everyone and not for some specific nation, it dosent make sense that people in US have all the fun and facilities and population in south asia is always blamed for all mis-happenings and bear sanctions for that.

Vivek Misra

Soaring Inflation in India – Hard times ahead!

Inflation depends on two major factors – Fiscal policy and Monetary policy, the latter is government driven – In India there was no major drought in any state, we have ample of resources, Uttar Pradesh had huge Sugar production, wheat production is excellent this year, Industry growth has been steady (slower in March- April), but even then Central government was unable to optimize the resources, it had. I expect no great change if any new political party comes to power, we should thank our stars that no Political party gets clear majority in center, atleast the ruling party has a fear that it might fall, for the blunders they have been doing.

On the contrary, in China’s Fiscal policy by the Central bank is strongly related to their monetary policy, Crude consumption in China is huge when compared to India – or for that matter South Asian nations, even then China has a better growth story, the Inflation in China dosent hurt people there, they have several sanctions from West nations, but still they have survived and have become a major power after the US. US might invade Iran, given they have elections coming up soon, and it will provide Bush’s Republican party more votes in coming elections. Although when it seems democrates have an edge over them. However, the demand of crude has increased exponentially and so is global inflation in last 6 months. If US invades Iran, demand in Crude will rise further in middle east and in the US as well.

It is foolish on the part of Indian government to distribute subsidy everytime they see given Industry in trouble. For example – when dollar weakend last year and rupee was around 39-38.50, Textile owners / exporters in delhi started crying for their business, and now when dollar is again strong against rupee at 43-43.5, why Government is still giving subsidy to them? The reason being election in 6 states, and general elections coming up, the UPA grovernment has to woo the voters.

The turmoil started when on Friday – Morgan Stanley published an official report that Crude will trade at $150 levels by July 4th (I dont know how they published date ! ), anyways as soon as the report got out Capital markets in the US slipped downside, with Crude heated at $140 levels.
Atleast for this week, it is very dificult for the markets to recover, for Nifty 4450 is crucial level, from which it re-bounded in Jan this year, if it closes below that level, markets will set to make new lows in coming days!
CRR hike is also on cards for RBI – 8.24% Inflation is not a comfort zone for UPA government and they will create pressure for RBI to hike CRR, which will suck remaining liquidity from markets.

Crude price heated up: What India should do!

Markets are extremly volatile ahead of decision on oil prices in India (I guess by today evening there will be some news), I wonder if the Government agrees to increase Oil prices given the crude level heating everyday.
I heard a Fund manager, and his views were real eye opener when he started with the current situation which will only be worsen if nothing is done any soon. He proposed these three points to help Oil biggies, and help them not loosing single penny in coming days -
1. Rise in petrol prices upto 50% (Current fair price is 78 INR / L – with Crude at $135)
2. LPG prices should be doubled
3. Kerosene Oil / its derivatives should see a 3.0-3.5 times rise from current levels.

If Government takes any steps to increase prices of these commodities, Inflation will rise exponentially, which will force RBI to hike CRR further, and India’s 8% growth story will become a dream. However, there is a section of people who have the view that crude might come down to $90 levels by the end of Fiscal 2008, which seems impossible (my personal opinion), given Olympics in China – Oil demand will be huge, and China has recently increased its stake in Oil consumption biggies after the US. (US consumes 25% of each 100 barrel of Crude)

India had a good growth story in 2007, however, the Government of our country has a bigger role when it comes to the factors which will hamper our growth – we all know growth has a direct correlation with employement in any nation. Given we have a huge population, which is increasing at a faster rate (faster than 7% growth ateast), at this growth rate, we will be having a huge number of unemployed youth in next few years.
No offense to PM, but he is taking India no where, lets summarize this month’s events
- Rs 2 hike in petrol
- Farmer loan waiver – 71,000 Cr
- China relief package – 1 billion (proposed)

We are sitting on 4% Fiscal deficit, Crude price will make the deficit even more, and we will be helping China with another billion, when it is known that China has recently increased its Oil consumption – for its new Navy troops? My personal opinion is China has become a big threat to south Asian countries, and its rising Oil consumption and increased Capital infusion in Navy have created imbalance in the region.

The Oil Secy has proposed 10 Rs rise in petrol, which is minimum to save Oil biggies, it gives me shiver when I think, IOC, HPCL, BPCL will shut down petrol pumps in metros next month, if this continues.

Vivek Misra