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How does United States of India look for the Equity Market ?

March 26, 2012

The Office of the Prime Minister, Dr. Singh has been indicted in the Famous 2G Wireless Spectrum Scam, Mother of All Scams – The Coal Block Allotment Scam and just a while ago the former chief of Army exposed the Rs 600 Crore Substandard Vehicle Supply Scam in the Defense. The financial budget for FY 2012-13 is not yet passed and the ruling party’s greed is unending without any sense of Moral responsibility.

We do not want to go over again on the impotence of Central Government, but we’d like to highlight the emergence of the United States of India – Strong Performance of Regional Parties and their Progressive Economic measures from State Governments. Surprisingly, Dr. Singh an Economist himself fails to understand and continues to endorse stupid and worthless populists measures [Food Bill, etc] which nobody cares for.

Gujarat – We do not have to tell how drastic the development in this state has been as the World has noticed the same. American Time magazine has covered Narendra Modi’s regime and asks the United States to re-work its strategies with Narendra Modi.

Bihar – Under the Goonda Raj of Lalu Prasad Yadav, Once upon a time   people said civilization ends here but today under 6 years of Nitish Kumar Rule, the state is on the path of embracing reforms with 5,000 ex-soldiers recruited into ‘special auxilliary force’ to check crime, Emphasize on School education with drop-out numbering declining, Patna model of taxation for properties are a few to name. Regional Party with Absolute Majority.

Tamilnadu, Orissa, West Bengal, Uttar Pradesh and Punjab citizens have all elected regional parties with absolute majority while the National Parties have been sidelined. It is amply clear that people have Moved away from narrow caste / religion politics and are voting towards better governance demanding better policies.

The states have been demanding More autonomy and to put an end to favoritism shown by Central Congress leaders for favoring Congress ruled Chief Ministers. The State ?Governments are up in arms against central Govt, take for instance the GST Bill – Prolonged process of getting State governments to arrive at consensus.

The following Chart Shows the Political Party / Coalition in Power During 1992-2012.

Is the situation headed like that in 1996-97 ? Mulayam Singh has already said that General Elections can be expected anytime within the next 12 months, fractured mandate is for sure. So is their any hope for Economy and Equities ?

Economy no longer solely driven by Central policy. Private sector investment gravitates towards states offering better infrastructure and governance. States competing against each other for economic development. Proof of Economic Development at State Level –

Gujarat – Direct tax collection growth in Gujarat at 17%yoy for 2010- 11 was highest in the country – Gujarat ruled by BJP for past 2 terms.

Bihar – The share of services to the state GDP has increased from 50.5 per cent to 61.6 per cent in the past 10 years.

Metro Rail Projects – Another State Initiative, though Centre has provided some funding too. Thus it it safe to conclude that local economic growth giving State governments leverage over Centre.

What Should be Your Equity Strategy
The New India will see some companies in Power, Infra, Real Estate, Telecom and Construction sectors backed by Political Groups break the nexus and strain the Balance Sheet. Foreign Institutional Investors will rejig their folios by shifting away from these Shady Political-CEO nexus kind of companies.

For Long Only Investors with 90% Plus Networth in Equities – We have already advised you to start Booking Profits and Diversify to other asset class. No more fresh exposure, please.

Investors upto 65% Networth in Equities – May Book Profits on Rise over 19,000 to re-enter the market later.

Investors with Less than 50% Networth in Equities – ACCUMULATE Stocks with Strong Management, cash generative and with competitive advantages other than political connectivity.

We are working towards a new interface where independent research of the company will be presented and updated on a daily / event basis thus making it more current for analysis.

Comments

2 Responses to “How does United States of India look for the Equity Market ?”

  1. How Regulators like TRAI, CCI and Special Courts are Fighting Corruption | Dalal Street on April 25th, 2012 11:05 AM

    […] our recent report, on the emergence of United States of India, we had written about the rise of Regulatory Powers to Curb Corruption at High Places including […]

  2. FIIs Indian Equity Strategy - GAAR / Tax Issues / Policy Paralysis | Dalal Street on May 3rd, 2012 11:15 AM

    […] they can’t understand how the Indian petty political system can deliver results given the emasculation of the two national parties. Regardless of how GAAR pans out, FIIs attention is drifting to other Asian markets like Thailand […]

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