India's inflationary measures
The government’s attempt to get the best of both the worldsThe governor of the Reserve Bank of India is quite a busy man these days. The chief of the Central bank of one of the fastest growing emerging economies is doing some fire fighting to curtail inflationary trends in the economy which has been growing at a phenomenal pace in recent times.
But, unfortunately, the Indian central bank is not truly an independent institution in reality and has to consider political aspects and pressures while taking major decisions. Thus, the rising inflation --- measured by various parameters including rise in wholesale price index (WPI), price indices for urban nonmanual labour and agricultural labour --- for past few weeks has really upset the finance minister especially due to local elections in various states wherein rising inflation, even today, is considered as a failure of the government to control rising prices. This, in turn, has resulted in RBI's decision to hike benchmark interest rates and also the percentage of money banks have to maintain as cash. This serves the purpose of sucking excess cash in the system which makes demand run ahead of supply.
At the same time, the government is taking its own measures to bring down inflation by trying to artificially check increase in product prices. So, we have seen it slashing customs duties on various inputs and prices of transport fuels recently.
Now, this interference of the government in the market place seems to be reversing the kind of result the RBI wants to see. Basically, the central government sucks money from the system to curb the excess demand --- the demand in excess of supply, which drives prices up. If the government is trying to bring the prices down, the demand will not recede as expected by the RBI. And, this means, we are entering in a long mess wherein at one end the RBI will go on rising interest rates to curb demand, while the government's urge to bring prices down will keep the demand intact!!
This sounds weird. The government is trying to go in two different directions at the same time. It wants to curb inflation without seeing a drop in economic growth. Now, this is like trying to have the cake and eat it too!!
Labels: Policies
Vodafone bags the Hutch Puppy
Vodafone has apparently struck a deal with Hutchison Telecom International (HTIL) to buy its 67% stake in its Indian operations for over USD 19 billion. This values the total Indian operations of the Hong Kong based telecom major at USD 826 per subscriber or INR 37,000. Now, that's a steeper price to pay looking at the valuation of INR 34,000 of Bharti Airtel, the largest mobile operator in India. Further, IDEA Cellular, which is tapping the primary markets to raise INR 1,250 crore values itself at approximately INR 19,000 per subscriber.
Amazing price tag for Hutch, isn't it? This perhaps shows Vodafone's desperation to enter the fastest growing mobile communication market in the world. The Indian market is expanding by 5-6 million users every month! And, despite this, market penetration is over 14%!! This is estimated to touch 28% by the end of this decade. That's mind numbing pace!! Perhaps this answers the obvious question of why such a steep pricing. But, there is another obvious question left unaddressed and unasked by the popular media: Why Hutch wants to move out of such a seemingly lucrative market after having over 16% stake?
Interestingly, nobody is in a mood to either ask or answer this question. Well, there is this vibe from down under the market currents. Hutch knows for sure that it has to make big investments in 3G business to remain competent. It has already spent over USD 20 billion in such projects. So, it needs more money to keep growing. But, why to sell the entire stake? It can very well offload some of its stake to the Indian public. That way, it can have its cake and eat it too. Now, comes the unscratched part of the story. It is rumoured that over a period of time, HTIL has routed investments in its Indian operations from various sources, some of which, it may not be comfortable to disclose to the Indian regulators. So, only way out for Hutch was to move out of India!
Well, that sets an inorganic growth tract for Vodafone in India. With the entry of world's largest mobile service provider in the country, the Indian telecom industry is up for a major excitement in the foreseeable future.
Labels: Corporations
Growing things 3
Century Textiles This story has got two very strong drivers : robust growth in cement sector and realty development plans of the company.
Century Textiles is one of those very few companies with a connection to realty boom, which also have very sound basic operations.Its cement business is doing well and will continue to do well. also, the company is going to develop its land at one of the hot spots in Mumbai. I don't know, how much beneficial that will be to the company but it adds to the fizz given the realty boom. Moreover, some sources in the market predict a nose dive in the realty market in about three months or so!
Go for it if yu are ready to accept a compay with good basic operations even if the realty part ceases to remain lucrative.
Labels: Money matters
Growing things 2
Teledata Informatics This one seems to be a purely speculative bait.
The scrip is hitting the upper circuit alomst every session. I think, somebody has been assigned a job of propping up it's P/E to some respectable level. It should be noted that the company did some resturcturing of its business in November last year. The upward momnetum in the scrip strated in December.
Think about getting into this scrip if and only if u wear a heart of steel and posses a money purse saddled with risk capital!
Labels: Money matters
When Sachin's ton wins the match
Wednesday 31 January 2007 was a rare day in Indian cricket. On this day, two things happened on after another perhaps for the first time in recent memory. Sachin Tendulkar hit a century and India won the cricket match!!
As a matter of fact, India has almost always lost the match wherein Sachin socred a century. This is amazing! Over a period of time, some of his fans have realised this thing. For them, sachin's performance has become more or less a Catch 22 situation! They want Sachin to hit a ton but they also know that if he does hit one India may very well lose the game!! Wedenesday's instance may have provided some relief to Sachin's fan. And, it was an opportune event given the close proximity of the World Cup!!!
Labels: Cricket
