THE WORLD IS BETTING ON INDIAN POLITICS

Indian Markets have been defying the law of gravity over the last few months. In spite of the gravitational force being posed on the market by the present state of the economy, the markets are continuing to break their established highs. This is thanks to the FII money that is pouring into our markets. A portion of this flow could be due to the round tripping of unaccounted money to support the appetite of our political system. However, a large chunk of it is fl owing in because India is looking better in the pack of the so called emerging/ developing markets. The chant of NaMo is building hope and confidence amongst the foreign fund managers and they are playing their odds to win this game of chance. Looking at the amount of monies that are at stake, it can be easily concluded that this would be the largest stakes ever played in the history of mankind.

In these circumstances, there is only one factor which can impact the trend of the market and that is a credible snap poll report that swings the odds against NaMo. Besides the hope, there is this sense of uncertainty that is emerging with respect to other markets. Japan and China, the two powerhouses of economic development in the Asian region, are facing rough weather. China has announced that it intends to focus on sustainability and will not further pollute its environment for the sake of growth. It has lowered its growth target and wants to consolidate itself. International trade in both these countries is slowing down and that should be reason enough for the Asian markets to get jittery. Russia is in a geopolitical turmoil of sorts and our far away cousin Brazil seems to be busy preparing for the FIFA World Cup
and the next Olympics. Thus, India seems to be the best bet with FIIs.

But at times like these, retail investors need to understand that chasing the herd could be dangerous. In fact, it would be much better to check on whether you really have a herd out there. It could well turn out to be a small pack of Wall Street wolves with hot money in tow that could pull the plug at the slightest hint of unease. Economic fundamentals are just about beginning to stabilise. But there are also some indications that the older worries may crop up again. The recent climatic developments in states like Maharashtra are a case in point. Unseasonal rains, hailstorms and the El Nino effect have suddenly brought worries about inflation creeping up again besides natural disasters that could compound the situation further.

Banks are reported to be sitting on Rs 5000 crore of loans which could turn bad because of this. In a situation which is already bad, this additional stress on bank assets will probably spell a death knell for them. Considering everything mentioned above, the retail investor should stay liquid and book profit in the stocks which are creating new highs. We would recommend this stance till the clouds of uncertainty clear away. Coming to our stories in this issue, our main feature is on Banks and their present state of affairs. Banks have been going through some very bad times with bad loans pilling up on their balance sheets.

The Indian banking system, which was considered to be a very conservative one and hence safe from the vagaries of the excesses that the western world indulges in, is suddenly facing headwinds of the same type. Any failure to control the menace at this stage itself could see the most important pillar of our economic model collapse sooner or later. The cover story dissects this problem of rising Non Performing Assets of banks and explains what has gone wrong so far. But more than a post mortem, what is needed is a prognosis of what lies ahead. Please read this well researched story from one of our guest columnist who has tremendous experience in international banking. 

Inspite of the uncertainty, for those who want to enter into the markets, here are some opportunities that you may want to invest in. Mayur Uniquoters, an artificial leather maker, is our Choice Scrip this fortnight. A high margin export business is its forte and hence the company is focusing on its expansion. To cater to this segment makes a lot of sense from the longer term perspective. Do read the detailed analysis of it and invest as suggested by our team of expert analysts.

HiedelbergCement India is the Low Price recommendation of the fortnight. The company has been faring well on all fundamental parameters. With demand expected to rise, the visibility of its future growth prospects becomes clearer. We carry out a detailed analysis of Nitin Fire Protection this fortnight. The company is into fire fighting equipment for industrial purposes. That itself makes it a unique proposition. But what is really driving us to recommend this counter is its future plans.

The company will soon be launching a new technology-based inert gas product. This should further shore up revenues and bolster its fundamentals. Read about the detailed rationale coming from our research side. The issue as usual rounds up with our other normal recommendations and features including those on commodities. 

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