Reality Strikes Finally

190825 – First and foremost, our tributes to the former FM #ArunJaitley. Most of us who have heard him debate in the parliament have ended up learning something or the other. He will be remembered forever surely for these things: GST, IBC, NCLT and Benami Properties Bill. Om Shanti.

I in the previous posts have been writing that one major reason for the correction in Indian market apart from the global slowdown is the cleanup process which is going on the debt side of companies. As I post this writeup today, an FIR has been filed against NDTV’s founders, and raids have been conducted on the JET Airways founders. Both the companies are suspected of swindling crores of investors monies.

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Coming back, are the raids justified? Of course yes, is the govt aggressive in the clean up process? Of course yes and that’s hurting the economy too, is there any alternative? No is the answer. So there is no other option but to grind through the pain for better corporate governance and transparent balance sheets.

Finally the reality has stricken the Finance Minister and the government on the economy side. The biggest positive is that finally, the government has agreed that there is a slowdown. Acceptance is the first step to a solution. Until you accept a problem, a solution can never arrive.

There are major three pain points in the economy right now, and solutions to all three were attempted too. The three pain points are Liquidity Crisis, Automobile, and Housing Sector. And one major confidence booster has been the removal of additional tax on the FPI’s. Remember FPI’s were continuously selling since the budget taking a severe toll on the markets. The clarification that we are back to pre budget rules will sooth them a lot.

You all would have already read through the proposals and hence would not like to dwell in all of them, but few of the most important ones are these:

– Clarification that Petrol and Diesel cars will not be banned.

– You can still without worry buy the BS-IV vehicles.

– Additional depreciation on the cars bought now.

– Lifting of ban on government departments on buying vehicles.

– Additional infusion of money into PSU Banks for easing liquidity.

– Additional allocation towards NBFC’s.

– Making EMI’s cheaper.

There are many more announcements made, and these will surely lift the sentiments in the coming week. The best part is that the FM has announced that she would be coming with Part-2 and Part-3 of the proposals also.

A stimulus package is announced by the governments when the economy of a country is slogging. Such packages have been announced by the governments in history too and is a common phenomenon across the world. Let’s now wait for two more announcements which may happen soon. These small steps can lift the sentiments considerably.

On the valuations, my stand remains the same. We are now cheap. As mentioned in the previous articles the pain has been overstretched this time. This is not the first time the market is seeing such movements and nor is the last. If you cannot invest more at this point at least wait. Selling at the bottoms should be avoided. Remember we are at the bottom region of the U. Warren Buffet says: Be Greedy when Everyone is Fearful. With my conversations I can humbly submit that investors are severely scared right now.

Feel free to ping us anytime. Do share this writeup with other investors.

Expecting Sentiments to Turn

Vivek Karwa

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