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If you've bought into the pre-budget rally, good luck.

Another day and everything - moat, high returns, exceptional management, MoS, throw in all the buzz words - is falling. But don't worry, the elusive growth story, demographic advantage is still intact.

Don't buy the fall. It's easy to post - blood on street, best time to buy without actually putting your money where your mouth is.

Don't be surprised if there's a bounce and the euphoria returns. But, it'll only get worse before stabilizing.

Trust in God but hold onto your cash. Gold isn't bad. I'm glad Indians don't care what Buffett says about gold.

 

Good post...

Nifty Cracked 7000 and sensex 23,000

Big jump in even 6500 put. 468 scrips on lower circuit

Fear factor all around with or without 'silent' charts

 

If there's a new "multi bagger", " wizard/guru said/traded " thread, there'll be guaranteed hits. People only want to read/hear what they like and will make em feel good.

Waiting for reassuring copy paste quotes. Only if quotes made money.

At the risk of bragging, I said so! I'm happy if I dissuaded somebody from buying into the fall.

BTW @darth post results, capital raising a concern for banks, thankfully the parent mints money.

When a "retail investor" on internet forum knows how to better run a business than the professionals doing their jobs, it's time to be worried.

Away from the noise, had the opportunity to attend CII 1st Banking Summit and listen to the RBI Governor and make sense of what the problem with banks is. Even the guv referred to market turmoil and elusive growth, which won't change without taking corrective actions.

Will try and find the address & upload it later.

 

Issues in Banking Today

Dr. Raghuram Rajan, Governor - February 11, 2016 - at CII’s first Banking Summit, Mumbai

 

There is already something on money control. I saw it on the TV. He was impressive as usual. Long overdue and credit to him for taking the bull by its horns. The best we have had in decades and helping him on this exercise are two females. After the books clean up, I hope his next step is to stop Government recapitalisation ( which he confirmed the FM has committed to provide this time around). Time inefficiencies are punished.

 

Good speech. In the end it will be good even if pain is there now.

The market turmoil will pass. The clean-up will get done, and Indian banks will be restored to health. While we should not underplay the dimensions of the task, we should be confident that it is manageable and that the Government and the RBI will do what it takes to make sure that banks are able to support the tremendous growth that lies ahead. Thank you.

 

@darth

Inefficiencies in lending, credit appraisal or all across the board? If the likes of a Yes or a Kotak had exposure to the troubled sectors, would it be inefficiency if it lead to NPAs?

From memory, Aditya Puri said they made money by not being in certain businesses. Even among PSBs, you'll see banks with little or no change in NPAs.

The government as an owner is committed to standby its banks. No problem with that. The US Fed & other regulators did it during the credit crisis. Even the private banks will have access to regulatory capital, if needed.

I think it's in the guv's address too - PSBs credit offtake has been hampered due to the stressed assets on the books.

I’ve not checked these details and am going by memory so sorry if I’m not anywhere near what you're looking for.

 

If you hearD the Guv, he said it right.....even the best credit appraisal systems cant prevent NPA's and most NPA's dont involve malfeasance ( i would say it was a politically correct statement he made). The inefficiencies i refer to are those that creep in due to this on going availabilty of the safety net ( in the form of recaps) - the parent is always there to bail the child out.

Dont forget, credit appraisal isnt a one time exercise at the time of disbursing. Its on going and efficient credit risk management / managers should pick up the distress signals early on. If they don't, clearly in pvt sector and foreign banks the credit head has a lot to answer.

Further, do you think the SBI head cares a damn that about its share price ? Do or can Rana or Sobti also show this disdain?

The Govt recurring bailout of PSB is a big problem. To big to fail should occur. Don't forget its you and I who eventually pay for this.

The US Fed, others did it..... Once in how many years? And you think their government can dare make such bailouts a habit?

 

But we live in a less than ideal world.

Economists and Politicians will always find a way to fix what's not broken and then fix it again.

The private sector players have an incentive to help manage the share price. The pay disparities. But that's a different thing.

Yesterday, I think on ET Now, MoS Finance was blaming the NPA problem as "toxic assets of UPA".

The one thing I agree is that a bailout is like going to a casino and getting unlimited chances without the risk of losing your money. But, would you or me like to see a run on the bank situation or just play the exchequer blame game?

 

And this is getting technical

Currently provisioning follows an incurred loss model. ie provide for credit exposures only if signs of distress. The world is moving on but. Basel 3 and IFRS 9 now provides or making provisions on an Expected loss basis. The scope of the impairment requirements is thus now much broader. Previously, under IAS 39 and current RBI norms, loss allowances are only recorded for impaired exposures. Going forward banks are required to record loss allowances for all credit exposures... ( on the basis of expected loss even though the loan is good today.

Further under Basel ( otherwise commonly referred to as Minimum Capital Requirement at banks), Banks have to submit to the RBI each year a board approved ICAAP document ( Internal Capital Assessment Process). This amongst other thing also covers the impact on the banks profitability and capital position of certain stress situations and differing intensity.

The situation clearly reflects the rot, understanding of risks, the accountability that exists at the top levels ( banks with skeletons tumbling out)

 

This was spoken of, during the Q&A session and we're also going to move to dynamic provisioning. CAMELS to RBS. IFRS compliance by 2018-19. I think even now there's institutions with provisioning for standard assets.

Anyways, let's leave it at this and go back to stocks. What's the call for tomorrow? Chinese markets open on Monday after a week's holiday.

 

Toxic assets of UPA - just political elbowing. But the fact is that most of these sticky loans relate to 2008 or hereabouts. A time when the Government arm twisted these PSB's to lend to kickstart and protect the economy from the 2008 sub-prime. This probably was India's version of quantitive easing.

Keep government out, make boards more accountable, bring in professionals.... All already recommended. Hope Rajan does this too. the bailouts should reduce both in quantity and frequency.

 

Provisions on standard asset is a current requirement. All banks need to raise this. But its a small percent upto 1% if i am not mistaken.

Whats RBS? CAMELS I know.

You right. Leave this. probably not the place to have this kind of a discussion.

What's the call for tomorrow - i am no soothsayer so will leave it for the 'i had predicted blah blah ' to answer that.

At the moment enjoying the money made on closing my USDJPY trade. Something to cheer about besides the gold i bought in q4 2015.

 

Congratulations on the Yen trade. Looks like more upside with flight to safety. If the Fed does a U turn on rate hikes, gold looks a good bet. GS is bearish on gold though.

Before this, I had never seen negative yields! Learning something new everyday.

 

Ya upside exists ... Like my advisor told me : we hear people cutting losses. Mine he said was a case of cutting profits .

But Japan isnt a place I claim understanding of. So asked him to close 60% atleast.

Gold - bearish or bullish : key is the timeframe. GS bearish over what period? 1 year, longer? Shortterm clearly they would have gone long to some extent beginning first signs of global turmoil. Flight to safety during turmoil has one destination that is gold

Gold @ 30,000.

 

Budget round the corner, expectations flying high about the positivity contained therein, voices indicating it will trigger the bull market again with all the infra spendings etc.

But I would rather place my belief in our Governor. Thus I sincerely hope that

- our Excellent Governor's advice is heeded by our pragmatic FM in that it shouldnt be simply assumed that time is still in favour of the government to continue their last year’s exercise of stepping up public investment in infrastructure, even if it means we have to defer by a little the sticking to the fiscal consolidation path. Here in we have committed to the world and investors to assure them that the Country would not stray into populist or spend-the-way to growth approach.

- the feel good factors like the 7+ % growth, low oil prices, low inflation and a low current account deficit doesnt lure the FM to plunge headlong into any borrowing to fund public investment in infrastructure programme or higher borrowing strategy discarding the future consequences of this.

This message has been in his usual style of speaking out his mind with gusto conveyed loud and clear to the government particularly to the Finance Minister. Thankfully our FM has responded that he is weighing the pros and cons of higher public spending and its impact on the fiscal ganit.

Looks like greater long term benefits if we go the Guv's way...... Else who knows chances of Sensex kissing 100,000 may get pushed back

 

Even Bimal Jalan in a recent interview advised against funding growth by public debt. But my question is - if not by public spending, where's the money coming from? The private sector won't go in with investments and PSBs are already stressed and it's reflecting in the poor credit growth. Assets remaining unproductive due to lack of cash flow.

At the CII event yesterday, McKinsey had some suggestions and it was just a copy paste of what the US did - TARP. Like the guv said - consultants make money regardless of what happens.

At a recent ET event, the PM talked about the hypocrisy regarding subsidies and subventions/incentive. Indian businesses are used to support from the govt. His point was not to eliminate subsidies but target and rationalize them. But I won't read much into a politicians statement. Like Samuel Jackson quote in a movie - politicians stand only for one thing, reelection.

The feel good factors only remind me of - India Shining, makes for a good advertising campaign.

Don't you think the two points which were recently argued - FIIs & Indians buying gold preventing financial independence of Indians are at play now? FIIs selling equities, Indians who don't care what a guru says about gold. Blame the firangis?

 

This is abosoultly absurd talking about shortage of funds any where any time in world and just not more than useless noise from some new produces of business schools practicing modern non practial finincial models. This is all academic and useless.When ever there is demand for any product for any industry,it will go for expansion and funds will always available.I am in manufacturing for last more than three decades and have exposure and interaction with manufacturing around the globe and never heard anywhere in world that any profitable producers(except temporary cyclical profits) is not able to expand due to shortage of funds.This is all useless noise ,all profitable vantures with shortage of supply with huge profitable demand will always get funding .Rather fund are always waiting on the door step 24*7*365 for such expansions and investments.Rather availability of easy money is root cause of all Economical problems in world and nothing is better than tight envirenment for such businesses to control their mushrooming .

 

It is easy to be wise in hindsight.What was the RBI governor doing when banks were piling the bad loans ?This is my personal opinion but I do not see that he has done anything great. Finally RBI has tightened NPA norms. The RBI gave banks enough leeway in the past by allowing the 5/25 rule, SDR, and infra loans classification as priority sector lending. Really there was nothing left but to finally acknowledge NPAs as NPAs.

 

You got Bimal's interview all wrong. The Ex Guv's opinion/ message was directed towards private sector companies and not the Government for very soon its gonna be private sector companies who are either flushed with or have easy access to unlimited liquidity which will start building roads, electrifying villages, developing smart cities, providing low cost housing etc etc.

Infact even Rajan should have told the Industry captains and not the FM to not induce growth by increasing borrowing.

1st March ET headlines ( would make an interesting read)

"Govt withdraws from infrastructure development. Asks Private Sector to discharge this responsibility"

Our sovereign rating would sky rocket, govt free of worries to manage fiscal, current account issues, we will become an economic powerhouse, sensex will not just kiss but even bed 100,000 much before the current predictions. Gold too would zoom past 100,00 0 India would have truely arrived on the global stage.

The 24x7x365 funding will always exist to be tapped into.

Having said this I know you ain't stupid and when you mentioned " Even Bimal Jalan in a recent interview advised against funding growth by public debt" you actually meant - what the govt spends to sustain its citizens and that this spend shouldnt be through increased borrowing... Creating fiscal issues, breaching our commitments, leading to inflation blah blah.

Ofcourse both playing out. But hey remember there is always a fall guy. Blame it on FII some will always do.

Wonder how opinions swing overnight to it now being a bear market.... Despite India shining, growing at est 7.5%, insulated from China etc etc. Fundamentals not at play is it or have they simply vanished overnight.

Like I told you, atleast some people are making serious money in this carnage and this very group will make serious money whenever the market rises. For the retail investor it will be like " heads I win, tails you loss" - so basically always loose.