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Global Investors Have Faith Only In NAMO, India Is The Only Long-Term Growth Story In World: Akash Prakash



Akash Prakash of Amansa Capital has provided a masterful analysis of the reasons for the underperformance of the Indian markets vis-à-vis their foreign counterparts. He has assured that this is a temporary phase and that the Indian markets will take off once again and shower multibagger gains upon investors




Gross underperformance of Indian stocks vis-à-vis global counterparts

Samir Arora of Helios Capital, a FII, has deep knowledge of Global markets.

He produced shocking data to establish that the Indian stock markets are grossly under-performing their foreign counterparts.

While Indian stocks delivered a return of only 8.8%, its arch rival China delivered a fabulous return of 37.5%.

The entire emerging markets basket has delivered a handsome return of 22.2%.

Even the S&P 500 did better with a return of 11.5%.

Four reasons for the underperformance of Indian stocks

In his latest article, Akash Prakash has provided a clinical analysis of the reasons why the Indian stock markets are performing so badly.

(1) Global investors have faith only in NAMO, political uncertainty is spooking them

It is a fact that the bungling by NAMO and Arun Jaitley has alienated even their die-hard followers.

The starkest example of this is provided by Porinju Veliyath who is known to a staunch supporter of NAMO and the BJP.

He ruefully admitted that the dream of “Acche Din” which NAMO promised may never be realized and that we are condemned to live with a “corrupt Political system”.

He also issued a “charge sheet” of “7 mistakes that eclipsed good governance”.

Later, almost as an afterthought, he stated that he is still a fan of NAMO because the alternatives are “simply horrible”.

PN Vijay, the veteran stock picker and member of the BJP party, also homed in on the “mistakes” that NAMO has committed.

Other influential commentators are also irked at the mishandling by NAMO, especially with regard to giving allegedly tainted politicians like Narayan Rane and Naresh Agrawal a seat in the Rajya Sabha.

Akash Prakash has opined that this sorry state of affairs is spooking foreign investors.

“What was seen a sure thing even a few months back, the current regime coming back to power, is now seen as more complex and not straight forward,” he has said.

“At the moment global investors have little faith in any alternative to the current regime,” he has added, implying that the prospect of RaGa occupying top position will lead to an exodus of foreign investors from India.



(2) LTCG Tax Fiasco

The LTCG tax imposed by Arun Jaitley in Budget 2018 has come at an inopportune time and spoiled sentiments of investors.

It is worth recalling that Samir Arora and Shankar Sharma had sent the clear warning that the move is not desirable because it would discourage foreign and domestic investors.

To compound matters, Dr Hasmukh Adhia, the Finance Secretary, made an imbecilic statement that the LTCG tax is justified because capital gains accrue “without any effort”.

Naturally, such idiotic statements from officials at the highest levels of the Government got the goat of investors who are struggling to make ends meet.

“The long-term capital gains (LTCG) tax has not helped. Most of the truly long-term capital investing into India from the US is t. exempt. The LTCG reduces their expected return. It also reduces the relative return advantages for equity domestically. Any reversal of domestic flows and markets will immediately be in serious trouble,” Akash Prakash stated.



(3) PSU Banks NPA Fiasco

Akash Prakash also points out that the colossal loss suffered by PNB and other junkyard PSU Banks has shocked the wits out of foreign investors.

Worse, even their private counterparts such as ICICI Bank are walking on the same path and notching up hefty NPA losses amidst scams.

“Foreigners are concerned by the Punjab National Bank (PNB) fraud and the seemingly never-ending banking system clean-up. When will this end? When do the non-performing assets (NPAs) stop piling up? How can a banking system have 20 per cent of its corporate exposures turn bad in the absence of a recession?” Akash Prakash has asked with extreme frustration in his tone.

He has also warned that the new Reserve Bank of India norms on asset recognition and provisioning will cause a “bloodbath in bank balance sheets”.



(4) GST Fiasco, Oil on the Boil

GST was touted as a game changer. However, it has earned the dubious reputation of being the “most complex” system in the World.

In fact, not a single day passes without the GST Department issuing a press release, circular or notification clarifying yet another obscure point of the GST tax.

“The complexity seems to be leading to misuse, avoidance and collections continue to undershoot. Will this much heralded and critical reform also disappoint?” Akash Prakash asked.

The surge in crude oil prices to $65-70 a barrel is wrecking havoc with the macro levels and will lead to inflation and high interest rates, Akash Prakash further warned.

“The tailwinds of easy liquidity and falling interest rates are over,” he said in a grim tone.

Not all gloom and doom

Finally, after listing out a long litany of woes, Akash Prakash has pointed out that there are a number of positive factors about India and that it is not all “gloom and doom”.

He has explained that India will see growth acceleration over the coming years and that 7 to 8 percent GDP growth is “eminently doable”.

“Earnings will rebound, profit margins will regress to the mean, and we will see double-digit earnings growth,” he said.

“Once we get thorough the current uncertainties, investors will come back to India,” he added.

Towards, the end Akash Prakash has confidently asserted that foreign investors have no choice but to come to India because “it remains a sustainable long-term growth story in a world devoid of structural growth”.

Conclusion

It is explicit from Akash Prakash’s analysis that the present underperformance of the Indian stock markets is a blessing in disguise for us because we can tuck into high-quality stocks at bargain basement prices. Once the clouds of uncertainty lift, the stocks will surge like rockets and shower mega gains upon us!








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6 Comments
  1. Ravi's Gravatar Ravi
    April 4, 2018 at 10:41 pm | Permalink

    Huge mistake to have Jaitley as finance minister. What idiot introduces taxes a year before elections. Mind boggling arrogance and stupidity.

    Also Modi doesn’t understand that a strategy to come to power cannot be replicated to stay in power. For goodness sakes, use your brain Modi. Why didn’t Modi pick a decent team to execute his agenda. He was more interested in party strength than anything else. What a shame for India.

    Reply
    • Prashant's Gravatar Prashant
      April 6, 2018 at 11:15 am | Permalink

      It is called as bias. Before 3 months everyone was bullish and happy about GST and demo implementation and have lots of faith in NaMo now markets are in doldrums so everyone is speaking ill about NaMo.

      Prashant

      Reply
  2. shakti khanduri's Gravatar shakti khanduri
    April 5, 2018 at 2:07 am | Permalink

    A difficult conundrum to answer.When present state of affairs of the country is visible to all,why is Modi unable to see it? Is he really cut off from ground realities? What has happened to his promise of providing best quality governance?Jaitley seems to be the most ill suited to finance portfolio.

    Reply
  3. shakti khanduri's Gravatar shakti khanduri
    April 5, 2018 at 2:13 am | Permalink

    It is feared that Jaitley will prove to be Modi’s nemesis.

    Reply
    • agnostic's Gravatar agnostic
      April 29, 2018 at 10:50 am | Permalink

      Jaitley is the scapegoat. Unbiased and knowledgeable people know who the real culprits are.

      Reply
  4. Suraj's Gravatar Suraj
    April 6, 2018 at 10:27 pm | Permalink

    It looks like Modi is on shaky ground with backward classes and farmers turning against him. Middle class also losing interest.

    Reply

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