Watching the Indian financial networks lately is better then watching the latest comedy flick. The talking heads are just trying to say something positive but the reality is there is nothing to say. My favorite was on Friday when an HSBC analyst said “inflation could hit 15% but growth should not be impacted much.”
Are you kidding me? Current inflation is 11.42% (a 13 year high) and for it to rise to 15%, that’s a 31% jump. It’s like saying crude going from USD 140 to 183 is no big thing. Even today, growth is getting affected and if inflation does hit 15% it’s definitely going to dull the “India Shining” story.
Luckily not everyone is so brain dead, an analyst from a local broker had the following rare gem: ”Why would a US fund manager buy ICICI Bank, when he is getting a Citi or Merrill a lot cheaper?”
One of the big growth stories for the past 3-4 years in India has been the rise of automotive component manufacturing companies. However, with the slow down of the US automotive market all 3 companies (Chrysler, Ford and GM) are all getting taken to the cleaners. Last week GM’s stock hit a 53 year low, I would imagine the guys over in Detroit aren’t ordering as many parts as they did last year. So much for the “decoupling” theory that was being tossed around a couple months back on TV.
2 responses so far ↓
1 Pankaj // Jul 5, 2008 at 10:22 am
Manish,
Great post! It truly is amazing how much of the ole smoke and mirrors game we’re seeing in India. Is it denial, absolute ignorance of basic economics on most “financial advisors” and politicians part, or a simple game of diverting the attention of non-professional investors? I feel that it’s a little bit of all these things.
I had put up a similar post recently at http://www.teknatus.com/blog/pjain
Cheers,
Pankaj
2 Gautam Kshatriya // Aug 16, 2008 at 8:32 pm
Manish, while I agree with your sentiment that most of these TV analysts don’t really have much to add - check out this funny YouTube video on my post here: http://www.moneyvidya.com/blog/?p=118
However, I disagree with your approval of the analyst’s preference for Citi / Merrill over ICICI. Surely these American banks are a lot cheaper - not denying that. But they’ve also written off ridiculous amounts of debt, there’s no clarity how long, or if they’ll ever be able to fully recover from their losses, or indeed whether there aren’t a few more surprises left up their sleeves.
ICICI bank - sure inflation is high, interest rates are climbing and bad debt is rising - but they were largely unaffected by the subprime crisis (I think that they wrote off some $200mn - a pittance, even for ICICI). Currently, its PE is at 20 - this for the largest private sector banks, that has proven itself year after year through its aggression, innovation and capable management.
Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com
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