LOOMING RECESSION

We have been talking about the impending slow down in India and the lack of strength of recovery in US coupled with the turbulence being generated in EU nation right from the Mar-Apr-11. The non stop rise of rate hikes continued and the RBI is willing to sacrifice the growth .That time published that the State Assembly Election in the 5 states are holding and we expected some policy decisions that can prop the Index but not the economic growth. 

Now Thanks to ET covered in detail.

22 AUG, 2011, 10.10AM IST, 

Global economy is dangerously close to recession

Concerns over the wavering US economy and Eurozone debt crisis has put world markets in turmoil and most of them witnessed massive sell-offs in the past week. Excerpts from a Morgan Stanley research report dated 17 August 2011. 

Recent economic events in the US and Europe have been disappointing. Europe's insufficient response to the sovereign crisis and the events around lifting the US debt ceiling have negatively impacted the financial markets and substantially eroded business and consumer confidence. In the first half of 2011, US GDP grew by an annual average rate of less than 1%, which shows brittleness of the US recovery in the face of external shocks (oil, Japan earthquake) despite ongoing fiscal stimulus. 

On the other hand, Europe's past rate hikes, the sovereign crisis and the fiscal policy tightening will take a toll on its growth. The euro area GDP is likely to stagnate later this year and in early 2012. Because of such developments, Morgan Stanley has reduced its global growth forecasts to 3.9% from 4.2% for 2011 and from 4.5% to 3.8% for 2012. The report also lists the outlook for various regions. 

United States: The growth expectations are downgraded because of expected slower pace of income and spending growth. Also, there are concerns regarding the willingness of businesses to hire and invest. 

Euro area: The GDP growth estimates are reduced by a full percentage point for this year and the next year owing to softening domestic demand in the core countries. This could affect the euro area as a whole, slowdown in global trade momentum marked by deceleration in manufacturing indicators, difficulties faced by banks in accessing term funding at reasonable rates and likelihood of increased funding costs that could impact investment projects. 

United Kingdom: UK will follow a pattern of weak (but positive) growth. Its export led recovery is likely to be hit due to global slowdown. Also, lack of spare capacity and pressure from global inflation will make 2012 another uncomfortable year for the Bank of England. 

Japan: Morgan Stanley has reduced the country's economic prospects due to weakening global economy, a delay in post-quake reconstruction activities and tighter electricity demand-supply conditions over the medium-to-long term. The main downside risks are deflation, concerns regarding fiscal resources and higher taxes. 

Australia: There are growing signs of weakness across the non-mining related sectors due to restrictive monetary and fiscal policy and adverse wealth effects as house prices are falling. Also, consumer sentiment has deteriorated significantly in recent months, which could raise the prospects of higher unemployment. 

Asia (ex-Japan): The report has reduced the GDP growth estimates for the region to 7.6% in 2011 and 7.3% in 2012, from 7.7% and 7.8%, respectively. The region is likely to decelerate due to a significant slowdown in the developed world growth. 

According to the report, countries which are more externally oriented, such as Korea, Singapore, Malaysia, Taiwan and Thailand, will see a greater adjustment in their growth outlook compared with the economies with higher dependence on domestic demand, such as China, India and Indonesia. 

WE ARE BUILDING THE GROWTH & SAFETY.....

Emerging markets can drive global recovery

2 Hours ago
The emerging market economies will remain key to global recovery and will continue to display the resilience they exhibited during the global meltdown……ET covered

'India can lend stability to world'

BS Reporter / New Delhi August 30, 2011, 0:19 IST

Finance minister says sustained high growth requires nimble, transparent, coordinated responses, allowing non-state actors to shoulder much more….. BS covered today.

In my previous article posted we discussed the same and the opinion being circled among others mind also

PEOPLE WIN but not markets!!!!

The US sovereign debt might have got rerated on the grounds of slowing economy.  The cues from the Fed Chairman Ben Bernake are crucial for markets across the globe at this juncture. The QE-3, Quantitative Easing may prop up the sagging economy and may correct it in due course of time. The extra funding from Govt may give opportunity to US industrial houses to generate employment opportunities there by spending more to propel the recovery in economy. 

In this current scenario the foreign brokerage firms are putting India on watch, down grading the the SENSEX targets. The CLSA has down graded from 19,500 to 18,200 and Morgan Stanly has brought down the target from 22,750 to 18,850 for 2011. These firms have down graded India due to the global linkages and dependence that has increased from 2008 to current situation. The share prices likely to get de-rated depending on the emerging global scenario.

“There is a good reason to hope that the crisis is over in two to three years’ time”, European Financial stability Facility (EFSF) Chief Klaus Regling quoted while mentioning about the need for collaborative cooperative effort needed among the member countries to support for reforms and sorting their budgets. So the severity is sustained for next 6-9 months for sure. The markets across the globe will find only technical bounce rather than rallies in equities. The Switzerland banks are trimming their teams so banking professionals close to 10,000 will get their pink slips. The Euro zone crisis will have short-term impact on the markets across the globe but the de-coupling will emerge especially in India may be from pre budget rally in Feb-2012. The Europe and US debt crisis gets solution by fiscal stimulus is the remedy for foreign markets and policy liberalization is for our markets.

A positive note on inflation is from Goldman Sachs which predicts that the inflation may recede to 6% by March of 2012. The RBI has used 11 times rate hikes since Mar-10, to curb inflation but the petrol price hike coupled with product input cost rise on global front spiraled the inflation above 9%. The capital inflows to emerging markets like India will increase as the search for growth and safety intensifies.So we can expect trend reversal of rate cuts to boost the economy. The short week likely to close on positive news from the US and the Nifty may close above 4850 level and may wait for US president Obama announcement on 5^th which is may the main reason for Bernanke non committal at Jackson Hole, Wyoming.

The DOW and S&P of US are going to be listed from Monday on the NSE. In order to encourage participation, NSE is offering no transaction charges till 29 of Feb-2012.

ANNA HAZARE UNITED ALL: Anna Hazare who united Indian middle class who got severely being affected but scattered, to raise voice against ever talked and less addressed deep rooted corruption issue. Anna made the over whelming crowd at Ramaleela maidan to cheer on the achievements by forcing the central government to accept the JAN LOKPAL discussed in parliament. He ended fasting on13^th day, asking people to become ANNA by following and leading spotless character and sacrifice to fellow being. The media helped to highlight the issue and the common man voices were aired. The 74 yr old dedicated Gandhian follower maintained fasting for 12 days. He says next agenda is ready for electoral reforms agitation. His fight would be for “Right to Recall” and “Right to Reject”. The good beginning shall bear fruitful results.

Steve Jobs resigned: In any body’s life disease is curable but the death is not. The despair put’s immense pressure on the mind, when it becomes incurable leading to death. The Apple chief Steve Job, who built an empire against all odds, succumbing to such pressure, finds joy in living with incurable pancreas disease. He is a visionary, traversed India for enlightenment in Uttarakhand but could cleanse his soul found the strength to establish Apple Inc. with his friend Steve Woznaik, also a college dropout like him. Both sold their beloved goods and could gather $ 1300 dollars to kick-start the company in a garage. His skills and vision shaped “Mac” computer but Apple Inc became super rich with the success of it’s incredible products like iPod, iPhone and iPad that changed the mobile world, now under the leadership of Tim Cook, the then COO of Apple. He built an empire bigger than many countries reserve, with 100 billion dollar business growing at scorching pace, now the new management to take it forward to nest level. 

Critical times… troubled waters…

The growth in our economy is not contracted but we are making it to grow slow to control spiraling inflation. The growth will have no significance unless the inflation is controlled. The Nifty is now adjusting to the future earnings. The world economy especially the EU is cracking like in 2008. The world over growth now has become a big challenge as the developed nations like US are at negative growth coupled with high un-employment, low productivity are at stagflation stage.

In this emerging scenario the export dependant, driven countries will depend on their local markets for sales that creates a situation of glut will will create and aggravate economic problems where in the production cuts will become the order of the day. The classic examples of de-rating will happen on most developed sovereign nations. The markets will react to a situation to grind it lower to lower level. In India, the Govt. is grappling with many issues related to corruption and governance. The last 3-6 months the policy measures for triggering the markets are at bay.

Now our situation is forcing us to think twice, whether to continue our tight monitoring policy or encourage the economy to open for growth. The production cuts are happening in auto mobile and now in stainless steel. The iron ore production has reduced that forced steel companies production cuts. The coal shortage due to floods in coal mine areas in Australia spiraled in cost but the India situation is not seriously effected with Coal India support. The Jharkhand pollution control Board has given notices to Coal India for closure of Mines due to environmental issues. The situation may create another shortage problem to power and steel industries. The ripple effect will have cascading effect that can derail the growth estimates. The next five year plans starts from 2012 to grow above 9% will become a big challenge that topple and crumble the foundations made so far.

The Nifty has exhibited great support at 5200 level was not easily broken but three time support has built retail investor participation but not left anything special. The situation now has changed gradually to touch a level of 4700. The fall from the reasonable bullish zone above 5850-5800 to 4700 is more than 1000 points. The Reliance, DLF, Tata motors, Tatasteel, Hindalco, STER, Sesa Goa ICICI, AXIS and SBI lost their shape and attractiveness. The deformed stocks will get a healthy look only when the Nifty crosses 5100. Now the news flow is against for blue-chips. The standouts will have very bright future along with these stocks. The midcaps will out perform only after one year or so. The fancy look is not available and the growth driven rose picture is not saleable in these market conditions.

The technical bounce back shall be used to off load the positions as they are not going to yield any significant results. The risk reward ratio for these stocks looks attractive on the face of it but the multi-baggers will emerge only after 2-3 years that to on selected counters. The world economy is a concern for now but the emerging markets will out-perform in the years to come.

Rakesh Jhunjhunwala

26 AUG, 2011, 03.49AM IST, AHONA GHOSH,ET BUREAU 

Rakesh Jhunjhunwala: The fire of investing in stocks is still in me. I eat, sleep and live markets

An investor with the Midas touch, lover of the king-size life, a relatively recent family man, and now a budding philanthropist. ET attempts to unravel the multilayered world of Rakesh Jhunjhunwala 

July 5, 2010: Rakesh Jhunjhunwala (RJ) is celebrating his 50th birthday in Mauritius at the InterContinental hotel. He's flown in along with 250 friends who will partake of the festivities over three days. The birthday boy has also brought along 12 of his cooks to prepare special Marwari dishes for his guests; a part of the hotel has been cordoned off for this purpose. 

On the guest list, which includes some of Dalal Street's and India Inc's biggest movers and shakers, is Hiren Ved, a director and chief investment officer at the RJ-owned Alchemy Capital. Ved, who has known RJ for 17 years and fondly refers to him as bhaiya, still has one vivid image of the revelries etched in his mind, RJ on the dance floor. 

"He was dancing his heart out with this shirt tails out, least bothered what others thought of him," chuckles Ved. That's the credo India's first investor to make a billion dollars from the stock market, that's how much Forbes had estimated his net worth in 2008, swears by. And at 51, RJ still has the time and energy to work hard and party harder. 

"If we were partying in Hong Kong till 6 in the morning or gambling till 3 in the morning, he would be fully awake and on his screen tracking the Indian markets, which would open at 6.30 am Hong Kong time. The rest of us could barely keep our eyes open," recounts Ramesh Damani, a member of the Bombay Stock Exchange who has known RJ for the past 25 years. 

If RJ can do that, it's because he's still an investor with fire in the belly, sifting through a heap of stocks for tomorrow's multi-baggers. "I still eat, sleep and live markets," says the investor who was christened India's Warren Buffet for his penchant for, and success with, value investing. Sitting in his plush 15th floor office in South Mumbai's commercial hub Nariman Point, RJ's eyes light up when discussing stocks. 

A diamond ring sparkles on a finger of his right hand as he flicks the ash of an India Kings cigarette into a large marble ashtray. "Success is measured quantitatively by everyone including myself. Money matters but I enjoy the process more, and have never used unfair means to make wealth," says RJ. 

Markets are still at the core and the good life a natural corollary, but of late, RJ has widened his universe to include two ingredients, one that most people consider a given; and the other that most folks don't consider at all. 

OTHERS IN THE PICTURE 

Let's start with the first element: 

Family. In June 2004, after 17 years of marriage, RJ and his wife had their first child, daughter Nishtha who is eight years old now. Two-and-a-half years ago they had twin sons. "The greatest joy in life is having a child. I adjust to their timings now; they can't adjust to mine," says the proud father. 

The even newer constituent of RJ's life is perhaps more unlikely, the man who believes that greed is good also believes giving is good. Recently, he announced in a public forum his intention to pledge a fourth of his wealth by 2020, which he hopes will amount to a billion dollars, to charity. "Money is an outcome and not the purpose... As of now it is just a pledge. I have not given away the money but by God's grace I am sure it will happen," he says, adding he also wants to be involved in deciding the causes into which the money goes and in monitoring its deployment. 

A die-hard investor, lover of the good life, a relatively late family man, and now a wannabe philanthropist, is RJ for real, or is this just a well crafted image-building exercise? After all, as his detractors point out, and there are a few of them, RJ is just trying to mirror Buffett. After being put on the same pedestal as the Oracle of Omaha on the investing front, he wants to attain the same status with his philanthropic efforts. 

AN OPEN BOOK 

Others point out to some visible, if arguably superficial, contradictions in the man: his love of the tipple and everything else that goes with it don't quite sit well with his projection as a family man and as an enthusiastic philanthropist. 

To be sure, it's easy to be sceptical about RJ with all his inconsistencies. Yet, here's a man who has never attempted to hush up his lifestyle. "My biggest insecurity right now is my health. I eat at odd times, drink like a fish and smoke like a chimney. I need to change my habits. I want to live long not just for the kids but for myself," says the man who started taking yoga classes six months ago. 

Such transparency spans across his personal life to the professional. "When he bought Titan, the benchmark of his portfolio, he shared his ideas with friends. Unlike other traders who buy stocks secretly, he has always been transparent," says Damani. Today, RJ can look out of his duplex apartment in upscale Malabar Hill in South Mumbai and take in the sweeping view of the Queen's Necklace with a Cuban cigar in one hand and a scotch tumbler in the other. But he didn't get all this on a platter. 

The day this writer visits his home, she gets to see a totally different side to a man retail investors consider a god. The children are running around in the sprawling living room, a nanny is pandering to their needs, and at the other side of the room a barrage of hired help is busy dusting, polishing and sweeping the house. 

That's a typical Sunday morning at the Jhunjhunwala household. As RJ bids his yoga teacher farewell in the second living room, he sits back in his chair and starts describing his earlier days. He got married in 1987 and for the next two years, had his back to the wall. The luxury RJ enjoys today was a distant dream then. "The markets were bearish, there was no activity. I had no income and people would advise me to seek another career," says RJ as he dips a garlic toast into a cup of milk, his breakfast. 

BREATHING WORK 

In a short film made on RJ for his 50th birthday celebrations, longtime friend and investor Radhakrishnan Damani recollects their earlier days when they would spend hours discussing the market till the wee hours of the morning. 

One day, they were sitting on the streets of Nariman Point till 3 am when a police car drove past and ordered them to go home. "I went home, but Rakesh went to Delhi Darbar for biryani and came back to my house at 5 am with the day's newspapers to continue our discussion," grins Damani. 

In his heyday, RJ was known to put in 16-18 hours tracking and talking stocks. These days he has slowed down, although not by much. "Especially after his kids were born, he is making a lot of effort to spend time with his family and is looking after his health," says Ved. Shankar Sharma, cofounder of First Global, says: "I keep telling him to lose weight, forget about the markets, and that health is more important." Sharma and RJ have been involved in some spectacular faceoffs, but that's only because of their contrasting styles of investing, the former thinks macro and RJ's approach is bottom-up. Otherwise, they're perfectly comfortable meeting over a drink. 

"Rakesh always tells me that people will be surprised to find us sitting together," says Sharma. Perhaps with age both Sharma and RJ are more open to accepting each other's opinions, even if they are as forceful as they were in the past. As Ramesh Damani says: "He has reached a happy stage and has nothing to prove any more." 

Such a stage in life allows for room for new-found indulgences. Recently RJ bought eight racehorses, stallions and fillies in a three-way partnership with two businessmen. RJ is a 50% owner and says he spent around Rs 75 lakh on this purchase. Then, he has also forayed into Bollywood by teaming up with adman-turned-filmmaker R Balki to make a movie titled 'Hinglish English.' The film is about an Indian who goes to the US and learns English there. RJ is financing the project, he isn't saying how much he is sinking into it, that stars Sridevi and features Amitabh Bachchan in a small role. 

A NEW DIMENSION 

Beyond such treats, however, key events in RJ's life have triggered actions of more consequence. After his daughter was born, RJ had this dream of starting an orphanage. A year ago he did just that. He opened an orphanage in Panvel on the outskirts of Mumbai and has 80 children, between five and eight, enrolled. Over the next two years, he wants to increase the count to 384. His brother Rajesh, who is also a CA like RJ, manages the orphanage. 

"I have enrolled them in English-medium convent schools and local Marathi schools. I will further the education of those who are academically inclined, and those who are not, I will put into vocational training," says RJ, who spends Rs 3,500 per month on a child. "I spend 25% of my dividend income on charity," he adds. RJ is a firm believer in the virtuous cycle of greed and giving: "Making wealth and giving are two sides of the same coin. You can't give it unless you make it." He still wants to create wealth, perhaps now even from overseas. 

"I want to replicate in global markets what I have done in India," says RJ. "(For that) I need to build a team which I am trying to do now." But even such global ambitions may have to make way on the priority list for his children. Wife Rekha says that since their arrival, she has seen a 75% improvement in his behaviour. 

"(Earlier) he never had any set time to come home. Often he wouldn't come home till well past midnight," she says. These days, she adds, RJ rushes home from work by 7.30 pm to help Nishtha with her homework. Rekha also points out that the man famous for his erratic temper has calmed down over the years. 

RJ jokes: "During our 24 years of marriage I must have shouted 7,500 times at her and she has only once." Yet, some things just don't change. Rekha says sometimes she is embarrassed by her husband as he can never keep anything to himself. "There are many times when I don't tell him things because he doesn't think before speaking and you never know when he will say what," she says. But then again, RJ wouldn't be RJ without his individuality, his quirks, his forceful opinions, his sharp mind, and his unpredictability. 

THANKS TO ET