June 27, 2006
Celebrations
Mittal's acquisition of Arcelor has sparked celebration in the Indian media. New York Times took the note of the same.
In fact, seen the light of some of the brutal facts, this event is a matter of shame for India's socialistic model, under which, the spirit of entrepreneurship has been subjected to systematic infanticide. Check this article by Washington Post published couple of years back.
One of the reason for this euphoria is Mittal's statement that he is proud to be an Indian. Surprisingly, all the searches lead me to only recent statements. I might be wrong, but Mr Mittal's interest in India has risen only after Posco announced its multi-billion India plan. A few years back, I remember, he had said, he might be interested in entering India if Govt decides to sell-off Steel Authority of India Ltd (SAIL), a PSU, at the "right" price. Mr Mittal has excellent track record of acquiring ailing steel mills in various countries from their Govt and then turning them around. And SAIL was a perfect candidate for Mittal. It was all about business. For all these years, he did not find Indian business scene conducive and friendly. With the wave of liberalization, the atmosphere is just right to set up the shop.
As usual, ignoring the glaring facts, Indian media, , will turn Mr Mittal the Page 3 personality of the pink papers. People like Kamal Nath will only act as catalyst.
On a side note, a lesson from the ouster of Arcelor's CEO - "Always keep your words soft and sweet, just in case you have to eat them."
Technorati Tags: Mittal India
In India, Mittal's acquisition of Arcelor was heralded as an indication that India had arrived on the global business stage.India Inc.? Tricolour? Mr Mittal had no business interests in India till few months ago. How come he is suddenly counted as a representative of India Inc? And, why all the jubilation with Mr Mittal being awarded the sobriquet like "Sultan of Steel?"
"Lakshmi Mittal's success will ensure that India's tricolor flag will be planted across the globe," said Venugopal N. Dhoot, chairman of the Videocon Group, a consumer products company with $3 billion in sales. "Other Indian companies will be encouraged to step out and hunt for overseas assets."
The minister of commerce and industry, Kamal Nath, said that Sunday's merger "demonstrates that India Inc's intellectual and entrepreneurial abilities are to be taken very seriously."
In fact, seen the light of some of the brutal facts, this event is a matter of shame for India's socialistic model, under which, the spirit of entrepreneurship has been subjected to systematic infanticide. Check this article by Washington Post published couple of years back.
The group had got into steel in 1975 when L N Mittal's father Mohan Lal Mittal left the country because of India's restrictive economic policies. He went to Indonesia to set up Ispat-Indo, a 65,000 ton a year steel plant.Mittals left the country in frustration. That was the time when the Govt treated businessmen with utter contempt. Achievements of Mittal outside India just highlight things that are wrong with the Govt's economic policies.
One of the reason for this euphoria is Mittal's statement that he is proud to be an Indian. Surprisingly, all the searches lead me to only recent statements. I might be wrong, but Mr Mittal's interest in India has risen only after Posco announced its multi-billion India plan. A few years back, I remember, he had said, he might be interested in entering India if Govt decides to sell-off Steel Authority of India Ltd (SAIL), a PSU, at the "right" price. Mr Mittal has excellent track record of acquiring ailing steel mills in various countries from their Govt and then turning them around. And SAIL was a perfect candidate for Mittal. It was all about business. For all these years, he did not find Indian business scene conducive and friendly. With the wave of liberalization, the atmosphere is just right to set up the shop.
As usual, ignoring the glaring facts, Indian media, , will turn Mr Mittal the Page 3 personality of the pink papers. People like Kamal Nath will only act as catalyst.
On a side note, a lesson from the ouster of Arcelor's CEO - "Always keep your words soft and sweet, just in case you have to eat them."
Technorati Tags: Mittal India
Advocate need not emulate the master
Arun Shourie is one of the very few intellectuals who doesn't indulge into sound bite circus. I expected his interview with Karan Thapar on the show Devil's Advocate to be a real treat with Shourie providing a crystal clear view, backed with solid study of various judgments and reports, on extremely complex (and controversial!) issue like reservation.
When I read the interview transcript on CNN-IBN site, I was disappointed. No. I was filled with rage. Thapar had spoilt the entire interview. The voluble Thapar didn't allow Shourie make his points till the very end. With basic Unix skills, I could find that in the interview Thapar spoke 1841 words, which was just a shade below that of Shourie's 1882. In fact, Shourie also pointed this multiple times in the interview.
"But... My friend, let me answer."
"... You just don't let me speak..."
"....First let me speak. Let me first answer your question... You have to listen."
"... Just one second, let me complete it."
Then, Thapar tries to beat his own drums rather than listening to what other person is saying. Mr. Shourie pointed even this out.
"Because I have answered it 10 times and you keep going back to the same question. Repeating the very words. Just look at your own recording Karan, you are just repeating. You are taking up time."
Even in the last interview with Mr Rahul Bajaj, Thapar was just hell bent on making Bajaj accept that he has become politician with Rajya Sabha membership. Why is technicality so important when the airwaves can be spent in much better ways? That was completely ridiculous.
Thapar needs to tone down his self-righteousness, stop making conjectures on the go, and stop pretending that he is representing a billion people. Somebody need to tell Mr Thapar, it is an interview where he supposed to ask questions (shorter ones, preferably) and let the other person put his views. This is not a platform to display his expertise of the topic under discussion. For that, he can utilize the space given to him in his columns in print media.
Contrast this with Shekhar Gupta of Indian Express who does Walk the Talk on NDTV. Shekhar Gupta is generally soft, empathetic and a lot more polite. Generally, he stays away from directly confronting the interviewer, which makes a good discussion. He might be more knowledgeable about a subject than the other person, but he never brags about it or tries to score brownie points by flaunting the wisdom. Same goes with Harsha Bhogle. Whenever he is with a great player from yesteryear, he asks interesting questions and then lets them do the rest of the talking. That skill, keeping your mouth shut when you are omniscient, is extremely rare.
Thapar needs to take a lesson or two from Harsha Bhogle and Shekhar Gupta.
Technorati Tags: Arun Shourie Karan Thapar Talk Show
When I read the interview transcript on CNN-IBN site, I was disappointed. No. I was filled with rage. Thapar had spoilt the entire interview. The voluble Thapar didn't allow Shourie make his points till the very end. With basic Unix skills, I could find that in the interview Thapar spoke 1841 words, which was just a shade below that of Shourie's 1882. In fact, Shourie also pointed this multiple times in the interview.
"But... My friend, let me answer."
"... You just don't let me speak..."
"....First let me speak. Let me first answer your question... You have to listen."
"... Just one second, let me complete it."
Then, Thapar tries to beat his own drums rather than listening to what other person is saying. Mr. Shourie pointed even this out.
"Because I have answered it 10 times and you keep going back to the same question. Repeating the very words. Just look at your own recording Karan, you are just repeating. You are taking up time."
Even in the last interview with Mr Rahul Bajaj, Thapar was just hell bent on making Bajaj accept that he has become politician with Rajya Sabha membership. Why is technicality so important when the airwaves can be spent in much better ways? That was completely ridiculous.
Thapar needs to tone down his self-righteousness, stop making conjectures on the go, and stop pretending that he is representing a billion people. Somebody need to tell Mr Thapar, it is an interview where he supposed to ask questions (shorter ones, preferably) and let the other person put his views. This is not a platform to display his expertise of the topic under discussion. For that, he can utilize the space given to him in his columns in print media.
Contrast this with Shekhar Gupta of Indian Express who does Walk the Talk on NDTV. Shekhar Gupta is generally soft, empathetic and a lot more polite. Generally, he stays away from directly confronting the interviewer, which makes a good discussion. He might be more knowledgeable about a subject than the other person, but he never brags about it or tries to score brownie points by flaunting the wisdom. Same goes with Harsha Bhogle. Whenever he is with a great player from yesteryear, he asks interesting questions and then lets them do the rest of the talking. That skill, keeping your mouth shut when you are omniscient, is extremely rare.
Thapar needs to take a lesson or two from Harsha Bhogle and Shekhar Gupta.
Technorati Tags: Arun Shourie Karan Thapar Talk Show
June 24, 2006
Shell Companies
Mr Anil Ambani is on a spending spree to ensure that everybody understands that double "A" in blue and red imply Reliance Anil Dhirubhai Ambani Group (R-ADAG). The telecom giant under Anil's wings also had to change its corporate colours from the peacock green to white, blue and red.
According to the latest bill, I am subscribed to Reliance Mobile as opposed to earlier Reliance IndiaMobile. The billing statement I receive is from Reliance Infocomm Services, which is a division of Reliance Communication Infrastructure Ltd (RCIL). The bill is for the services provided by Reliance Infocomm Ltd and RCIL. The entity which is listed on stock exchange is Reliance Communication Ventures Ltd (RCVL). Till a few months back, the holding of RCVL was "complex and opaque" like this. RCVL went under restructuring and this is the "simplified" structure. (Source: Investor presentation) Now, most of these may very well have a definite business as opposed to the shell companies which exist only on paper and conduct activities which mostly involves exchanging documents. And cheques, may be.
Cut to the "other", or "origianl", Reliance. Here is the list of companies which form the "group" for Reliance, basically promoters. (Source: Annual Report) Now this list is huge! I have heard of none of these names. It is a general practice that promoters form a shell company which holds majority stake in the publicly listed company. But 42 shell companies? Douglas Adams fans, may be.
Another example is Jet Airways. Pre-IPO, Jet was completely owned by Tail Winds registered in Isle of Man, Mauritius. The brand "Jet Airways" is owned by Jet Enterprises, a promoter company. Jet Airways, the public company, has to pay a small percent of revenue to Jet Enterprises, a private company, for using the brand. Another promoter-owned company, Jetair Pvt Ltd, gets commission on all passenger and cargo sales.
On a side note, these names look like variables names used in a complex situation where a single logical entity undergoes a series of changes and every change has to be captured in a different variable. Like, it starts with pages_fetched, then goes on to pages_fetched_sorted, pages_fetched_sorted_ipaddr, pages_fetched_unique_ip, etc. Ok, leave that.
A short article on Wikipedia about shell companies gets the crux right. While the motivation of creating such companies can vary from legitimate business to downright illegal, I believe, in India, the prominent reasons are tax shielding (Mauritius is a tax heaven) and extracting more money from the front companies. Remember, sweat equity?
Technorati Tags: Shell Companies Reliance Jet Airways
According to the latest bill, I am subscribed to Reliance Mobile as opposed to earlier Reliance IndiaMobile. The billing statement I receive is from Reliance Infocomm Services, which is a division of Reliance Communication Infrastructure Ltd (RCIL). The bill is for the services provided by Reliance Infocomm Ltd and RCIL. The entity which is listed on stock exchange is Reliance Communication Ventures Ltd (RCVL). Till a few months back, the holding of RCVL was "complex and opaque" like this. RCVL went under restructuring and this is the "simplified" structure. (Source: Investor presentation) Now, most of these may very well have a definite business as opposed to the shell companies which exist only on paper and conduct activities which mostly involves exchanging documents. And cheques, may be.
Cut to the "other", or "origianl", Reliance. Here is the list of companies which form the "group" for Reliance, basically promoters. (Source: Annual Report) Now this list is huge! I have heard of none of these names. It is a general practice that promoters form a shell company which holds majority stake in the publicly listed company. But 42 shell companies? Douglas Adams fans, may be.
Another example is Jet Airways. Pre-IPO, Jet was completely owned by Tail Winds registered in Isle of Man, Mauritius. The brand "Jet Airways" is owned by Jet Enterprises, a promoter company. Jet Airways, the public company, has to pay a small percent of revenue to Jet Enterprises, a private company, for using the brand. Another promoter-owned company, Jetair Pvt Ltd, gets commission on all passenger and cargo sales.
On a side note, these names look like variables names used in a complex situation where a single logical entity undergoes a series of changes and every change has to be captured in a different variable. Like, it starts with pages_fetched, then goes on to pages_fetched_sorted, pages_fetched_sorted_ipaddr, pages_fetched_unique_ip, etc. Ok, leave that.
A short article on Wikipedia about shell companies gets the crux right. While the motivation of creating such companies can vary from legitimate business to downright illegal, I believe, in India, the prominent reasons are tax shielding (Mauritius is a tax heaven) and extracting more money from the front companies. Remember, sweat equity?
Technorati Tags: Shell Companies Reliance Jet Airways
Smart or Stupid?
I received a letter, alongwith a card, from my bank informing that I have been upgraded to "GOLD PRIVILEGE". After the initial flattering pleasantries, they listed the services I am entitled to. The first one was "Waiver of charges for non-maintainence (sic) of Quartely Average Balance."
The savings account holder has to maintain Quarterly Average Balance (QAB) of Rs 5,000. If one fails to maintain that the banks levy anywhere from Rs 400 to Rs 750 as fine. Last year, a few private banks raked in more than Rs 100 Crores by charging customers with this fine. RBI had to intervene and talk to the banks about such exorbitant ransom.
I was wondering, if my QAB is below 5,000, then it means either I have stopped using that bank account or I am broke. In the first case, I would immediately close the account and in the second case, irrespective of the fine, signs of trouble are already looming large.
A bunch of usual things like great deal on loans, withdrawl limit increased to Rs 50,000 (which you can anyway avail by visiting a bank), "preferential rates for gold and foreign currency, etc. etc. were listed as premium services.
Then came the master stroke. In Aerial, font size 12, Bold. "To retain membership of this elite Gold Privilege circle, all you need to do is maintain a minimum quarterly average relationship of Rs 1,00,000 with us." See the clever use of word "Relationship" instead of "Balance" after "quarterly average." Basically, I need to maintain a QAB of Rs 100,000 so that I don't have to pay the penalty for not maintaining a QAB or Rs 5,000.
Should I be ROTFL at the stupidity or admire the folks for their creativity?
I really don't feel like cutting the card across diagonals, my usual practice for unwanted cards, but I'm not going to use it. Thanks, but no thanks!
Technorati Tags: India Banking
The savings account holder has to maintain Quarterly Average Balance (QAB) of Rs 5,000. If one fails to maintain that the banks levy anywhere from Rs 400 to Rs 750 as fine. Last year, a few private banks raked in more than Rs 100 Crores by charging customers with this fine. RBI had to intervene and talk to the banks about such exorbitant ransom.
I was wondering, if my QAB is below 5,000, then it means either I have stopped using that bank account or I am broke. In the first case, I would immediately close the account and in the second case, irrespective of the fine, signs of trouble are already looming large.
A bunch of usual things like great deal on loans, withdrawl limit increased to Rs 50,000 (which you can anyway avail by visiting a bank), "preferential rates for gold and foreign currency, etc. etc. were listed as premium services.
Then came the master stroke. In Aerial, font size 12, Bold. "To retain membership of this elite Gold Privilege circle, all you need to do is maintain a minimum quarterly average relationship of Rs 1,00,000 with us." See the clever use of word "Relationship" instead of "Balance" after "quarterly average." Basically, I need to maintain a QAB of Rs 100,000 so that I don't have to pay the penalty for not maintaining a QAB or Rs 5,000.
Should I be ROTFL at the stupidity or admire the folks for their creativity?
I really don't feel like cutting the card across diagonals, my usual practice for unwanted cards, but I'm not going to use it. Thanks, but no thanks!
Technorati Tags: India Banking
June 19, 2006
Raw deal
A friend of mine has this habit of verifying the dinner bill (check, when the waiter speaks in English) once in a while. Surprisingly, quite a few times he hits an anomaly. The rate has been so high that it warrants verification of every bill. Once, after pointing the error, he said, "We tend to be so careless about these things. This is all fallout of the high disposable income, where we really don't care if the bill is Rs 634 or Rs 674." I nod in agreement with a sense of guilt.
I read about how the credit card companies rip the customers by adding charges for an insurance scheme which the card holder didn't even apply for. People immediately raise their voice, call up the customer care number few times (matter never ends in a single call) to ensure the charges get cancelled. Then they put it on blog, forward the same to millions of friends, and ask them to forward their zillions of friends.
Now, there is one company whose services everybody subscribes, voluntarily or involuntarily. Actually, very few have what the company's services are even though lots of them have read the shining prospectus. The company charges really large sum for its service which everybody pays up religiously. But, the company fails to deliver on its promised services, time and again, and I hardly see anybody complaining about. Any quick guesses about this company? It is called Government. And, the arm of the company which collects the charges is called Income Tax Department. The other cousins of this department being Customs, Excise, Service Tax department. But owing to the limitation of my grey cells to handle complexity, let's assume all these to be a single entity.
Every year, the salaried employees pay up their income tax honestly. Actually, that "honest" part is little deceiving. They have no room to be dishonest as the company deducts the tax before handing over the salary. It is called Tax Deduction at Source or TDS.
Take a look at the India's richest people list, published by the international magazine specializing the world's wealth. Or India's highest paid executives, published by business magazines. Now, check the list of India's highest tax payers. While you'll find the business tycoons in the first list, CEOs/promoters in the second list, the third list has people from entertainment industry. Shahrukh Khan, Amitabh Bachchan, Aamir Khan have been highest tax payers in recent years. Logic is simple. Like salaried class, even the actors/actresses have very little to hide. The number of movies Shahrukh acted in, how many ads Amitabh has done is the data available in public domain for everybody to scrutinize.
How does this money collecting agency treat everybody?
Large software services players try to get more business out of same clients as signing up a new client is much harder than getting more business from the existing clients. I think, they call it "mining the existing customers." Income tax department does the same. A list of "honest" tax payers is now available. Now, start extracting more out of them. Ask them to file a complicated "Saral" form to check what they are doing with their money AFTER they have paid taxes. Send 40 notices in six months to a Bachchan family asking clarifications about their properties, investments and sun glasses. Ask Mr Bachchan if he is an actor or an anchor in the KBC game show, never mind he is fighting for his life in the hospital.
As if that is not enough, there are ads from the agency in the newspaper almost every day from last year. The tone of the ad sounds similar to the "recovery agents" from various banks and credit card companies. One particular ad published during Diwali was something to the effect - "If you don't pay your taxes, we'll ensure, all you see this Diwali is darkness." The same ads are laced with sermons preaching high moral standards - "There is a sense of relief and pride when you fulfill a commitment to your country and its future by paying tax honestly in time."
And, what about those who evade taxes? Well, it is really hard to figure out who is evading taxes as, in all probability, they have employed best brains for this activity. What justification do I have for the statement that there are tax evaders? As on March 2005, as per income tax department, there were 85,000 individuals who have declared their annual income to be higher than 10 lakhs. In another report published in June 2005, there are 70,000 with networth of US$ 1 million or more. That is, while there are 85,000 people with income higher than Rs 10 lakhs, there are 70,000 people with wealth of Rs 4.5 Crores! You see the chasm, right?
Actually, I need not to be so verbose to prove my statement. There is ample proof available already. Current Finance Minister Mr Chidambaram had, in his earlier avatar, launched a scheme called Voluntary Disclosure of Income Scheme or VDIS. To put simply, it was a Govt sponsored amnesty scheme to convert "Black" money to "White." That is, the source of that money need not be disclosed. Just pay up the 30% tax, rest 70% is yours. Legally. No questions asked. 4,66,031 people declared their wealth to the tune of Rs 33,000 Crores and Govt netted around Rs 10,000 Crores. Let's not ask hard questions like where those Rs 23,000 Crores went. I suppose, North Block is working on Version 2.0 of the same.
Government's creative policy decisions make sure that the kitty always keeps on growing at super-linear pace. A sample of decisions include increasing service tax from 8% to 12% in two years, to be increased to 20% in next few years, 2% education cess, and bringing more services in tax net. One may wonder, why doesn't the Govt outsource the job of tax collection? Well, if this department is outsourced, how can one play the game of vendetta with only other investigating agency.
Now, we all have been paying a hard-earned, small fortune for this company's services. Recollecting what services I am being offered, sends my brain into tizzy. A few quick and easy things comes to my mind. The right to choose who will (mis)manage this coffer. The freedom to express my thoughts and rant about it openly. There are minor things like pathetic infrastructure, etc. If I complain about it, then there is very little left for the industry captains to talk about. I can't think any harder.
We, the "honest" (as defined above) tax payers are getting a raw deal. Now, that is bad enough. But, there is worse. We can do very little (read nothing) about it. We cannot call up a 1600 number and scream at them about their pathetic service and ask them to cancel the service then and there.
PS: Trying tagging for the first time.
Technorati Tags: India Tax
I read about how the credit card companies rip the customers by adding charges for an insurance scheme which the card holder didn't even apply for. People immediately raise their voice, call up the customer care number few times (matter never ends in a single call) to ensure the charges get cancelled. Then they put it on blog, forward the same to millions of friends, and ask them to forward their zillions of friends.
Now, there is one company whose services everybody subscribes, voluntarily or involuntarily. Actually, very few have what the company's services are even though lots of them have read the shining prospectus. The company charges really large sum for its service which everybody pays up religiously. But, the company fails to deliver on its promised services, time and again, and I hardly see anybody complaining about. Any quick guesses about this company? It is called Government. And, the arm of the company which collects the charges is called Income Tax Department. The other cousins of this department being Customs, Excise, Service Tax department. But owing to the limitation of my grey cells to handle complexity, let's assume all these to be a single entity.
Every year, the salaried employees pay up their income tax honestly. Actually, that "honest" part is little deceiving. They have no room to be dishonest as the company deducts the tax before handing over the salary. It is called Tax Deduction at Source or TDS.
Take a look at the India's richest people list, published by the international magazine specializing the world's wealth. Or India's highest paid executives, published by business magazines. Now, check the list of India's highest tax payers. While you'll find the business tycoons in the first list, CEOs/promoters in the second list, the third list has people from entertainment industry. Shahrukh Khan, Amitabh Bachchan, Aamir Khan have been highest tax payers in recent years. Logic is simple. Like salaried class, even the actors/actresses have very little to hide. The number of movies Shahrukh acted in, how many ads Amitabh has done is the data available in public domain for everybody to scrutinize.
How does this money collecting agency treat everybody?
Large software services players try to get more business out of same clients as signing up a new client is much harder than getting more business from the existing clients. I think, they call it "mining the existing customers." Income tax department does the same. A list of "honest" tax payers is now available. Now, start extracting more out of them. Ask them to file a complicated "Saral" form to check what they are doing with their money AFTER they have paid taxes. Send 40 notices in six months to a Bachchan family asking clarifications about their properties, investments and sun glasses. Ask Mr Bachchan if he is an actor or an anchor in the KBC game show, never mind he is fighting for his life in the hospital.
As if that is not enough, there are ads from the agency in the newspaper almost every day from last year. The tone of the ad sounds similar to the "recovery agents" from various banks and credit card companies. One particular ad published during Diwali was something to the effect - "If you don't pay your taxes, we'll ensure, all you see this Diwali is darkness." The same ads are laced with sermons preaching high moral standards - "There is a sense of relief and pride when you fulfill a commitment to your country and its future by paying tax honestly in time."
And, what about those who evade taxes? Well, it is really hard to figure out who is evading taxes as, in all probability, they have employed best brains for this activity. What justification do I have for the statement that there are tax evaders? As on March 2005, as per income tax department, there were 85,000 individuals who have declared their annual income to be higher than 10 lakhs. In another report published in June 2005, there are 70,000 with networth of US$ 1 million or more. That is, while there are 85,000 people with income higher than Rs 10 lakhs, there are 70,000 people with wealth of Rs 4.5 Crores! You see the chasm, right?
Actually, I need not to be so verbose to prove my statement. There is ample proof available already. Current Finance Minister Mr Chidambaram had, in his earlier avatar, launched a scheme called Voluntary Disclosure of Income Scheme or VDIS. To put simply, it was a Govt sponsored amnesty scheme to convert "Black" money to "White." That is, the source of that money need not be disclosed. Just pay up the 30% tax, rest 70% is yours. Legally. No questions asked. 4,66,031 people declared their wealth to the tune of Rs 33,000 Crores and Govt netted around Rs 10,000 Crores. Let's not ask hard questions like where those Rs 23,000 Crores went. I suppose, North Block is working on Version 2.0 of the same.
Government's creative policy decisions make sure that the kitty always keeps on growing at super-linear pace. A sample of decisions include increasing service tax from 8% to 12% in two years, to be increased to 20% in next few years, 2% education cess, and bringing more services in tax net. One may wonder, why doesn't the Govt outsource the job of tax collection? Well, if this department is outsourced, how can one play the game of vendetta with only other investigating agency.
Now, we all have been paying a hard-earned, small fortune for this company's services. Recollecting what services I am being offered, sends my brain into tizzy. A few quick and easy things comes to my mind. The right to choose who will (mis)manage this coffer. The freedom to express my thoughts and rant about it openly. There are minor things like pathetic infrastructure, etc. If I complain about it, then there is very little left for the industry captains to talk about. I can't think any harder.
We, the "honest" (as defined above) tax payers are getting a raw deal. Now, that is bad enough. But, there is worse. We can do very little (read nothing) about it. We cannot call up a 1600 number and scream at them about their pathetic service and ask them to cancel the service then and there.
PS: Trying tagging for the first time.
Technorati Tags: India Tax
June 15, 2006
Random jotting about movies and music.
- Why were bloggers so eager to watch Fanaa on First Day First Show? To be the first ones to rave/trash the movie? Aamir Khan's last two movies have been plain disappointing. Yashraj Films offers movies with the assumption that average age of the audience is 15 and average IQ aspiring to be triple digit. And Kunal Kohli's last movie, Hum Tum, was a shoddy rip-off of a hollywood blockbuster.
- Inside Man was probably the second good movie I saw this year, first being Munich. Denzel Washington was brilliant, but I craved for more of Jodie Foster. I won't call MI-3 a good movie, but the mindless action kept me engaged.
- Da Vinci Code probably didn't deserve Tom Hanks. The fast action was much suited for the other Tom. Cruise, that is. I watched the movie for sole reason - Tom Hanks.
- Krrish and Kabhi Alvida Na Kehna have disappointing music score. Oh, yeah, few tracks of Fanaa were really good. But then, why did Jatin-Lalit steal their own tune of "Yara yara main to" from "Hum Tum" for "Chanda Chamke"? It wasn't such a hummable tune, anyway.
- Sonu Nigam seems to be a very popular singer for title songs. He has lent voice to most of the songs in the above mentioned three hindi movies. He is such a talented singer, only if he could focus only on singing. Some time back, in the award acceptance speech, he said, "I hope, next year I will get Best Actor award." Ahem!
- When Sukhwinder's Chaiyya Chaiyya from Dil Se was played while credits rolled for Inside Man, we thought, PVR folks are trying to impress us with their brand new audio system. Well, I was wrong. This song was actually part of the movie.
Sensex and Economy...
I wanted this to be a two-part post. But, there is a seamless continuation, so I decided to make it a single post. Apologies for the length.
When Sensex started to fall steeply a month back, within days the instant pundits in the media came out with a rhetorical question "Is India story over?" Magazines put this question on the covers with the background of Jeejeebhoy Tower, a thick scarlet-red downward graph, starting on top-left corner and touching the bottom-right of the cover. An editor of a newspaper put the same question in one of the article, but in a slightly different context.
Since Sensex started becoming moving up 3 years back, it has become a perennial fodder for event hungry 24-hour electronic media. On certain occasions, like 17th May 2004, it even managed to become a story bigger than country's premiership. The TV/print reporters pretended to be economist think-tanks, stock analysts, experts on govt policies - all rolled into one. They were wrong then. They are wrong now. For the simple reason that they are looking at the economy through the prism of stock market index.
In my view, Sensex does not fully capture the country's economy. This post makes an attempt to support this argument.
What is Sensex? Sensex captures stock price movement of India's top 30 companies. The companies are chosen based on their financials and free float available. Nifty, another index from NSE, is composed of 50 companies, picked up by slightly different criteria.
The combined market capitalization (referred as m-cap henceforth) of the Sensex companies is around US$ 122 billion as on 14th June. The total m-cap of all the stocks traded on BSE is US$ 500 billion. Approx. 2500 companies stocks are traded on BSE and around 1000 on NSE. (NSE being the newer exchange, did not carry the legacy of earlier mess.) The number of actively traded stocks is still lower. Most of the activity is concentrated in the 150-odd stocks in which derivatives are allowed. That is, 3% of companies command 24% of the m-cap.
This highlights two important things. One, there are hundreds of companies outside Sensex. Secondly, an economy as big as India has thousands of companies, many of which are not participating in the capital market. Look at this - TCS was a private entity till couple of years back. DLF, another multi-billion dollar real-estate giant, is a private company. And so is Hiranandani group. Big players from entertainment industry are not on the bourses.
To give you a sense of numbers, US GDP is around $12 trillion and the combined m-cap of companies listed on NYSE is $17 trillion, majority of which are American corporations . (I could not get same number of Nasdaq, but I suppose even that is equally meaningful with major technology companies listed there.) Compare this to India's GDP of $750 billion and m-cap of $500 billion.
What do "fundamentals" say?
One need not be an equity analysts to check how economy is doing. One can see the signs of activity just by observing few things which one sees everyday. Those giant cranes blocking half of the road, those huge mixers pouring the concrete on other half of the road are screaming about the economy. Spending 150 bucks for latest Yash Chopra flick in spite of negative reviews does indicate the increasing disposable income. The difficulty to find some really good programmers talks about the booming job market. In spite of falling telecom tariffs, the cellphone bill hasn't come down proportionately. That is, we are talking more on phone. Yes, this is all fundamental analysis.
Now we have started hearing about the possible global slowdown. And people are already worried over how badly it will affect India. Here is my take. The slowdown will force companies in developed countries to outsource (manufacturing and services) to lower cost destination (read India.)
Net-net things are not as bad as stock market wants you to believe. Yes, even with some of the mis-adventures like reservations by Govt. things look good.
Where do all these things leave to common investors?
Lets try answer why index is falling. The sentiment in the market is down. It is no longer "FIIs are leaving" story. Definitely not that dubious CBDT cirucular. Due to some steps taken by Japanese banks, the liquidity from global markets is shrinking. So all the hot money that entered in emerging markets and commodities has left. Now, there are very few buyers in this market. The volumes have cash segments have come down by 50%. Volatility has had an adverse impact on derivatives market.
The common investor in India is extremely ill-informed and unsuspecting. Not many will be comfortable to see their capital eroded by 30-50% in a matter of days. Investors have a lesson or two, albeit hard ones, to learn in this volatile markets. First, experts (those coming on TV channels) are not always right. In fact, most of the time they are wrong. Just a month back, people were talking about 5000 level for Nifty. Now the same people are talking about 5000 for Sensex. Every fall meets with "This is bear market," and every rise is greeted by "We are still in bull market." The behaviour of market participants, as quoted often, can be described in two word - greed and fear. And even experts are no exceptions to this behaviour. While we are at experts, the performance of mutual funds has been disappointing. All, and I mean all, of them have fared worse than index. Moral is, don't watch too much of TV.
Another lesson is investing time horizon needs to be years, not months, definitely not days. You don't need to something everyday. Laziness and inertia can be rare virtues in stock market investing. Finally, set the expectations of returns right. Buffet, Lynch, and other Gods of investing have managed to get returns of 25% or so, over a period of few decades. If you think, you can do that, stop kidding yourself and be more imaginative.
On a related note, Franklin India Prima Fund which was closed for fresh investment some time back, is open again. I read it as a signal that market is again ripe for selective investment (as opposed to broad-based).
When Sensex started to fall steeply a month back, within days the instant pundits in the media came out with a rhetorical question "Is India story over?" Magazines put this question on the covers with the background of Jeejeebhoy Tower, a thick scarlet-red downward graph, starting on top-left corner and touching the bottom-right of the cover. An editor of a newspaper put the same question in one of the article, but in a slightly different context.
Since Sensex started becoming moving up 3 years back, it has become a perennial fodder for event hungry 24-hour electronic media. On certain occasions, like 17th May 2004, it even managed to become a story bigger than country's premiership. The TV/print reporters pretended to be economist think-tanks, stock analysts, experts on govt policies - all rolled into one. They were wrong then. They are wrong now. For the simple reason that they are looking at the economy through the prism of stock market index.
In my view, Sensex does not fully capture the country's economy. This post makes an attempt to support this argument.
What is Sensex? Sensex captures stock price movement of India's top 30 companies. The companies are chosen based on their financials and free float available. Nifty, another index from NSE, is composed of 50 companies, picked up by slightly different criteria.
The combined market capitalization (referred as m-cap henceforth) of the Sensex companies is around US$ 122 billion as on 14th June. The total m-cap of all the stocks traded on BSE is US$ 500 billion. Approx. 2500 companies stocks are traded on BSE and around 1000 on NSE. (NSE being the newer exchange, did not carry the legacy of earlier mess.) The number of actively traded stocks is still lower. Most of the activity is concentrated in the 150-odd stocks in which derivatives are allowed. That is, 3% of companies command 24% of the m-cap.
This highlights two important things. One, there are hundreds of companies outside Sensex. Secondly, an economy as big as India has thousands of companies, many of which are not participating in the capital market. Look at this - TCS was a private entity till couple of years back. DLF, another multi-billion dollar real-estate giant, is a private company. And so is Hiranandani group. Big players from entertainment industry are not on the bourses.
To give you a sense of numbers, US GDP is around $12 trillion and the combined m-cap of companies listed on NYSE is $17 trillion, majority of which are American corporations . (I could not get same number of Nasdaq, but I suppose even that is equally meaningful with major technology companies listed there.) Compare this to India's GDP of $750 billion and m-cap of $500 billion.
What do "fundamentals" say?
One need not be an equity analysts to check how economy is doing. One can see the signs of activity just by observing few things which one sees everyday. Those giant cranes blocking half of the road, those huge mixers pouring the concrete on other half of the road are screaming about the economy. Spending 150 bucks for latest Yash Chopra flick in spite of negative reviews does indicate the increasing disposable income. The difficulty to find some really good programmers talks about the booming job market. In spite of falling telecom tariffs, the cellphone bill hasn't come down proportionately. That is, we are talking more on phone. Yes, this is all fundamental analysis.
Now we have started hearing about the possible global slowdown. And people are already worried over how badly it will affect India. Here is my take. The slowdown will force companies in developed countries to outsource (manufacturing and services) to lower cost destination (read India.)
Net-net things are not as bad as stock market wants you to believe. Yes, even with some of the mis-adventures like reservations by Govt. things look good.
Where do all these things leave to common investors?
Lets try answer why index is falling. The sentiment in the market is down. It is no longer "FIIs are leaving" story. Definitely not that dubious CBDT cirucular. Due to some steps taken by Japanese banks, the liquidity from global markets is shrinking. So all the hot money that entered in emerging markets and commodities has left. Now, there are very few buyers in this market. The volumes have cash segments have come down by 50%. Volatility has had an adverse impact on derivatives market.
The common investor in India is extremely ill-informed and unsuspecting. Not many will be comfortable to see their capital eroded by 30-50% in a matter of days. Investors have a lesson or two, albeit hard ones, to learn in this volatile markets. First, experts (those coming on TV channels) are not always right. In fact, most of the time they are wrong. Just a month back, people were talking about 5000 level for Nifty. Now the same people are talking about 5000 for Sensex. Every fall meets with "This is bear market," and every rise is greeted by "We are still in bull market." The behaviour of market participants, as quoted often, can be described in two word - greed and fear. And even experts are no exceptions to this behaviour. While we are at experts, the performance of mutual funds has been disappointing. All, and I mean all, of them have fared worse than index. Moral is, don't watch too much of TV.
Another lesson is investing time horizon needs to be years, not months, definitely not days. You don't need to something everyday. Laziness and inertia can be rare virtues in stock market investing. Finally, set the expectations of returns right. Buffet, Lynch, and other Gods of investing have managed to get returns of 25% or so, over a period of few decades. If you think, you can do that, stop kidding yourself and be more imaginative.
On a related note, Franklin India Prima Fund which was closed for fresh investment some time back, is open again. I read it as a signal that market is again ripe for selective investment (as opposed to broad-based).
June 02, 2006
Entertainment galore
Capital markets have been a great source entertainment (and learning!) during last couple of weeks. Here is a random compilation of thoughts on this.
Ground Situation: In May, FIIs have pulled out Rs 11558 Crores from India. It has been reported that they have been net buyers in derivatives segment. Hence, the total outflow may be lower than US$2 Billion. The combined market capitalization of all the traded stocks have a taken a hit of US$ 100 billion. When FIIs are selling, local investors/traders are getting out of the market, too. In fact, getting cue from FIIs, these traders create stampede on the exit doors. The "India growth story" is something Indians want everybody else to buy except themselves.
Retail investors: The nervousness among retail investors is quite visible. The message count of a yahoo group on stock markets clearly reflects the sentiment. Indian investors had taken the 60% annual growth in stock market for granted. On one of the TV show, one investor asked, "Some stocks are said to be fundamentally strong. Why, then, these stocks are pulled down when market crashes?" And worse, some people want Govt to do something about it. Money making, surely, can't be this easy. Otherwise, why are so many people working so hard to get a annual raise, in good times, I may add, of early double digits. The lack of confidence in such times, indicates that they lack understanding of risk associated with equities.
Government: The Govt and regulators have scored very poorly on their maturity scale. Their job is to ensure there is no mala fide activities. If they think, some news needs clarification, they should do it. If all the checks and balances are in place, they should not worry about the gyrations. And, they need not arm-twist LIC and UTI into buying whenever market falls. While govt wants the stock market to be up, it is meticulously ensuring long term growth of the country is back to the "hindu growth rate" of Nehruvian era. Just see the way reservations are pushed in education and private industry. Or, the way efficient administrators like Raha of ONGC are shown the door. And the frittering away of thousands of crores with schemes like EGS.
Finance Minister: From the day he said, he doesn't track every movement of index, he has been making statements about index everyday. Quite funny, actually. "Calm and order have returned", he said on 23rd May, and the next day, Sensex went down by 250 points promptly. Gurus of stock investing have humbly admitted that they can not predict movement of index, but FM is adamant about giving out his outlook. Also, he has been giving cliche advice like "long term investors need not worry about the fall." Somebody needs to remind him that he is Finance Minister, and not personal investment advisor of the country. He should not try to become Mahesh Bhatt of Dalal Street with loquacious soundbites.
Media: What amazed me the most is the illiteracy of financial markets in the media. The initial reasoning media gave for the fall is the CBDT circular. That tune was played to no end. (Which probably prompted FM to call a press conference and rap the media.) Doesn't it strike these "journalists" that nobody makes decisions involving hundreds of Crores based on an ambiguous document? Then there are utterly banal headlines - "Bulls are back roaring," "Bears continue the mayhem" which only the headlines' editor must be finding exciting. Equally trite are the words in the headlines used to describe a fall of 2-3% - "bloodbath", "black <choose the day>;", "tragic <choose different day>," "mayhem," "meltdown," "halal street." There were some seasonal favourites like "tsunami" and "katrina". When all the superlatives are used on day one, unprecedented situations like 10% fall embarrass the editors by putting their linguistic skills to test. To sum, even a novice like me can figure out how shallow the stock market reporting is.
Investing in general: People are looking at wrong graphs. A 1 day chart shows disaster, 3-months' gloom. But a 2-year chart is shows spectacular strength. But, in these days, the qualification to be called "long term investors" is ridiculously low period. Last time I heard, it was something like 2-3 months. Somehow people are ashamed to call themselves "short term investors/traders" as if it is same as admitting crack addiction. So, they adjust the period accordingly. (See the charts below)
Future Implications: The massive volatility, to the tune of 12% in a day, will make sure that a lot of foreign investors stay away. Foreign fund managers and experts will promptly downgrade the India's investment rating. For many of them, India will be a "high risk, high returns" game i.e. a casino with a difference.
Future Implication 2: Primary market will be dry till the market resumes its upward journey. Air Deccan was caught in the whirlwind and barely managed to sell entire issue. Mr. Singh of DLF has to wait for some time before he is crowned as the richest person of the country.
Finally, (stolen) wisdom: When walking in mall, you see the sign of "upto 50% OFF" (with "upto" in the smallest possible font) on a Nike/Adidas/<brand-you-crave-for>store. What do you do then? You probably end up buying lot of stuff you don't need in the first place. Look around, you will find similar stories in this market.
Recommended Reading: One up on Wall Street by Peter Lynch.
Ground Situation: In May, FIIs have pulled out Rs 11558 Crores from India. It has been reported that they have been net buyers in derivatives segment. Hence, the total outflow may be lower than US$2 Billion. The combined market capitalization of all the traded stocks have a taken a hit of US$ 100 billion. When FIIs are selling, local investors/traders are getting out of the market, too. In fact, getting cue from FIIs, these traders create stampede on the exit doors. The "India growth story" is something Indians want everybody else to buy except themselves.
Retail investors: The nervousness among retail investors is quite visible. The message count of a yahoo group on stock markets clearly reflects the sentiment. Indian investors had taken the 60% annual growth in stock market for granted. On one of the TV show, one investor asked, "Some stocks are said to be fundamentally strong. Why, then, these stocks are pulled down when market crashes?" And worse, some people want Govt to do something about it. Money making, surely, can't be this easy. Otherwise, why are so many people working so hard to get a annual raise, in good times, I may add, of early double digits. The lack of confidence in such times, indicates that they lack understanding of risk associated with equities.
Government: The Govt and regulators have scored very poorly on their maturity scale. Their job is to ensure there is no mala fide activities. If they think, some news needs clarification, they should do it. If all the checks and balances are in place, they should not worry about the gyrations. And, they need not arm-twist LIC and UTI into buying whenever market falls. While govt wants the stock market to be up, it is meticulously ensuring long term growth of the country is back to the "hindu growth rate" of Nehruvian era. Just see the way reservations are pushed in education and private industry. Or, the way efficient administrators like Raha of ONGC are shown the door. And the frittering away of thousands of crores with schemes like EGS.
Finance Minister: From the day he said, he doesn't track every movement of index, he has been making statements about index everyday. Quite funny, actually. "Calm and order have returned", he said on 23rd May, and the next day, Sensex went down by 250 points promptly. Gurus of stock investing have humbly admitted that they can not predict movement of index, but FM is adamant about giving out his outlook. Also, he has been giving cliche advice like "long term investors need not worry about the fall." Somebody needs to remind him that he is Finance Minister, and not personal investment advisor of the country. He should not try to become Mahesh Bhatt of Dalal Street with loquacious soundbites.
Media: What amazed me the most is the illiteracy of financial markets in the media. The initial reasoning media gave for the fall is the CBDT circular. That tune was played to no end. (Which probably prompted FM to call a press conference and rap the media.) Doesn't it strike these "journalists" that nobody makes decisions involving hundreds of Crores based on an ambiguous document? Then there are utterly banal headlines - "Bulls are back roaring," "Bears continue the mayhem" which only the headlines' editor must be finding exciting. Equally trite are the words in the headlines used to describe a fall of 2-3% - "bloodbath", "black <choose the day>;", "tragic <choose different day>," "mayhem," "meltdown," "halal street." There were some seasonal favourites like "tsunami" and "katrina". When all the superlatives are used on day one, unprecedented situations like 10% fall embarrass the editors by putting their linguistic skills to test. To sum, even a novice like me can figure out how shallow the stock market reporting is.
Investing in general: People are looking at wrong graphs. A 1 day chart shows disaster, 3-months' gloom. But a 2-year chart is shows spectacular strength. But, in these days, the qualification to be called "long term investors" is ridiculously low period. Last time I heard, it was something like 2-3 months. Somehow people are ashamed to call themselves "short term investors/traders" as if it is same as admitting crack addiction. So, they adjust the period accordingly. (See the charts below)
Future Implications: The massive volatility, to the tune of 12% in a day, will make sure that a lot of foreign investors stay away. Foreign fund managers and experts will promptly downgrade the India's investment rating. For many of them, India will be a "high risk, high returns" game i.e. a casino with a difference.
Future Implication 2: Primary market will be dry till the market resumes its upward journey. Air Deccan was caught in the whirlwind and barely managed to sell entire issue. Mr. Singh of DLF has to wait for some time before he is crowned as the richest person of the country.
Finally, (stolen) wisdom: When walking in mall, you see the sign of "upto 50% OFF" (with "upto" in the smallest possible font) on a Nike/Adidas/<brand-you-crave-for>store. What do you do then? You probably end up buying lot of stuff you don't need in the first place. Look around, you will find similar stories in this market.
Recommended Reading: One up on Wall Street by Peter Lynch.
