Everybody is trying to understand that what is happening in the world. Gold, Bitcoin, yield, it is just getting slightly nonlinear so to speak, is not it?
But there is no need to understand everything other than to focus on the fact that broadly over time equities will do well and secondly that broadly over time if you buy on fear which is not directly associated with you, you will mostly do better than other markets where the fear might be more valid up to a point. But I do not see the connection between US banking sector and our banks at the first level and secondly, if in the Federal Reserve meeting next week the interest rate actually are hiked as told by Citibank or a few others, in some sense that would mean that the Federal Reserve thinks that the banking sector there is quite comfortable in a big picture sense that they can handle even a few more blow ups if it comes to that. But the point is that the Indian banks falling on the basis that some SVB Bank there has had deposits going out looks a bit too wild to me.
What about this entire global connect which everybody seems to be talking about, which is that okay a banking crisis means that a repeat of 2008 could happen, right now it is looking like a spark but this spark will snowball into a fire.
Well, actually in 2008, it was very visible for six-nine months before that, although again there we thought that India was not so much a part of it. But today even in the world it does not look that bad. First of all, the response of the governments are much faster. The governments have broadly understood that instead of trying to bail out anything, you just give, even if it is extremely dilutive capital to the financial system, take warrants, take penal interest rates and basically if you give maybe maximum $500, $200 billion across the world as capital of these banks, whichever bank is doing badly, you can save the system.
They have understood again and again and therefore there is no reason to feel that again they will take two years to react to that kind of an issue where capital is an issue or flight is an issue. Now, of course, some other hedge funds might blow up this week because they might have shorted these bonds. I do not think anybody will blow up. But what I am saying is every line, every twist cannot be viewed as 2008. 2008 itself happened after 70 odd years.
Samir Arora’s message to our viewers is that too much of analysis leads to paralysis. Do not do too much of analysis.
100%.
Good news and good prices, they do not come together. Right now, news is not good, but are prices great?
Prices are not great, but they are not bad. First of all, look at it that when we are talking that this month there has been a big correction, but the market is down less than 0.9%. If you look at it year to date, the market is down like 4-5% and this is after absorbing a very big issue which at the end has been handled well.
The Adani issue, where people were feeling or would have felt if you had asked this question in November, December that what happens if the Adani Group stocks fall 50%, what will be the repercussions, the side effects, the follow-on effects, nothing happened. So, for us to be able to deal with the issue which may have come up later someday and absorb it in the same two months where FII flows were going out because people thought that they should go into China, that trade for them has failed, so I think in the end, India is doing quite well. Broadly, I am a long-short fund. I do not have that much to worry whether it is 70 net, I can reduce it to 50 net in one minute but I feel that broadly it is not bad.
I completely understand that the markets are being a little bit foolhardy in this knee-jerk reaction that if SVB is falling down, why should we be selling Indian banks. But at a time when the FIIs are so away and aloof from India and year to date we have been seeing the kind of selling which has been taking place and the sentiment largely is a little bit brittle and the markets have been consolidating for a while, I guess at that time, these kind of news flow does not really augur well for us.
No, it does not. But I am saying that we have been able to handle not just news flow but actual events related to our market. The two actual events are the Adani issue, which has in the end been absorbed by the market, and second is the actual outflow in January where the rest of the world was having inflows where China was up some 10%, where US was up 7%, in that month to have massive outflows was more depressing to me than being down 90 basis point in month to date where all these global issues are now affecting us.
For us to have dealt with more specific India related issues and being sort of highlighted in that sense in the month of January overall is not bad. But obviously, in the market, like in anything else nothing is straightforward.
Over analysis what I always believe is a bit too much. You have to think, okay somebody can tell me what would be the minutes of the meeting inside the RBI in a conceptual sense, when they decide it, it is just that okay, move on, let us decide all these things later. But to take it so literally that the RBI may say okay, okay you can run this for two years, no problem, but three years you will do some unhealthy things that is why I say over analysis is too much and not needed every time.
