The markets began well, RBI governor was positive as far as his comments on the economy were concerned and he made an excellent move by cutting SLR by 50 basis points and saying that GDP of 5.5% is achievable.
The geopolitical situation turned worse with USA attacking ISIS in Iraq. We already had a conflict on in Gaza and the Ukraine issue seems to be never ending. While global markets fell, the Dow Jones closed positive and gained 60 points or 0.36% to close at 16,553 points.
Prime Minister Narendra Modi will address the nation for the first time from the ramparts of Red Fort on the occasion of India’s Independence Day on Friday the 15th of August. The nation would like to know what’s on Modi’s mind and his speech would be heard globally as well. The man who has won a clear mandate after 30 years has a mandate to rule and deliver.
Markets seem to be stuck in abroad range and are unable to decide which way they will move. As long as the level of 24,900 on the SENSEX and 7,425 on NIFTY holds, the downside is capped. On the upside we need to make a new high to break out and the level of 26,300 on the SENSEX and 7,840 on NIFTY become crucial.
The Syndicate bank issue is a problem which confronts the PSU banking space and the current NPA or stressed assets is due to poor procedures being followed and the involvement of bribes. Post the arrest of Bhushan Steel Vice Chairman the share was hammered last week and fell over 44% to close at Rs 219.35. The fact that a consortium of banks have lent this company Rs 40,000 crs is a scam by itself and there is no way this money can ever be recovered. This company’s turnover on a consolidated basis was just about Rs 9,700 crs which means its sales is a mere 25% of loan. Yet another way of looking at it is that the company needed Rs 4 of loan to generate Rs1 of sales. It has spent about 1,400 crs as interest. Paying this kind of interest and such poor topline is indeed damaging for the company and may never recover from the setback of this arrest. The way some of these companies have looted the PSU banks and the government points to a systematic manner of usurping public funds. One hopes that this event of Syndicate Bank forces the government to even look at the selection of Managing Directors and Executive Directors in banks. Case in point is Deccan Chronicle. Kingfisher Airlines and Suraj Diamonds to name a few. There are many more scams which will come to light sooner than later.
While politicians give farmers loan waivers at the time of elections to win votes, the connivance with industry ensures perennial support of all kinds. A few corporates siphon out money running into thousands of crores and cause huge loss of taxpayer’s money. It appears just nobody is responsible or accountable for this money and misuse. One sincerely prays that this is the beginning of cleaning of the system and one would also look into the selection and appointment of ED’s and MD’s of these banks.
The market looks tired but is unlikely to crash as there is follow up buying from both FII’s and domestic institutions. Use dips to invest and enter the market.