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The return of the ugly American

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(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

Nearly a month after American authorities arrested India’s deputy consul general in New York, Devyani Khobragade, outside her children’s school and charged her with paying her Indian domestic worker a salary below the minimum wage, bilateral relations remain tense. India’s government has reacted with fury to the mistreatment of an official enjoying diplomatic immunity, and public indignation has been widespread and nearly unanimous. So, has an era of steadily improving ties between the two countries come to an end?

Judging from Indian leaders’ statements, it would certainly seem so. India’s mild-mannered Prime Minister Manmohan Singh declared that Khobragade’s treatment was “deplorable.” National Security Adviser Shivshankar Menon called her arrest “despicable” and “barbaric,” and Foreign Minister Salman Khurshid refused to take a conciliatory phone call from US Secretary of State John Kerry.

Emotions have run high in India’s Parliament and on television talk shows as well. Writing to her diplomatic colleagues after her arrest, Khobragade, who has denied the charges against her, noted that she “broke down many times,” owing to “the indignities of repeated handcuffing, stripping, and cavity searches, swabbing,” and to being held “with common criminals and drug addicts.” A former Indian foreign minister, Yashwant Sinha, has publicly called for retaliation against gay American diplomats in India, whose sexual orientation and domestic arrangements are now illegal after a recent Supreme Court ruling. The government has not taken him seriously, but his suggestion indicates how inflamed passions have become.

India Markets Weekahead: Driven by hope in an election-led rally

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The New Year was ushered in with a steep and sudden correction in the broader indexes, with the Nifty closing 1.63 percent lower at 6,211. However, the mid-cap and small-cap indexes outperformed.

Though the holiday mood was evident, it was a politically charged week. The newly installed Aam Aadmi Party (AAP) government in Delhi won a confidence motion with the support of the Congress. They subsequently announced power subsidies after granting water sops last week. Prime Minister Manmohan Singh addressed a rare press conference, the third in 10 years, announcing his intent of handing over the baton to a new prime minister.

Will 2014 be any better for investors?

(Any opinions expressed here are those of the author and not of Thomson Reuters)

High inflation, low GDP growth and a sharp depreciation in the rupee led to subdued returns of 6.8 percent for the Nifty in 2013.

The core sectors — steel, cement, industrials, energy, infrastructure and capital goods — continued their poor performance and hence valuations shrunk, while consumer staples, IT, pharma and private sector financials bucked the trend. But the polarisation towards a few sectors underscores growing risk aversion.

The year 2013 in perspective

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The economy was already in distress before 2013, but with no significant action by the government and increased pressure from external sources resulted in more danger signals. It is now doubtful whether the economy will recover in the current fiscal.

The rot began in 2011. It took hardly two-and-a-half years to bring down the growth from 8.8 percent to 4.5 percent. The monsoon was good but badly distributed with the result that the summer crop did not show much improvement.  Industry is amidst stagnation with zero growth in April- October. The capital goods sector has been hit the hardest because investment declined, while the only silver lining was the improvement in external trade. Exports increased and imports declined which brought down the CAD to less than 2 percent of GDP.

India Markets Weekahead: Investors to remain bullish in election season

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

A surprise decision by the Reserve Bank of India (RBI) to keep the repo rate unchanged and a dovish statement from Ben Bernanke in his last news conference as U.S. Federal Reserve Chairman improved sentiment with the Nifty closing 106 points higher at 6,274.

Markets tottered for three days during the week amid fears the Nifty could break a crucial support zone between 6,120 and 6,140. Investors had discounted a 25 bps hike in monetary policy based on inflation numbers that were the highest in 14 months. RBI Governor Raghuram Rajan should be lauded for taking a practical stance as food inflation is expected to cool considerably in December due to improved supplies and the monsoon effect.

Managing India’s budget deficit

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The budget deficit has been a concern for India, but Finance Minister P. Chidambaram has assured that the government will not deviate from the target of 3 percent deficit in 2017. In the very first year, however, it has become almost obvious that the target will be missed.

Budget deficit is not the privilege of government alone as even corporates and households borrow like the government to fund deficits. However, they ensure that the money is used in a manner that it is repaid in time. With the government it is different — it can borrow more in order to repay old loans and it can do so with impunity because banks are a captive market for the government securities. That results in mounting public debt which stood at 56.5 trillion rupees at the end of March 2013. Of this, 40 percent is held by banks.

Unclear messages from the electoral tea leaves

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The past 12 months have been characterized by the narrowest market in two decades although sectoral performance varied significantly. While the markets are likely to be range-bound, valuations are expected to rise in 2014, especially in the first half.

Based on a one-year forward PE range of between 12.5 and 15 times and our top-down FY15 earnings growth forecast for the Nifty of between 10 percent and 15 percent, we expect the index to trade between 5,500 and 6,900 in 2014, with a target of 6,900 — an implied increase of around 10 percent relative to current levels.

Solving the Indo-Japanese equation

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

In geopolitics, neighbours rarely make great alliances. However, distance does not impede strong partnerships.

In the case of Japan and India, historical bonds nurtured by Buddhism and the Japanese providing the wherewithal to freedom fighter Subhas Chandra Bose for the Indian National Army, provides for the necessary people-to-people connect.

Slow change comes to India a year after Delhi gang rape

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

One year ago, a 23-year-old physiotherapy student was raped and murdered. Her story showed the world that women across India are viewed as dispensable, undeserving of full human rights.

One year later, what has changed?

It is heartening that the case of Nirbhaya, as she is known, led to the setting up of the Justice Verma commission that recommended strengthening outdated laws to protect women and their rights. Although change has been slow, more cases of sexual violence are being reported rather than silenced, scuttled or quietly settled. However, crime statistics and prosecution rates show that most of these crimes go unnoticed, unreported and absorbed into the culture of “that’s the way things are.”

Indian hedge funds get knocked down but get up again

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The fortunes of hedge funds focused on India continue to twist and turn, with many plots and subplots. After witnessing widespread losses and heavy redemptions in 2008, Indian hedge fund managers bounced back remarkably to post a 50 percent return in 2009. They continued their good form in 2010, delivering healthy gains of 12 percent during the year.

But in 2011, the managers witnessed losses amid declining markets and a depreciating rupee. At the end of that year, many managers expressed confidence in the underlying market for the following year and predicted gains for the rupee by mid-2012 — both these predictions came to pass. The Eurekahedge Indian Hedge Fund Index was up 13.13 percent in 2012, making it the strongest regional hedge fund mandate for the year. Some of the funds even witnessed asset inflows in 2012 and early 2013, a rarity for Indian hedge funds since the financial crisis.

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