Indian stock markets to rise strongly in 2013 based on the TINA factor: Morgan Stanley

Morgan Stanley has cited the TINA factor, or “There Is No Alternative” as one of the reasons why India could do very well next year

Morgan Stanley has argued in one of their recent reports that the Indian stock market is likely to perform well in 2013 as it remains the most attractive relative to other countries. In other words, while the Indian economy is in doldrums it remains more attractive than the United States and European Union as the last two undergo economic upheaval, and this is the reason why investors and foreign institution investors (FIIs) pour easy money into India. Morgan Stanley calls this the “TINA” factor or “There Is No Alternative”. It also said, “Our top-down forecast is higher than the consensus, putting earnings in an even better light”.

Since India is relatively better off than the rest of the world, Morgan Stanley cites Indian stock markets as an attractive destination even if there are plenty of headwinds as far as Indian economic fundamentals are concerned. It said, “Global investors argue that India is a place where they would like to put money to work because the other options do not seem attractive enough”. This is a peculiar approach because if nothing is attractive, investors wouldn’t investors be better off waiting and watching.

Despite this, it believes the Indian stock market offers good opportunities in terms of diversification and stock picking because it believes its corporate fundamentals seem more “stable”. Consider the chart below:

As you can see, Indian companies are at the top because they exhibit steady growth in earnings, without too much variation. Even the coefficient of variation is low which implies that earnings growth between all the companies across the years is not that widely dispersed. India has the lowest standard deviation of EPS growth at 13%, while US it is nearly three times volatile. Even India’s growth rate since 2001 trumps that of US as well as developed markets as a whole. This is one reason why global investors would prefer stable Indian shores rather than foreign ones. The report said, “Over time, not only has earnings growth been comparable with that of the rest of the world, but the earnings stream has also exhibited markedly lower volatility.”

Apart from this India’s recent performance, which has been one of the best performing stock markets YTD, has caught the eye of investors worldwide. This means more investors are keen and keeping an eye on upcoming corporate earnings, not to mention the slew of economic reforms and whether they’ll be passed in the parliament. Further more, Morgan Stanley has cited, “Unlike in 2011, the earnings trend in 2012 mirrors India’s long-term record in earnings.”

Having said this, Morgan Stanley believes stock picking opportunities exists, especially for passive investors. Diversification hinges upon having several stocks, with each having low degree of deviation within each other in order to reduce volatility. Diversification also will work if the stock market is not dominated by one sector alone. For instance, look at the table below:

You can clearly see that Russia has nearly 60% of the weightage in one sector alone—energy. It is billed as a gas and oil superpower rivalling to Saudi Arabia. From a top-down perspective, it makes little sense to diversify even if stock picking opportunities maybe there. India’s standard deviation across sector weights remains one of the lowest across emerging stock markets. It said, “India’s sectoral diversification seems the best across major emerging markets”, with low standard deviation on sector weights and low degree of single-sector dominance.






4 years ago

As predicted, the Indian government has started its divestment drive. The govt. is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to the old r a n d i (prostitute) to satisfy his private needs because the younger fresher one is too expensive. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. SELL ALL STOCK. ( post below)

India. Reforms. Really?

Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

Real reforms for India will not happen for a long time. These include financial sector reform, and privatization of the banking system. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

Is the market discounting the possibility that in a few weeks, all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

A Nomura index has 72% success ratio in predicting economic drift and therefore Nifty

Nomura’s new proprietary indicator developed by its quant team called Nomura Economic Surprise Index for India (NESII) is designed to help investors predict whether stock market will turn bullish or bearish. It has 

Beating the stock market is tough. With a torrent of information flowing in daily, how can an investor or portfolio manager sift through all the noise and come up with an effective signal to guide trading and investment decisions? How do they deal with stock economic surprises? For example, traders and investors are often overloaded with information such as inflation (wholesale price index), Index of Industrial Production and GDP, which are announced at different points of time and have a significant effect on the stock market direction and movement. If positive news is contained in these numbers, stock markets and bond markets will move up and vice versa. Sometimes, the data disclosed can be wrong and can harm investors. Many a times, in India, we’ve noticed that IIP numbers have surprised investors only to find out that later it is only a blip. Will the surprise lead to a stock market trend over time? Will the surprise turn around the stock market? Does lower inflation really mean that the economy has rebounded, or is it a flash in the pan? All these are pertinent questions to be answered, but aren’t easy. 
To equip investors to deal with this, Nomura has come up with a proprietary indicator called Nomura Economic Surprise Index for India (NESII) which is used as a “tactical tool” to gauge investor sentiment and to help predict key turning points. Nomura says, “NESII is a single numerical index which crystallises the relationship between markets and economic data in India, and tracks the direction and magnitude of economic data surprises.”
NESII is a weekly index which has “shown a strong correlation with India’s financial markets and can be used to reaffirm nascent price movement.”  In other words, it is used to predict bullishness and bearishness of the stock market vis-a-vis market expectations and surprises. Sometimes, the gap between investor expectations and actual facts can be so large that it can potentially be a turning point. Again, it may not be. NESII is a forward indicator which aggregates and normalises the market ‘surprise’ of certain key economic data to gauge sentiment so that the portfolio manager can decide the investment plan. Consider the chart below. 
It shows NESII and NESII 3-month moving average. The idea is that if NESII goes over zero, then it could be taken as a sign of turning point and a bullish trend reversal and positive sentiment which will further lead to good mood and could lead to euphoria. Likewise, if it goes below zero, expect markets to fall as negative surprises build up, you guessed it, negative sentiment, which will drag the market further downwards. 
Here is an interesting chart of how NESII behaved in relation to the GDP
This shows how sentiment can affect the market. As you can see—between October 2008 and October 2009, the sentiment went up and NESII mean-reverted above zero. At the same time, the GDP was depressed and actually declined. This should have told investors to stay away from the markets, right? What really happened was that the Nifty picked up from the aftershocks of the sub-prime crisis and went up, thanks to Quantitative Easing by the Federal Reserve. It can also show how irrational exuberance could be at play and whether traders would like to take advantage of such movements. Nomura says, “When NESII starts to mean-revert from extreme levels it sends a strong signal that data surprises will continue in the new direction, and so is an invaluable cross-check for whether or not nascent market rallies or sell-offs will continue.”
More analysis on Nomura reports.
How effective is this indictor? For an investor to be confident of an investment tool a lot of back-testing needs to be done. For equities, its success ratio was 72%, with currencies it was 66% and bonds 57%. For the benefit of investors, they may consider trying it out only for equities. Nomura also spoke of its “success ratio” defined as percentage of times NESII correctly mapped the sign (above/below zero) of specific market movement in a given sample space. It also found out that there was positive correlation between NESII and the NSE Nifty market, government 10 year yield and a negative correlation between NESII and the FX markets. For equities, the correlation was 0.67; bonds 0.41; and currencies -0.61. In other words, the NESII behaves closely in fashion with the Nifty Index. A perfect correlation of 1.00 would mean NESII would behave exactly like the Nifty. 
Having said this, investors should use it as one of the tools to aid investment plans and decision making. There are many tools, from technical analysis to fundamental analysis to a quant indicator like NESII. Use with caution and only whether you’re comfortable incorporating it into your investment plans and philosophy. 



New science of healing: Learning from the past

The combination of the new and old should be the future of human illness management. In addition to the known three energies in sciences we might have to make use of the occult energies which our ancestors have harnessed to heal mankind

The human body is a colony of 50 trillion happy individual human cells, each of which existed as single organisms for millions of years during evolution to have come together lately for economic reasons. When all of them are in sync, one is healthy and vice versa. In addition, the human body consists of trillions of germs living in symbiosis with man having been incorporated into his genome—together called human metagenome having about 25,000 human genes and 2-3 trillion germ genes. 
Every human cell has its own mind in its cell wall, called memBrain. The cell is capable of all functions that the whole human body is capable of. However, evolutionary economics did teach the cells that it is easier to delegate powers to groups of them with a specific task, instead of each of them doing all the jobs all the time. That is the birth of morphologically different cells in different parts of the body called organs, but they all function the same way for doing their assigned tasks. They have different shapes but work identically.
Each one of us is a part of this macrocosm and, is, interconnected. Therefore, our cells also vibrate in consonance with cells of other organisms and even plants. In short, everything in this universe is related. One of the important hitherto unknown risk factors for illness is hurting others. Scientifically, hurting others is like hurting one’s own body parts; a kind of social autoimmune disease! 
When we realize this oneness—otherwise called aduality in quantum physics—the egoistic ‘I’ concept changes to the altruistic ‘We’ concept. The relevance of modern physics to medicine can be gauged from the following.
 “Quantum theory is such a wonderful example of a situation that one can understand something in complete clarity and at the same time realizes that one can only talk about it in terms of images and metaphors.”—Werner Heisenberg in Der Teil und das Ganze- (Physics and Beyond).
JC Bose, an Indian physicist, had hinted at the possibility of human, animal and plant consciousness. Russian medical scientist, Professor Alexander G Gurvich in 1923 recorded the presence of “mitogenic rays” from human cells. By 1930s this information reached Europe and researchers both Europe and the USA have been looking for such rays. It was in the year 1974, German bio-physicist, Fritz-Albert Popp had proved their existence, their origin from the DNA and, later their coherence (laser-like nature), and had developed biophoton theory to explain their possible “biological role and the ways in which they may control biochemical processes, growth, differentiation.”  
Popp’s biophoton theory leads to so many new insights into the life processes and may provide key to the major elements of a future theory of whole person healing based on such an approach. The importance of the discovery has been confirmed by eminent scientists such as Herbert Froehlich and Nobel laureate Ilya Prigogine.  The International Institute of Biophysics, a network of research laboratories in more than 10 countries and based in Germany, is coordinating research in this field.
“The holographic biophoton field of the brain and the nervous system, and maybe even that of the whole organism, may also be basis of memory and other phenomena of consciousness, as postulated by neurophysiologist Karl Pribram and others. The consciousness-like coherence properties of the biophoton field are closely related to its base in the properties of the physical vacuum and indicate its possible role as an interface to the non-physical realms of mind, psyche and consciousness,” writes Marco Bischof in his book Bio-Photons-the light of our cells. 
 Recent work of physicists like William Tiller, Hans Peter Duerr, Joie Jones and material scientists like Rustum Roy we have been able to unravel the mystery of human physiology to a large extent. Indian Ayurveda’s holistic model comes very close to an ideal model. In view of the advances in quantum mechanics, we might have to fine-tune that model slightly to be perfect. Work is going on in that direction. The human body is a bundle of jumping lepto-quarks. (Subtlest energy particles at the subatomic level where matter and energy have no difference) Although we all look solid and distinct, there is nothing solid about us. Because there is no difference between energy and matter, the delusion of solidity has been mistaken for reality. 
When Popp applied an ointment on the hand, the photon lights changed even in distant brain or leg! Body cells do communicate with one another and try and help each other. The photon light could even make the photon lights from others to vibrate in communion with our showing thereby that we are all interlinked through the universal consciousness. Health was defined by Popp as that state where our body cells are in sync with each other. Illness is a state where the cells are out of sync. In fact, each one of our body cells loves another cell not only in our own body but even in others’ bodies. But for the immune system provided by nature, we would all have become a large syncitium. Imagine a situation where on the one hand our body cells love another person’s body cells and our mind hates that person, there will be a conflict with the ‘me-you’ concept which might result in autoimmunity! Recent epidemiological studies have shown that anger, jealousy, hostility and frustration with depression are very potent risk factors for killer diseases. 
Post modern medicine; the future
If the body is the mind and the body cells are only energy vibrations—the future medical care, which I call as post-modern medicine or meta-medicine, has to be holistic and energy based. Disease being energy based its healing must also be based on energy. We have been working in this field for fifteen years with significant success. Health, then, loses its present reductionist connotation of absence of physical organ based diagnosis. On the contrary diseases are but altered energy pattern of the human body which needs resetting the altered energy pattern using energy from outside. There is now recognition for a new word “Whole Person Healing” or WPH as the future. This was introduced by late professor Rustum Roy and was accepted by the IOM (Institute of Medicine) in 2010. Consequently health gets a new definition. It is enthusiasm to work and enthusiasm to be compassionate. 
With these newer insights the time honored organ based disease screening, setting the aberrations right with hi-tech quick fixes and reductionist chemical molecules become redundant. Mankind has been experimenting with this kind of medicine for eons in our ancient cultures all over the world. Although observational longitudinal research has given credence to them, we need to authenticate them using the hard scientific yardsticks which work we have been doing in our World Academy of Authentic Healing Sciences for well over a decade. We need to do more before this becomes common practice. Still we would need emergency trauma care and surgical corrections to be retained from the present modern medical systems with innovations to fit the new paradigm. We can not throw the bath tub and the baby together just because the bath water is dirty.
This combination of the new and old should be the future of human illness management. In addition to the known three energies in sciences we might have to make use of the occult energies which our ancestors have harnessed to heal mankind like Yoga, meditation, Ayurveda, Chinese Chi, praanic healing and many such. Each one of them needs to be re-authenticated using today’s modern scientific methods before being incorporated into the post-modern medicine. 
To read more from Dr Hegde, click here.
(Professor Dr BM Hegde, a Padma Bhushan awardee in 2010, is an MD, PhD, FRCP (London, Edinburgh, Glasgow & Dublin), FACC and FAMS. He is also Editor-in-Chief of the Journal of the Science of Healing Outcomes, Chairman of the State Health Society's Expert Committee, Govt of Bihar, Patna. He is former Vice Chancellor of Manipal University at Mangalore and former professor for Cardiology of the Middlesex Hospital Medical School, University of London. Prof Dr Hegde can be contacted at [email protected].)




4 years ago

Those interested in "healing" might like tos tudy the works and teachings of Mokichi Okada who proved much of what the Wolrd of medicine, farming, and healing is still in the process of discovering in the 1930s, 40s and early 50s.

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