The sensex nosedived again yesterday. Its now gone below 18K and ended at some 17800 odd, a new low reached in the last 5 months. Those responsible for this must feel a certain pride.....and must be gloating re-assuredly about the power they wield. They have knocked off a CM (and spared another), a central minister; made the entire government nervous; stopped decision making in the government; and made the economy a hostage to their personal lust for power and control.
Fundamentally, nothing has changed in the Indian economy. Under normal circumstances, a 15% drop in the sensex within a couple of months would be next to impossible. Sure, the sensex was over-priced, but it had been so for several years. The higher price was not irrational. Investors were willing to invest even at high prices because of the very high future growth expectations. Investors dont look only at the P/E ratios; they also look at what is called the PEG ratio (P/E to Growth ratio). So if the growth expectations are high, a higher P/E is justified. In fact, the P/E ratios on BSE and NSE were even higher than those in China.....because there was a near-universal consensus that the Indian growth story was now entering a zone where it would outpace China. Investors are logical people; they have several evolved models which helps them decide on their investments; and while they do make mistakes (who doesnt?), they have, by and large, managed very well for themselves. So pricing cannot be the reason for this precipitous fall.
The real reason for this fall is the sudden nervousness about the political future of India. Consider some of the rumours going around:
1) The present government could fall. No one knows what the nature of the next government could be (except maybe Arnab and Rajdeep!).
2) Even if the present government doesnt fall, Manmohan Singh may have to quit. And lets be clear.....investors (and almost anyone sane in this country) loves the PM.....irrespective of all his "weakness".
3) A ridiculous report even suggested that India could face Egypt and Tunisia like street protests. Admittedly, this is a BJP dream and not likely to fructify soon.
Who have been the ones giving a life to such reports? Of course Messrs Arnab and Rajdeep.....who in their desperation to gain TRPs have given prime time to these rumours (actually they work in concert.....because they are fighting the GECs, not each other really.....and as I mentioned once in an earlier blog, if "all is well", then news channels lose out and GECs gain). Of course, its all justified in the name of "plurality of voices", "freedom on speech", "we are the conscience keepers" and so on. Of course, its ok with these two that the other side is not heard.....that the panel is packed unfairly against the ruling party (while at the same time repeatedly claiming that there are equal reps from all sides on the panel and equal time is being given to all!). They are the ones who make the rules and they are also the ones who sit on judgments!
Its also ok for them to be the decision makers of which story deserves prominence and which doesnt. So when there is a report which says that the BJP telecom minister Arun Shourie also deviated from the BJP cabinet's decision (accepting TRAI's recommendation to go for multi-stage bidding) in pursuing "first come first served" in 2003, that report is placed on an inside page of the leading newspaper.....and somewhere deep into the show on TV where there is limited viewership. Of course, there is no debate on this subject. Its just given a couple of lines in the entire 90 minute show! The story about Karnataka is well known. Yeddy and Reddy get away scot free......in fact, the line that they have taken that nothing has been proved yet; that the party has set up a fact finding mission; is perfectly acceptable. Its a different thing that when the ruling party does the same thing, then its not acceptable to the two leading journalists.....sorry, two leading power brokers (I cant call them journalists).
The mood in India has turned. There are few people left who will argue India's case at this point. Even if they did, who would hear them? They wouldnt find space on Indian TV or in the newspapers. Their voices simply wouldnt be allowed to reach the people. Today, no one believes that India can best China in the next few years. That India can become the 3rd biggest economy in a decade. That India can go past its past colonial ruler in the next 5 years. That India will regain its place in the world order. No one believes any of this. A lot of people now believe that India will remain like this only.....mired in corruption and run by the power brokers. The only difference is....the power brokers are now the media bigshots; not just the politicians and babus. Bigshots, who are allowed to run amok in this undemocratic way.....ironically, because of the democracy that we are.
It's time for us to fight back. Write letters to the editors; compel them to print them; let the bigwigs in industry speak up; media will have to listen to them; and if none of this happens, stop viewing news tv. And stop reading papers which spread a gloomy picture. Believe that the sunshine that is showering over India will outlive the lust of the power brokers who have held India to hostage.
The real truth is that India has been kidnapped. All of us have been kidnapped. Its time we show that we are not going to give in to the kidnappers. That we are going to fight back. That we are going to save India. And ourselves.
Fundamentally, nothing has changed in the Indian economy. Under normal circumstances, a 15% drop in the sensex within a couple of months would be next to impossible. Sure, the sensex was over-priced, but it had been so for several years. The higher price was not irrational. Investors were willing to invest even at high prices because of the very high future growth expectations. Investors dont look only at the P/E ratios; they also look at what is called the PEG ratio (P/E to Growth ratio). So if the growth expectations are high, a higher P/E is justified. In fact, the P/E ratios on BSE and NSE were even higher than those in China.....because there was a near-universal consensus that the Indian growth story was now entering a zone where it would outpace China. Investors are logical people; they have several evolved models which helps them decide on their investments; and while they do make mistakes (who doesnt?), they have, by and large, managed very well for themselves. So pricing cannot be the reason for this precipitous fall.
The real reason for this fall is the sudden nervousness about the political future of India. Consider some of the rumours going around:
1) The present government could fall. No one knows what the nature of the next government could be (except maybe Arnab and Rajdeep!).
2) Even if the present government doesnt fall, Manmohan Singh may have to quit. And lets be clear.....investors (and almost anyone sane in this country) loves the PM.....irrespective of all his "weakness".
3) A ridiculous report even suggested that India could face Egypt and Tunisia like street protests. Admittedly, this is a BJP dream and not likely to fructify soon.
Who have been the ones giving a life to such reports? Of course Messrs Arnab and Rajdeep.....who in their desperation to gain TRPs have given prime time to these rumours (actually they work in concert.....because they are fighting the GECs, not each other really.....and as I mentioned once in an earlier blog, if "all is well", then news channels lose out and GECs gain). Of course, its all justified in the name of "plurality of voices", "freedom on speech", "we are the conscience keepers" and so on. Of course, its ok with these two that the other side is not heard.....that the panel is packed unfairly against the ruling party (while at the same time repeatedly claiming that there are equal reps from all sides on the panel and equal time is being given to all!). They are the ones who make the rules and they are also the ones who sit on judgments!
Its also ok for them to be the decision makers of which story deserves prominence and which doesnt. So when there is a report which says that the BJP telecom minister Arun Shourie also deviated from the BJP cabinet's decision (accepting TRAI's recommendation to go for multi-stage bidding) in pursuing "first come first served" in 2003, that report is placed on an inside page of the leading newspaper.....and somewhere deep into the show on TV where there is limited viewership. Of course, there is no debate on this subject. Its just given a couple of lines in the entire 90 minute show! The story about Karnataka is well known. Yeddy and Reddy get away scot free......in fact, the line that they have taken that nothing has been proved yet; that the party has set up a fact finding mission; is perfectly acceptable. Its a different thing that when the ruling party does the same thing, then its not acceptable to the two leading journalists.....sorry, two leading power brokers (I cant call them journalists).
The mood in India has turned. There are few people left who will argue India's case at this point. Even if they did, who would hear them? They wouldnt find space on Indian TV or in the newspapers. Their voices simply wouldnt be allowed to reach the people. Today, no one believes that India can best China in the next few years. That India can become the 3rd biggest economy in a decade. That India can go past its past colonial ruler in the next 5 years. That India will regain its place in the world order. No one believes any of this. A lot of people now believe that India will remain like this only.....mired in corruption and run by the power brokers. The only difference is....the power brokers are now the media bigshots; not just the politicians and babus. Bigshots, who are allowed to run amok in this undemocratic way.....ironically, because of the democracy that we are.
It's time for us to fight back. Write letters to the editors; compel them to print them; let the bigwigs in industry speak up; media will have to listen to them; and if none of this happens, stop viewing news tv. And stop reading papers which spread a gloomy picture. Believe that the sunshine that is showering over India will outlive the lust of the power brokers who have held India to hostage.
The real truth is that India has been kidnapped. All of us have been kidnapped. Its time we show that we are not going to give in to the kidnappers. That we are going to fight back. That we are going to save India. And ourselves.
so well crafted this one! and true as well...
ReplyDeletePrsashant
ReplyDeleteYou give them all too much credit!
The markets are plunging because
- inflation is not under control
- interest rates are rising, giving the 2008 jitters to corporates and individuals alike
- crude was a short term crisis cause of egypt, but has been rising as well
- and since investors are smart, they often MAKE the market behave for gain! as you said, no dramatic changes in the economic environment - so markets shd stay stable! choppy markets (to me) only mean someone is manipulating them. and we all know the broker-politico nexus in making this stuff happen for quick killings.
- besides - what are the combined viewership of these individuals? and does it become hugely significant even if you combine the elite english press?