The year that never was

Fake outrage, rotten governance and volatile markets left investors none the better in 2018

The plight of investors landing with a thud after riding high on indices touching their lifetime peaks neatly captured the frothiness of the year that was. Assets turned into ashes, solid business models seized up and the liquidity tap turned into a trickle. Sought-after retail lenders became outcasts and the virtues of low-cost deposits overshadowed the convenience of short-term borrowings. Near the end of its run, governance missteps, frauds and boorish behavior clouded the sunny optimism at the beginning of 2018. The stench of rotten practices enveloped the private as well the public sector, companies with dispersed shareholding and family-control. Cooking the books was not restricted to the promoters. Professional managers turned Ponzi operators. If the accomplishments of historical and mythical figures were sought to be equated with the height of their statues, the stature of the guardians of constitutional institutions, social icons and swashbuckling pioneers shrank as they tried to protect their fiefdoms in the wake of demands to share their cash-chest, snuff out misuse and adopt high standards of conduct. Auditors and independent directors shed their reticence and opted to depart than face the increasingly active shareholders. The eyeball-to-eyeball face-off between nations was not over geographical influence but to pacify the home base. The weapon in use was tariffs instead of bombs. Monetary authorities became the favorite target to take pot-shots as they grappled with the existential dilemma of being dampeners or drivers of growth.         

End of the year resembled end 2017, with Whatsapp continuing to remain the medium of message. If circulation of leaked financial results raised a storm then, the platform was preferred to air insinuations of dodgy dealings in boardrooms. Along with suspect news, fake outrage dominated the discourse. Frequent disclosures of breach of personal data mysteriously vanished from the public domain no sooner did the apex court restrict the usage of the unique identity number to subsidies and tax returns. The irony surely was not lost that these rebels searching for a cause did not balk from using social networks that tracked the user’s habit relentlessly to enlist warriors to their column. Amid the dire warnings of a contagion in the financial services sector crippling the economy, a housing financier merrily raised more than Rs 1700 crore. The distinction between dissent and deception blurred. Raids stemming from economic offences such as using shell companies and manipulating penny stocks to launder money were painted with ominous undertones of assault on freedom of expression. Easing of farmers’ distress due to output glut was linked to blanket waiver of loans without addressing the root cause: shift in India’s economic activity to manufacturing and services from agriculture. A suggested revision to compute GDP growth was welcomed as long it suited the narrative of higher historical expansion but was accused of being contaminated with bias when the method incorporating internationally accepted standards pulled down the past trajectory.     

 

There were plenty of reasons for investors to come out of the year that was dazed and puzzled. Their wealth as measured by the broad market had hardly moved. It was as if crude oil had never crossed US$80 a barrel, the rupee had not plunged to 74 a dollar and bond yields had not pierced 8%.  The Federal Reserve had not caused havoc by being hawkish and dovish. There never ever was disruption due to a new indirect tax. Neither was the country without a full-fledged finance minister for more than a month and central bank governor for a day. Yet, there were some reminders of the tumultuous times. A jeweler fled after depleting a bank’s treasury by Rs 11400 crore. A showcase of public-private partnership came down crashing under the weight of Rs 91000-crore debt. The mere five percentage point difference in tax on equity holdings for less than and more than a year turned the premise of investing for the long term upside down. Four new-age banks were set for a New Year with fresh hands on the top deck. Imminent share offerings from another four presented a striking picture in contrast: the eagerness of nationalized lenders to make provisions to clean up the balance sheet as against the private bankers masking bad assets and staying in the game without following the rules on ownership. While a state-owned airline’s disposal was grounded before takeoff, the frenetic search for a capable pilot to steer a private flyer looked likely to descend into a bumpy landing. The fastest-growing economy’s silhouette lighted up as last-mile power connectivity turned into a reality, cost of data went off the cliff and inclusive healthcare coverage became the world’s envy.

-Mohan Sule