Fasten the seat belts

Many changes that call for a portfolio shake-up go beyond disruption caused by innovation

If there were any doubts of equity being a risk capital, three recent events have put them to rest. The Telecom Regulatory Authority of India saw nothing wrong in predatory pricing. Coal mining has been opened to the private sector. The size of the Punjab National Bank money-siphoning fraud due to lax oversight ballooned by another Rs 1000 crore to Rs 12000-odd crore, souring the mood that was turning favorable after a series of reforms to clean up banks. The journey of the telecom sector from emerging as a new investment idea to a battle for survival is a tale of a recipe gone wrong in cooking. Due to 25% supply deficit, genuine end users had to import coal from countries that behaved like Shylocks, squeezing the buyers by imposing export tariffs even as fly-by-night operators cornered blocks at home out of turn. Negligence by the monetary authority in addressing complaints and by banks of warnings to plug the scope for misuse of systems and procedures has pushed the nationalized category to the edge. For a time, it looked the turmoil in all the three sectors was ebbing. Consolidation had cast aside the early gold digger and left only three telecom services providers with deep pockets. Bharti Airtel’s African business is showing signs of a bounce-back after being a drag on the consolidated performance since the costly foray. Idea’s merger with Vodafone India is progressing. The Aditya Birla group company is raising capital with end in sight to the pricing wars. Late-entrant Reliance Jio is charging, although very modestly, subscribers after providing free services, resulting in operating profit in the third quarter and lifting the parent’s share price. Coal India’s thrust on cost-efficiency translated into standalone profit in the latest three-month period from a loss a year ago. The capital infusion in banks that agreed to follow prudent norms and the central bank pulling the plug on the endless rehabilitation process and nudging defaulters to declare bankruptcy had seen a rerating of the industry. 

Recent regulatory-, industry- and company-specific developments, however, have created uncertainty instead of resolution. The decision of Trai to not interfere with pricing is being contested by Jio’s rivals. Those who were attracted by the cheap valuations might balk or reduce exposure, increasing the sector’s volatility. With its status as the sole supplier of coal under threat, the scarcity premium of Coal India will be under scrutiny. After recording the highest output last fiscal year, the economic slump has resulted in stockpiles and downward revision of the production target. As it is, the counter has shed more than 30% from its all-time high in July 2015. Despite being listed, there is lack of accountability in PSU banks. Their difficult-to-replicate reach was once envied and used as a justification for being invested. The digital revolution is reducing the compulsion of physical presence to be near the customer. The market value of a private bank with 150% lower gross advances is more than double of the largest government-owned lender. 

What these examples of fluctuation in the fortunes of companies and industries demonstrate is the fear of unknown that investors face. Disruptions can be gradual or sudden. There was hardly any warning about the transformation that Internet and wireless communication were set to usher. In contrast, the market is preparing for the imminent arrival of electric vehicles. India is promoting alternative energy sources so aggressively that the  solar industry is in distress as prices have crashed. China’s unexpected crack-down on polluting industries, a source of blue-collared employment, has given a new lease of life to manufacturers of steel and inputs in emerging countries. The surprising finding of the 1991 liberalization is that owning automobiles and white goods has become a necessity rather than a luxury. The dominant position achieved through the first-mover advantage can be challenged by smart upstarts that enhance user experience (private airlines), provide a price edge (online retailers) or cater to niche markets (new private banks). Often it is greed (rush into IT, telecom services and real estate) and technology innovation (online aggregators) that result in a shake-up. Sometimes the issues are complex. The accounting fraud by Satyam Computer Services did not affect its rivals but the PNB scandal triggered de-rating of its peers. The adverse impact of the ban on issue of letters of credit and undertaking for imports will be widespread and not restricted to the gem and jewelry sector. Will streaming content kill the movie-going habit that the advent of TV was forecast to do and the introduction of cellular phone has done to the traditional camera is a question that still cannot be answered with any firmness.     

Mohan Sule          

     

Time's up

Both equity and debt instruments carry investment risk and deserve a uniform tax treatment

The comeback of long-term capital gains tax on equities indicates a reversal of traditional policy formulation. Vehicles with uncertain outlook got preferential rates compared with those with predictable returns. Two arguments were offered in support of removing LTCG tax on stocks in 2005.  The most important justification was to encourage investors to take a longer view. The proposition was that it takes patience, ranging from three years to 10 years, for the investment to show a decent appreciation. The underlying message was only those who have surplus funds to spare should dabble in stocks. Yet the nil tax acknowledged that as the span of staying invested increases, so do the external and company-specific risks. Second, the unequal tax treatment punished trades based on arbitrage opportunities. Such strategies are capable of producing bumper gains in a short period and, hence, a higher tax rate. The nimble-footed participants, moreover, contribute to volatility, scaring the cautious investor as well companies who might want to pricing shares for private placement and follow-on offers, usually a function of historical averages. The higher rate of tax on fixed-income instruments, thus, is a response to the perception of predictable returns. In comparison with share capital, chances of a sharp appreciation or depreciation on debt are rare. The stock market reacts to news, minute by minute. Influencers of money market such as the credit policy and macro economic data dissemination are spaced out. 

Profit on debt is equated with income. Short-term gains are taxed accordingly. Ironically, most credit-worthy issues have coupons barely above inflation. Conceding that the interest rate scenario could undergo a change over a longer time, LTCG attract a lower tax rate with the benefit of indexation.  Even among debt instruments, the rate of tax is different. Interest on fixed deposits is deducted as per the personal tax slab. Indexation is not applicable irrespective of the holding period as banks and companies offer assured returns despite no guarantee about the trajectory of inflation going ahead. Bonds issued by companies and government absorb wide-ranging stimuli. Yields move in tandem with the outlook on interest rates. Prices depend on liquidity besides demand. As a nod to possible volatility, debt traded in the secondary market is categorized into short- and long-term holdings. The tax rate, however, is higher than that on short- and long-term gains from equities. Recent developments have ambushed the conventional theory. Over the last several years, liquidity was flowing into stocks and fixed-income paper from bond-buying by central banks in the developed world after a half-decade-long slump following the credit crunch triggered post September 2008. Indices have been hitting new highs at a pace that is not matching the earnings recovery. Investors in debt funds have been reaping rich gains as sluggish consumption kept interest rates low. The win-win scenario contributed to the perception of ease in making money.

Normally, bonds and equities find hard to coexist.  Investors opt for the safer debt over moody stocks when interest rates start climbing. Ironically, shares displaying exuberance in anticipation of the economy mending start shedding valuations when macro indicators confirm their confidence. Though the linkage has sustained over time, there is no surety that the equation will continue. Till recently, the money market was providing attractive returns in the belief that interest rates will only go down due to the fragile health of most countries even as the stock market was running ahead by betting on economic revival. Central banks by and large are reluctant to disturb the status quo to avoid panic in the financial markets. If they do so, they take care to sound contrite and give direct or indirect warnings on and off. As the developed and emerging nations stand poised to usher growth, the task of the monetary authorities is becoming complicated. Any hint that the economy is gathering pace creates turbulence instead of satisfaction. Dithering triggers even more chaos. Staying put is greeted with relief when the sentiment is bullish and frustration when it is bearish. Of late, the markets are taking away the power of the monetary authorities to shape the landscape. They react to fiscal deficit projections in India and unemployment data in the US to determine the direction of the economy without waiting for the central banks to act. As such it is time to revise the discriminatory tax treatment on equities and debt. Both are prone to sudden and violent movements and deserve a lighter tax touch irrespective of the duration of exposure.

-Mohan Sule

Treat, not kill

PSU banks are too important for financial inclusion to allow them to fail

In the early 1990s, Harshad Mehta exploited the manual transactions undertaken by banks to get rich. Fake bankers’ receipts, not backed by underlying assets, were issued by two little known entities to secure funds. Some banks transferred money that was to be used to buy government securities into his personal account to play the market so that they could get better returns. Shares were held in physical form. Long positions could be carried forward from settlement to settlement after paying a nominal charge. Brokers undertook proprietary trades using clients’ money. The scam triggered the transition to automation in banks and the stock market. If modern trading practices have increased the size of the market, the downside is limitless damage. The rollover of letters of undertaking by some employees of Punjab National Bank did not leave a trail despite using the Swift network to direct money into its accounts in foreign branches of Indian lenders since 2011. The fraud, estimated to be more than Rs 11000 crore, was detected when there was a change in personnel mid 2017. In 1995, a two-centuries-old British bank vanished into thin air due to unauthorized trading by a 28-year-old derivatives trader in Singapore.

If an individual’s greed brought about a great institution’s demise, the meltdown of the global markets in September 2008 stemmed from the financial markets’ insatiable hunger for profit. To capitalize on the housing boom, there was a scramble to buy and sell mortgaged-backed securities comprising a cocktail of low- and high- rated paper. Eventually, prices of homes reached bubble territory. Buyers dried up, leading to loan defaults. Not only Wall Street firms but even those in remote places such as Iceland ended up holding worthless instruments. Finally, the US government forced many of the too-big-too-fail financial services providers to merge and allowed some to die. A few smaller economies in the euro region had to be bailed out by the rich nations.  The first conclusion is that money skimming schemes can occur with or without digitization. Second, internal controls and risk management are invariably lax. Third, greed at every level contributes to the blowout. Fourth, due to global linkages, the fallout is across partners within and outside the border. The PNB money-siphoning scandal has come at an inopportune time. Credit growth is reviving. The period for recognition of non-performing loans has been shortened. Time-consuming restructuring processes have been junked. Borrowers are being shepherded to insolvency. The headwinds of demonetization and roll-out of GST are fading. Yet, the demand for privatization of the ailing nationalized banks is growing louder. The rise and fall of Global Trust Bank, one of the earliest new-age private banks, should silence the vocal proponents of wholesale selloff of government-controlled peers. Goldman Sachs owned 4% and the International Finance Corporation 5% when GTB suffered in the market crash of 2001 due to exposure to Ketan Parekh-boosted stocks in 2001. It was acquired by Oriental Bank of Commerce in August 2004. Shareholders received nothing.

Nonetheless, the grouse against political interference, from appointing top managers to influencing to whom and where to lend, cannot be dismissed, going by the fate of UTI. Flagship US- 64 scheme bought KP stocks even as their market value was plunging mid 2000.  Getting a whiff of trouble, there was a run on the scheme mid 2001. Units of Rs 10 were redeemed at Rs 14.20 when the actual value was less than Rs 8. In July, purchase and sale of units was frozen for six months. A 10% dividend was declared. Repurchase was undertaken at face value. The then NDA government had to spend Rs 3500-crore on recapitalization. PSU banks need to thrive as they are important links in the last-mile connectivity of various financial inclusion schemes. The strategy to revive the PSU asset management company can be copied to clean up the banking system. In August 2002, UTI was split into two. Tax sops were extended to US-64 and assured returned schemes. These were handed over to the Specified Undertaking of UTI, managed by a government-appointed team. The shortfall in US-64 scheme was Rs 6000 crore and of ARS Rs 8561 crore. UTI Mutual Fund got other net asset value-based schemes. Shareholding was offered to some PSU banks. When the market recovered, Suuti returned all the support provided by the government and was wound up in 2012. In the same way, the top 10 banks’ assets can be divided into good and bad banks. Bad loans can be disposed of at a good price as economic recovery catches speed and the bad banks dissolved. The government should remain a strategic investor, instead of owner, in good banks.

Mohan Sule

Yours sincerely

The last budget of the present government will burnish Modi’s legacy as a compassionate reformer

It will be a mistake to dismiss the Union Budget 2018-19 as a balancing act, giving away with one hand and taking with the other. It is a carefully crafted document with lot of thought. With the focus on widening the tax base out of the way, the attention has turned to ensuring social equity. The economy that was inherited four years earlier was beset with systemic weaknesses. As a result of crony capitalism in the garb of socialism practiced over the last many years, 1% of the population is holding more than three-fourths of the nation’s wealth. Demonetization, a uniform indirect tax regime and legitimizing insolvency over supplying unlimited credit are efforts in repairing the damage. The transition to a formal economy has commenced:  indirect and indirect tax collections have increased so far. It would have been surprising if the improved fiscal position had not emboldened the government to address the income inequality gap. The latest budget should be considered another step in the direction, following the Housing for All, Ujjwala scheme of last-mile electricity access without cost and the Saubhagya mission of free LPG connection. The last two programs get more allocation to increase coverage. These initiatives are not doles that the previous regime was known to distribute, the most infamous being the rural employment guarantee scheme promising predetermined minimum wages not linked to productivity. The budget for the current fiscal had in fact increased the outlay, with a rider that the work resulted in the creation of tangible assets.

The beneficiaries of universal healthcare and he recipients of 1.5 times the cost of crop production can be counted just like the outcome of the flagship Swacch Bharat by the number of facilities created. The prime minister’s horizon is never short term as is evident from the recall of high value notes and the roll-out of the goods and services tax. Their impact will reverberate over the long term. The target for the affordable housing scheme is 2022, the 75^th year of independence. Second, their irreversible nature ensures that Narendra Modi’s legacy survives. Withdrawing ModiCare or diluting the formula to calculate the compensation for farm output cannot be without severe repercussions. Importantly, the social outreach is not by printing more money. Two-thirds of the world’s largest medical insurance cover will be financed by budget allocation as well as the 1% increase in cess on income tax and one-third of the cost will be borne by the states. There are chances of PSU divestment exceeding the target of Rs 80000 crore for the next year if the current year’s experience is any guide. No wonder the slippage in the fiscal deficit target is just 0.3 percentage points at a time when crude oil prices have shot up to US$ 70 a barrel as against an average of US $50 a barrel for nearly half of the current fiscal year and the strengthening rupee is hampering export realization.     

The two areas of concern are inflationary pressure due to the slightly higher fiscal deficit and taxing long-term capital gains from equity instruments. Usually, the markets are the best indicators of the soundness of the budget math. Bond prices slipped, with yields going over 7.50%. The volatile stock market benchmark appreciated more than 250 points intra-trade after the announcement of medical reimbursement up to Rs 5 lakh per year per poor family and closed marginally lower. The more-than-4% plunge of the Sensex and the Nifty in the next three days was largely due to the fear that the US Federal Reserve is set to ramp up rates as US bonds fetched near 3% yields with the tightening of the labor market. US stocks plunged even more steeply. There is acceptance, particularly after the cycle of drought and normal and excess rainfall, that unless government spends on social welfare, rural economy and infrastructure, Corporate India will not be  in a position to generate revenues and taxes. Equity investors have enjoyed spectacular returns over the last year due to global liquidity. Structural changes leave the domestic economy in a fine form to sprint ahead unencumbered. The 10% tax on gains above Rs 1 lakh after a year across the equity universe is balanced by the dividend distribution tax on equity schemes. After aggressively pursuing to bring foreign investors registered in Mauritius, Cyprus and Singapore in the tax net, it was essential to erase the image of India, with a marginal securities transaction tax, as a place to dump laundered money. Hiking the turnover limit to be eligible for a lower corporate tax of 25% to Rs 250 crore is a nod to the animal spirits of the small and medium enterprises.  Undoubtedly, the last full-fledged budget of the current dispensation shows Modi’s compassionate side after cracking down on illegal wealth and encouraging tax compliance.    

-Mohan Sule

Feels good

With most macro indicators pointing to improvement, it is up to the market regulator to ensure the sanctity of the market

CY 2018 has begun on a cheerful note. Benchmarks are hitting new highs. The projections of India’s growth by multilateral agencies are optimistic. World Bank sees GDP expanding 6.7% and the United Nations at 7.1% in CY 2017 than the 6.5% estimate for FY 2018 of our Central Statistical Organization. After a six-month pause since the roll-out of the goods and services tax, reforms are back on track. Government approval will not be required for 100% FDI in single-brand retail.  Public sector banks are being recapitalized. The merger of SBI and associate banks has set in motion the consolidation process in the banking sector. Eventually, only a dozen or so PSBs will remain. Brimming with demo liquidity, banks are reducing their cost of borrowing by cutting deposit rates. Credit growth looked up in November, though on a low base caused by the recall of high value notes a year ago. Foreign exchange reserves have climbed up to over US$ 400 billion, the highest-ever. Foreign investors bought over Rs 148000-crore debt in the last calendar year as against a net pullout of Rs 43400 crore in CY 2016. Equity exposure of these investors is up three times over the year. Mutual fund inflows in stocks more than doubled over the period. There is unlikely to be a flight of capital, with the Federal Reserve dithering over rate ramp-up in the current CY as inflation in the US is still soft. Yet the rupee can be expected to decline moderately from the CY 2017 level as the import bill goes up to meet a resurgent economy as well as due to surging crude oil prices. Fuel prices can come down if brought under GST. There is determination to make GST user-friendly. A slighter weaker rupee might have the ability to boost exports, down by half in December over November.

The index to measure services activity crossed over to expansion from contraction and that of manufacturing improved to 54.7 from 52.6 in December over November, indicating that the worst might be over. Industrial production surged at a 25-month high pace of 8.4% in November 2017 over November 2016. Manufacturing hit a record high growth. Capital goods posted the fourth consecutive positive expansion. The infrastructure and construction sector spurted a sharp 13.5%. Net direct taxes grew 18.2% in April-December 2017, meeting over two-thirds of the target for the current fiscal. The buoyancy in tax collection has resulted in reassessment of the government’s borrowing program. Now only Rs 20000 crore will be required, down from Rs 50000 crore estimated earlier. Consequently, fears of increase in interest rates going ahead have subsided. Most likely the fiscal deficit will remain at 3.2% of the GDP for the current financial year. As a result, the fall in bond prices has been capped, offering huge relief to banks. Companies are reducing debt. Distressed assets are getting buyers. Transparency in real estate and interest subvention on first-home loans are bringing back buyers. With the buyout of HPCL by ONGC, the Rs 65000-crore disinvestment target for the current fiscal year has been crossed. The Niti Aygoy has recommended 22 PSUs for privatization.

The spurt in consumer prices to a 17-month high of 5.21% in December 2017 over a year ago due to increase in core inflation should cause satisfaction rather than alarm. The heating suggests pick-up in demand after the cold wave stemming from demo and GST. Yet the cumulative CPI inflation is lower at 3.25% in April-December 2017 compared with 4.85% in April-December 2016.  Also, wholesale prices are at a three-month low on softer prices of vegetables, pulses, egg, meat and fish. What can puncture the feel-good mood? Inability to maintain the market’s sanctity is a looming danger. Despite injecting significant transparency in trading and imposing accountability on issuers and intermediaries, the regulatory framework in India is a work in progress. The reminder of the fact was the market regulator’s decision to put off disclosure of domestic and international debt default by listed companies after making it mandatory in August. It seems the Reserve Bank of India is not comfortable with the information coming in public domain. The equity and bond markets often anticipate problems even before they occur. Better to let companies reveal than have stocks fluctuate on rumors. The concern of insider trading is real, particularly in the digital age. Shares of a financial services company went up 15% in a week before it announced merger with a new-age private sector bank. Another private sector bank’s quarterly results were leaked on WhatsApp groups days ahead of their dissemination. Unless a crackdown is visible in such instances, investors might hesitate to enter the market despite favorable tailwinds.

-Mohan Sule

Three scenes for 2018

Will recovery pick momentum or political instability derail reforms? Will liquidity boost prosperity or create bubbles?

Stepping into the New Year, investors are confronted with three uncertainties. The first is the direction of the stock market. Second is the looming inflation. Third is the shadow of the poll season. In 2017, the market bet on the bottom-up effect for the economy after the second disruption, this time by the roll-out of the goods and services tax, in seven months. Many companies shed assets to become lean. The issue is if the higher base will crimp the rate of return in 2018. As the year ended, crude and commodity prices caused concern. Projection of interest rates were muddied by mixed signals. The pressure of rising food prices due to heavy rains in some parts, higher manufacturing costs and government’s need to borrow on lower tax revenues on shifting most items to the lower GST bracket on one hand and the pull of a strengthening rupee and banks’ deposit-rate cut spree amid plenty on the other. The next wave of reforms will have to skirt the model code that will be in force at different times of the year as elections are slated in eight states. There are likely to be three scenarios for investors. The most favorable is the global economy, led by the US and Japan, keeping its momentum, buoyed by pent-up demand after more than a half-a-dozen years of slump. The fallout is the pull-up of the euro region, cranking up of China’s export machine and lifting of Indian tech exports. Pay commission payouts, better farm realization in an election year and orders for infrastructure projects ensure liquidity inflows into low-cost houses and consumer durables. The ripple effect bolsters lagging sectors, spurs credit growth and pares bad loans.

Oil prices remain range-bound as users diversify sources but breathe life into the Gulf economy. Mines ramp up output, tempering prices. Domestic interest rates cool after a bout of volatility on flood of funds from profit booking and banks’ desire to push lending. Foreign investors continue to look at India to widen the portfolio base. The currency appreciates due to the steady foreign direct investment as more steps are taken for ease of doing business and on BJP winning Karnataka and retaining all the other major states. Higher import bill and the Federal Reserve’s measured rate hikes as the US economy’s recovery consolidates,however, keeps the gains under check. The crunch due to lower tax mop-up and increase in supply-side expenses is met by aggressive divestment of PSUs. The second scenery suggests flat or marginal returns as the stock market’s surge moderates to allow earnings to catch up. Inflation stabilizes at a slightly elevated level as food and metal prices are capped by increased production. The rupee turns volatile on mixed signal from the Fed on inflation even as the US economy keeps ticking. Exporters’ hedging costs go up and the Reserve Bank of India’s task of managing the supply and cost of the Indian currency becomes complicated. Tax collection bottoms out and recovers as teething issues in GST execution are taken care of. The BJP fails to wrest Karnataka and looks likely to lose Rajasthan but keeps in fold others and bags some small north-eastern states, throwing the run-up to the Lok Sabha polls in 2019 open. The reduction in other income of banks due to the underlying threat of higher interest rates is compensated by higher growth in credit as purchasing power gets a boost due to improved wages and farm support prices.

The slowdown in foreign fund inflows because of incremental reforms is countered by mutual funds as valuations turn affordable. With fuels under GST limiting the flexibility to tinker with Central and state levies to shore up the treasury, more and more PSUs are put on the block at attractive discounting. Stricter due diligence while lending prompts issuers to become transparent to tap the open market at reasonable prices before it is too late. Investors have an option to choose from debt and equity at realistic return expectation. In the third scene, everything that is possible goes wrong. Oil prices spiral, fueling domestic inflation and straining the country’s balance sheet. The surge in the US market comes to a halt as the buying triggered by the personal tax rate cut propel valuations to bubble territory, prompting the Fed to undertake aggressive rate ramp-ups. Central banks of emerging economies, bloated with foreign reserves, too follow suit. Markets around the world tumble due to credit crunch. China is the worst hit. Middle East is whacked by democracy protests and US-North Korea war of words escalates. BJP loses most of the states, giving rise to political instability. Exports collapse even as the rupee weakens. A scant monsoon aggravates agrarian distress. Hopefully, 2018 will have some elements of the first two settings, balancing each other and keeping the market afloat.

Mohan Sule

Taste the thunder

2017 hurtled to a nail-biting finale as equities surged and consumer confidence slipped

At a point well past half time in 2017, it looked as if there were no clouds with silver linings for the economy. Even as the country was recovering from the frenzy of the recall of high-value notes late previous year, a torrent of reforms swamped industrial activity. MSP, NPAs, MRP and IBC were the acronyms of the year, arousing passionate polarization. Developers were put on leash and sick companies cut off from the drip of credit. Signs of Cyclone GST triggered a wave of disruption. An umbrella with five different hues of a common tax was barely adequate to shield from the complicated and cumbersome compliance regime.  Agrarian distress despite normal monsoon became the fodder for debate. As a result, growth caught a cold and slipped into a slumber mid-year. If the 2G scam verdict confounded, the stock-buying frenzy was justified by simple maths: Higher tax base equaled higher government spending on infrastructure, a sure-fire demand propeller. Due to the surge in deposits from panicky households fearful of crackdown, banks were swimming in liquidity and did not need the raft of higher rates to attract savers. So much was the deluge of cash inflows that some asset management companies had to turn off the subscription tap. Foreign investors making a beeline to make in India bolstered reserves to record high and kept the rupee strong. Benign oil prices due to worldwide slowdown narrowed the current account deficit. Riding on optimism, equities ran ahead of earnings even as consumer confidence plummeted on pessimism. In an era of low costs, stocks became expensive. Issuers rushed into the ring with pricey offerings that ranged from the largest share-sale in the history of IPOs to those getting 100 times oversubscribed and debuting at 100 times gain on tight supply.

Impressed by the resolve to shake up a lethargic economy, the World Bank pushed up India to the 100^th place in the Ease-of-Doing business ranking. The tailwinds turned into a tornado, when a global credit rating agency upgraded the outlook to investment grade and two others lavished praises while maintaining the status quo. The satisfied purring emboldened equities to notch new records. The high mast of valuations were powered by the anticipated discipline in the real estate sector, interest subsidy for first home and support to low-cost housing to encourage buyers to take the plunge. The ripple effect was supposed to spur consumption across the board. Cheering from the banks would be the lenders, freed from their excessive baggage of bad loans courtesy the lifeline thrown by the liquidation law. The storm in the tea cup was who should bid. The big chill was the realization that there might be a slip between the intention to become lean and actually becoming mean despite supplementary infusion of capital and that private investment will revive only when companies shed their fat to become ready to swim. Among those rushing to become slim were conglomerates fattened on a diet of junk consisting of cement, construction, telecom towers and spectrum, steel, DTH, real estate and retail. The most notable weight-loss exercise was executed by an Indian steel giant, assigning a German guardian for its British offspring.

The rumblings in the corporate corridors were not restricted to the issue of collecting useless trophies. Egos were bruised in bloody battles with successors for supremacy. Instances of favorites turning foes were not confined to the boardrooms. Regulatory inspections and approvals left pharmaceutical investors spinning. The volatility extended to a re-look at the companies managed by the elder Ambani sibling in H1 and the younger one in H2. Shunned sectors such as metals and PSU banks turned into the flavors of the season. Private-sector banks and the central bank clashed on asset recognition. The tense game of thrones in the telecom sector ended with just three survivors. Tech players looked poised to leap back to life after a hasty burial as the Federal Reserve signaled that the US economy was on a sound footing. After being down in the dumps for most of the year, oil staged a comeback, spreading panic as the tamed consumer prices strained to break free. The surest sign that the mood was changing from being politically correct to simply being realistic was the dimming of the ferocity of the winds trying to demolish the unique identity program to weed out fakes and the muted protest to the US Federal Communications Commission’s repeal of net neutrality. 2017 was not for the weak-heart. Capturing the essence of the year was the cliff-hanger in the epic theater of intrigue staged in the home state of the prime minister. If not for the ending, India looked set to turn back in time to the medieval age of queens and princes.

Mohan Sule