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FINANCIAL VOICE -INDIA
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Asian Voice | 19th May 2018
IMF expects India to grow at 7.4% in FY 2018/19
Consultant Editor Financial Voice Alpesh Patel Dear Financial Voice Reader, The lazy way to become a millionaire. I like looking back on my columns to see if I was accurate…this is what I wrote in 2011 and then the update to today in bold. “Listen closely, I don’t mean to be rude, but I will only say this once. What I am about to write is what is going to happen in the financial markets in 2011. I am not being arrogant. I am just telling you the way it is. I probably will repeat myself endlessly throughout the year but for now this is it. How do I know? Am I a forecaster when we know how bad forecasters are? Am I into witchcraft or blackmagic – astrology even? Have I sold my soul to the devil in exchange for market insight? Maybe. But that’s not how I know. I know because it’s my business to speak to the traders at the biggest banks, the people handling the money for the biggest family offices, their bankers, advisors, the people they inform and the people they listen to. But then I ignore all that and do my own analysis. And in this case it accords with what the smart big money is doing. When that happens and it is rare – I get excited. I am excited. So here it is. First, world equities are not overvalued. Whether you follow forward or trailing price-earnings ratios (don’t switch off – this stuff can make you money) – which value the price of shares based on the profitability of the company ie earnings – then companies are trading at sombre 1990-92 levels – or 30% below a ‘normal’ non-boom or bust year and half boom year valuation associated with the dot-com era.” Well, the market has indeed skyrocketed. Boy was I right! I continued… “Indeed looking at the 2007 peak, equity prices are in the US 20% below there as is their valuations. In the UK they are 20% undervalued to 2007 peak and their prices 10% below. In India they are at those peaks in terms of prices but valuations are 30% below. All this leaves far more room for upside. And Brazil is a case in point. It is above its 2007 peak it is below the valuations those companies carried. A company in the Dow Jones Industrial Average for instance have their shares priced at about 14 times their profits per share. That is well below the 20 or 25 ‘multiple’ they could easily be at. Consequently I can see much upside. The other reason for my confidence is that the 10 year cycle of US equity returns shows we have had about a 0% return from US equities in the past 10 years. That suggests on past experience that in about 5 years you will have about a 200% return from 2005-2015 period! How much has gone between 2005 to 2011? Good news! Pretty much 0%. So the whole 200% will come from 2011-2015 potentially. (Not in a straight upward line!)” Take your Amazon investment - £10k when you read my article becomes around £100k or put another way, £100k makes you a millionaire. Free course on economics and markets on www.alpeshpatel.com/apprentice Alpesh B Patel For a free online trading www.alpeshpatel.com/apprentice
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Bad loans push four public sector banks to £1.17 bn Q4 loss
Four Indian banks reported a combined net loss of £1.17 billion for the fiscal fourth quarter due to a jump in bad-loan provisions following a tightening of Reserve Bank of India rules. Canara Bank Ltd said its net loss was £486 million for the three months to March 31, compared with a net profit of £21.4 million a year before. Allahabad Bank reported a net loss of £351 million and UCO Bank £213.4 million loss. Dena Bank, the smallest of the four, made a net loss of £122.5 million. Already burdened by a near-record £95 billion of soured loans as of last year, Indian banks were expected to report a further rise in bad loans in the March quarter after the apex bank withdrew half a dozen loan-restructuring schemes and tightened some rules in February. The government owns majority stakes in 21 lenders that account for the bulk of the sector's bad loans, forcing the government to announce a $32 billion bailout package to help the lenders set aside funds for the soured loans and kickstart new lending.
The Indian economy is expected to grow at 7.4 per cent in the current fiscal, and accelerate further to 7.8 per cent as it recovers from the impact of demonetisation and Goods and Services Tax (GST) rollout, International Monetary Fund (IMF) said. Its Regional Economic Outlook: Asia and Pacific (REO) stated that Asia continues to be the main engine of the world's economy, accounting for more than 60 per cent of global growth, three quarters of which comes from China and India alone. It said, “But there are risks and challenges ahead, including from a tightening of global financial conditions, a shift toward inward-looking policies and over the longer run, population ageing, slowing productivity growth, and the rise of the digital economy.”
The report said that Asia is expected to grow at 5.6 per cent this year and next, adding that the outlook was supported by strong global demand, as well as still accommodative policies and financial conditions. “In India, growth is forecast to rebound to 7.4 per cent in FY 2018/19 as the economy recovers from disruptions related to the currency exchange initiative and the roll out of the new Goods and Services Tax.” It said China was projected to grow at 6.6 per cent in the
current year that will moderate to 6.4 per cent next year. The report said it had seen some upward movement since September 2017 on the back of rising oil prices. “But core inflation- which excludes food and energy, remains low and below target in many economies. In 2017, headline inflation on average was 0.6 per cent lower than target in Asian advanced economies, and 0.8 per cent under target in Asian emerging market economies.” It further said inflation has become more backwardlooking, meaning that past inflation drives current inflation more than future expectations. It means that if inflation rises, it may persist. “Further, there is some evidence that the sensitivity of inflation to economic slack has decreased, suggesting that if inflation rises, there may be a large hit to output when reducing it.”
Chidambaram's family members booked under black money law The Income Tax Department has filed four prosecution cases against former Finance Minister P Chidambaram's son Karti, wife Nalini, and daughterin-law Srinidhi, under the tight Black Money (Undisclosed Foreign Income and Assets) Act for allegedly failing to disclose properties and investments in the UK and the US estimated to be worth £9,45,000. The tax department listed investments made by the senior Congressman’s family members in acquiring a property in Cambridge worth approximately £5,37,000, apart from two investments made by Karti's Chess Global Advisory Pvt Ltd in the US and the UK estimated to be worth over £4,00,000.
P Chidambaram
Other than the acquisition, Karti allegedly invested over £3,28,000 in a company in the US through Chess Global, which the tax department claims is associated with him. He also allegedly made another investment of Rs 80,00,000 in a company in the UK. A source in
the IT department said Karti, his mother, and his wife had failed to disclose these assets and investments in their income tax returns despite the fact that they were earlier given an opportunity through the one-time amnesty scheme to disclose all their foreign assets. The family was treated as wilful defaulters for not disclosing their foreign assets, a ground to face prosecution under the Black Money Act. If convicted, the act provides for “rigorous imprisonment for a term which shall not be less than six months, but which may extend to seven years and with fine.” Karti's chartered accountant responded to the cases, saying his client had “not defaulted”
in disclosing foreign assets in the income tax returns for assessment year 201617. His wife and mother too filed identical responses and said the disclosures were made in the revised returns filed by them. Srinidhi said, “Omission, if any, in the original returns under Section 139(1) was corrected in the revised returns under Section 139(5) of the IT Act. The original returns and the revised returns were filed on the advice of her chartered accountant.” The family has demanded that the case be dropped, arguing that “it would be totally unreasonable and perverse to conclude there has been any wilful failure to disclose any information about the foreign asset.”
CBI files charges against 19 in PNB fraud case Jeweller Nirav Modi has been named as "wanted accused" in the first chargesheet filed by the CBI in the £1.34 billion Punjab National Bank (PNB) fraud that involved his diamond merchant uncle Mehul Choksi and top bank officials. The chargesheet was filed in a Mumbai court just before the end of the 90-day period to submit charges against the 19 arrested persons. The accused will not be able to apply for bail now. Usha Ananthasubramanian, Managing Director and CEO of the Allahabad Bank, who held the same position at Punjab National Bank earlier, PNB Executive Directors KV Brahmaji Rao and Sanjiv Sharan, and General Manager (international operations) Nehal Ahad have been named as accused by the CBI. A separate chargesheet against Mehul Choksi will be filed later. According to the CBI, senior PNB officials had not complied with circulars issues by the Reserve Bank of India on the SWIFT control system, a platform for encashing letters of
Nirav Modi
undertaking (LoU). The CBI says they have shown how money raised through Letters of Undertaking issued fraudulently were routed through offshore firms which the agency believes are shell companies used to send the money back to India. Nirav Modi's wife Ami Modi, his brother Nishal Modi and other family members are likely to be named in the supplementary chargesheets later this week, CBI sources said. The jeweller duo
left the country before the fraud was uncovered and have since denied all allegations against them. As they refused to return to the country, nonbailable warrants were issued against them. PNB, India's second-largest staterun bank, had revealed in February that it has been swindled off over £1.20 billion through the fraud guarantees for Nirav Modi and Mehul Choksi. While the CBI probed the fraud, said to be the biggest in Indian banking history, the PNB also conducted a parallel internal investigation and suspended at least 21 officials. Meanwhile, Nirav Modi, who left India in the first week of January and is believed to be in New York, has been trying to seek political asylum in the UK. He is reportedly still travelling on his Indian passport that was cancelled by the government in February. Mehul Choksi wrote to the CBI in March saying it was "impossible" for him to return to the country as his passport had been suspended.