The sudden downturn in financial markets is giving an opportunity to look over the shoulder: is you fund manager letting you down, is the music about to stop in the game of musical chairs in financial markets, are the domestic macros getting bad to worse? We sliced and diced through some interesting writings and reports to offer you glimpses of what’s going on around you. Should be enough food for thought for your weekend. I reiterate that this is only a sampling of some of the best content I read through the week, with a dash of my own thoughts. Until next time…Thoughts and reflection on 30 years in Fund management There is no better time than today to remind portfolio managers who are managing hard-earned money of Indian investors of their fiduciary responsibility. Never forget your responsibility to investors who have entrusted you with a portion of their hard earned savings. When the perma-bull strategist at a bulge bracket investment bank is telling you to eke out the final few point of a rampant bull market even though there could well be 5 per cent upside and 50 per cent downside, try to think about the man or lady who has worked on the checkout at Tesco for years in order to put something by for her retirement. How would they feel if they knew what you were doing? How would it affect them if you did lose half their money? There are more gems in this letter but one which stayed with me because this is where I have serious grudge against Indian portfolio managers… They don’t READ. “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.” READ MOREIndia’s Sales Managers Index suggests slowing growth World Economics writes… The Indian economy continued to grow rapidly in October with the headline sales managers’ index at 59.0 but multiplying slowdown signals suggest caution regarding future months.Sales and market Indices continue to show growth, but the rate of growth falling fast; the jobs growth index has fallen from its recent (2 years ago) high of 73.1 to close to 50.0Despite still high business confidence, they expect a significant fall in GDP growth rate in the coming months.High frequency indicators such as auto sales, two- wheeler sales, tractor sales also show slowdown. Passenger vehicles sales fell 5.6 per cent YOY in September, followed by a 12 per cent YoY degrowth in tractor sales in September. Both are indicators of the health of urban and rural economy. While the rural distress can be explained by low farm income, urban slowdown can be best explained on general economic uncertainty and lack of Job creation . Read MoreH1FY19 fiscal deficit hit 95.3 per cent of FY19 target Dhananjay Sinha writes… India’s H1 net tax revenue at 40.1 per cent of budget estimate was seen to be the lowest since FY15.The growth has slowed to 7.5 per cent YoY. The indirect tax collection has been much lower than expected at 1.9 per cent YoY growth. Now with excise duty cut on petroleum products, we expect even lower indirect tax collection. However, the pace of expenditure strengthened to 13.5 per cent YoY primarily due to stronger revenue expenditure at 13.8 per cent. While capital expenditure slowed to 10%, overall expenditure of states remained strong this year, with revenues growing at 14 per cent and capital at 17 per cent. Outlook: Scope of fiscal slippageWith deficit reaching over 95 per cent of BE and capital spending also being at 54 per cent of BE, there is a limited room to curtail capital spending to meet the fiscal deficit target of 3.3 per cent of GDP. With petroleum excise cut, higher revenue obligations especially from subsidies, expected lower tax collections on economic growth peaking out in Q1, rising cost are all likely to increase the pressure on fiscal deficit.Also the impending state and general elections might compel the governments to retain the reflationary path, notwithstanding the narrowing fiscal headroom. Earlier, GoI announced lower market borrowing for H2FY19 by Rs 70,000 crore, which we believe will be rebalanced by higher other borrowings. With fiscal deficit likely to exceed BE, we believe the overall borrowing will be somewhat higher. India G-Sec yield has softened in recent days (10 year at 7.87%); this we believe is largely on the back of slower credit demand induced by the NBFC turmoil. We think this may be a temporary.My two cents… Market is underestimating the extent of fiscal slippage and I had already written before that household consumption is also slowing down simultaneously. Read More Govt in a Catch 22 situation because slowing consumption in the absence of capex will weigh down on revenue collection and there is not enough space left on the fiscal side to do extra spending. Expect slowing growth with stubborn inflation. Catch your chair: Music is about to stopAmbit writes… for next three quarters, it will be testing times for NBFCs, mutual Fund investors and fund managers. Teams and businesses which will survive through this pain and come out clean will lead India to its next economic and financial boom. My two cents: Any industry which grows higher than nominal GDP allows more competition and create opportunities for smaller companies to increase market share, but Indian mutual fund industry in spite of clocking almost double of nominal GDP growth over last few years has led to market share consolidation among the top 10 funds.So, what happens when there is a crisis like the one explained above by Ambit? Unfortunately, it will hasten further consolidation with marginal players getting pushed out of business.Most don’t have an USP and in a crisis like this, I will not be surprised is the industry downsizes to20-25 players in next few years from 40 now.
Read more: economictimes.indiatimes.com