vox populiMagazine for Business & Consumers 3

facebook.com/navhindtimes ± navhindtimes.in/app @navhindtimesnavhindtimes.comThe Navhind Times I Monday February 22, 2016

The current dip in the industrial commodity prices is fairly pronounced. The Bloomberg Commodity Index is down

investor’s guidesCrIp TIpRailway Budget will

influence sentiments  

Futures and options (F&O) expiry and Budget will dominate market sentiments

during the week. Volatility is expected to be high as traders roll-over positions in the de-rivative segment from the near month February 2016 series to March 2016 series. The February 2016 derivatives contracts are set to expire in Thursday.

  The next major trigger for the stock market is the Railway Budget and Union Budget 2016-17 as in-vestors seek clarity on the government’s plan to lower the corporate tax rate and phase out tax exemptions.

  We expect a lot of action in stocks of com-panies in the steel, ce-ment, coal, iron ore and

fertiliser sector after the railway minister Suresh Prabhu presents the Railway Budget for 2016-17 in the Lok Sabha on February 25. Investors want to see if the government is able to keep spending on areas such as building rural roads, houses and other infrastructure, without letting its fiscal deficit targets slip.

Key global data expected next week includes, Eurozone Markit PMI Composite index for February 2016 and  US Q4 GDP data.

  On the technical front,  Nifty index is weak till it rules below 7300 mark. Having said that expect sector/stock specific action. At current juncture, some of the index majors are looking attractive and they can surprise the traders.

Vijay Singhania, Trade Smart Online

weekly markeT ouTlook

Buy

Target Price` 210

Current Price` 171.05

Canara Bank

Buy

Target Price` 690

Current Price` 458

KNR Constructions

HolD

Target Price

` 220

ONGC

Current Price

` 211

Steering well amid volatile scenario

Like many other public sector banks who were hit on asset quality front, Canara Bank too followed suit. It was also not spared by higher slippages due to ongoing asset quality review (AQR) by RBI. Fresh slippages soared to Rs 54 billion during the latest quarter v/s Rs 22 billion in the second quarter. Consequently the bank reported a

provision of Rs 14.3 billion. However despite elevated stress formation, the bank was able to deliver fairly better operating performance as compared to its peers due to healthy growth in core fee income along with comparatively healthier growth in balance sheet. Canara Bank is relatively better placed compared to its peer PSUs in handling the clean-up of current loan book. Approx 62 per cent of Canara Bank’s fresh slippages in the third quarter amounted to stressed accounts reviewed by RBI. Majority of NPA came from steel, infra and textile. The bank has total exposure of Rs180 billion towards SEB’s restructured loan out of which Rs120 billion is covered under UDAY scheme. The bank will convert Rs60bn in state government bonds during 4QFY16E. Hence, NIM will be marginally impacted due to lower yield on these state government securities. Expect fresh slippages and credit cost to remain at elevated level in the fourth quarter as the bank has partially recognised loan impairment according to ongoing RBI’s asset quality review. Reliance Securities

Recovery ahead

KNR Constructions performance has been impacted by heavy rain and floods in its key project areas such as Tamil Nadu which accounts for 50 per cent of the order backlog. Consequently sales decreased five per cent. However operating margins were good and the company’s balance sheet remains strong. Order book outlook

is healthy. The company is shown immense potential by bagging Rs 26 billion worth of orders in the first nine months of 2015-16. We revenue booking will improve in coming quarters due to income flow from new projects. Reliance Securities

Positives vibes from Budget

Asset impairment hit ONGC’s profits in the third quarter. The company could receive positive boosts in the forthcoming Budget. Anticipated reduction in cess rates and reintroduction of five per cent customs duty in the budget, which will support ONGC’s earnings. Asset impairment is expected to be reversed next quarter. In

2016-17 ONGC’s crude volumes are estimated at 22.76 million tons while gas volumes at 24.65 bcm. Axis Securities

*Rate as on Feb 20 2016

farm proDuCe prICes

hLadyfinger 36.80

hCabbage 10.00

hCluster Beans 34.00

hFrench Beans 24.00

hCarrot 22.00

hCauliflower (piece) 16.70

hChilly 53.00

hOnion 14.70

hPotato 20.90

hTomato 11.60

Vegetables Retail rates at GOA STATE HORTICULTURE Corporation Ltd. (Rs per kg)*

� By Adv. JAtin RAmAiyA

Sandhya Mantri, Bambolim resident, recently ap-proached the Goa State Consumer Disputes Redres-sal Commission, assailing a

final order passed by District Fo-rum North by which her consumer complaint against Prince Dry Cleaners for deficiency of service was dismissed.

Mantri said that she had hand-ed over about 19 curtains for dry cleaning on the assurance that the Dry Cleaners shall provide excel-lent and quality service. It was further averred by her that for such ser-vice of the Dry Cleaner she paid some consid-eration too. However, on delivery of the curtains she realized that the lin-ers were damaged and she attributed the dam-age to the poor quality job done by the Dry Cleaners. It was further alleged taking cogni-zance of the same the Dry Clean-ers agreed that job undertaken by them was not up to the mark and therefore they collected seven curtains for replacing liners at first instance and promising that the remaining shall be taken at later point in time.

According to Mantri despite its promises Prince Dry Cleaners did not delivery the said curtains till date. And subsequently she claimed multiple reliefs against the dry cleaners. However, the District Forum, North Goa, on the ground that Mantri was not a consumer as the bill of purchase of the said curtains was not in her name but in the name of a Company and that there was absolutely no deficiency in service on the part of the Prince Dry Cleaners, dismissed the com-plaint.

Upon hearing the arguments of the respective counsels appear-ing for Ms. Mantri and the Dry Cleaners, the State Commission through its President Justice UV Bakre held that Mantri was indeed a consumer. In his judgement the retired High Court Judge observed that the complainant has no griev-

ance against the seller of the said curtains for deficiency in service. The complaint is against the op-posing party who are dry cleaners. Admittedly, it is the complainant who availed of the services of the dry cleaners. The bill towards dry cleaning charges have been issued in her name. The complainant therefore comes within the four corners of Section 2(1)(d)(ii) of the Act. In our considered view, there-fore, the finding of the Forum that the complainant does not come under the Act is not correct and is liable to set aside and is accord-ingly quashed. We hold that the complainant is a consumer under the Act.

Furthermore, on the point of deficien-cy of the service on the part of the dry cleaners, the Com-mission observed that the complainant has not produced any cogent evidence to establish even re-motely that the lin-

ers of all the curtains or of any of them were damaged. She alleged that the opposing party collected seven damaged curtains for replac-ing the liners from her residence. This only means that the complain-ant had collected all the nineteen curtains from the premises of the opposing party.

There is no explanation as to why the complainant did not verify the condition of the curtains, at the premises and at the time of taking delivery, and also why she did not refuse to take delivery on the ground that the liners were damaged. The correspondence and the affidavits on record reveal that there is assertion on one side and denial on the other side. Nothing had prevented the complainant from producing the said curtains before the Forum for perusal or at least producing photographs of the curtains with damaged liners.

Case of dirty linen

Latest BSE Sensex 23,709.15

Nifty 7,210.75Re/ US $ 68.72Rs/ UK Pound 99.00

Skinny dipping in receding tide � By tensing RodRigues*

Soon after 9/11, Warren Buffett made a comment about businesses he

thought were not run very well and that suf-fered when the economy tanked. “When the tide goes out you can tell who’s been skinny dipping, said Buffet. Perhaps there could not be a better allegory than that to de-scribe the situation in which some of the global players find them-selves. I am saying this particular-ly in the context of the cliff-diving commodity prices.

The current dip in the indus-trial commodity prices is fairly pronounced. The Bloomberg Com-modity Index is down almost by one third over the past 12 months and by more than half since 2011.Not even during the worst mo-ments of the last recession did it ever get so low.

Well it is thereperhaps that we have missed the point.

Most of the commentators are inevitably comparing the current fall to the one in 2008. But not all agree that the current crash of commodity prices is similar to the last one, or that this crash is even a part of a business cycle. David Stockman calls it a “fracturing monetary supernova” that was created by the 1990s boom, and the “lunatic monetary expansion that followed the 2008 crisis”.

Stockman was the director of the Office of Management and Budget under President Ronald Reagan. He should be knowing. Even bereft of the bombastic lan-guage that Stockman uses, there seems to be much sense in what he says. To put it more simply, the current fall in commodity prices is a correction of a monetary aberra-

tion that goes far beyond the smooth curve of a business cycle. That requires us to sit up and think. Because it is not self cor-recting. It has not been seen before and we may not have the benefit of hindsight.

Where did we go wrong? As Stockman points

out it is the bust of two booms in money supply, viz. the 1990s boom and the post-2008. In fact, the two are closely related; or, should I say it was a continuum. The 1990s economic boom in the United States was an extended period of ‘economic prosperity’, dur-ing which GDP increased continuously for almost ten years, the long-est recorded expansion in the history of the United States. It com-menced after the end of the early 1990s recession in March 1991, and ended in March 2001 with the start of the early 2000s reces-sion, following the bursting of the dot com bubble.

The United States economy grew by an average of four per-cent per year between 1992 and 1999. The unemployment rate dropped from nearly 8 percent in 1992 to four percent at the end of the decade. From 1990 to 1999, the American household income grew by 10 percent. But by 2000 that bull run came to an end. Since 2001 the economy has never grown by as much as four percent,

and since 2005 not even by three percent for a whole year. Since 2000, American household income has shrunk by nearly 9 percent.

That is not really surprising. Even at the prime of the boom, keen observers found cause for concern in various aspects of economic performance. Personal bankruptcies had climbed, the personal saving rate had plum-meted and the trade deficit ex-panded dramatically. All the three were the early symptoms of the crisis that came post 2000. Per-sonal bankcruptcies were clear in-dicators of what Stockman would call ‘lunatic’ explosion in personal indebtedness, abetted, nay en-couraged by the US government. Add to it the falling personal sav-

ing rate. That is where the infamous ‘subprime mortgage crisis’ began. Foreign trade deficit is what hap-pens when a nation as a whole practices living beyond means. But the coming storm was covered by the booming stock market till it could not cover it any more. So the tide receded – the 2008 crash – revealing the naked swimmers.

Fortunately for US then, Chi-na’s meteoric rise drew the curtain on the unsightly scenario. In its mad frenzy to rise to the top Chi-na primed the pump of US spend-

ing once again and creating a mirage of prosperity. Commodity prices soared to their never before heights, as China swallowed iron, copper, zink, oil, and whatever the bowels of the world could yield, wherever in the world. But, some day China realised its megaloma-nia, amidst losses in equities and plunging yuan, and set out putting its house in order. Not much later, using Stockmans metaphor once again, the ‘monetary supernova’ began to disintegrate in its final Titanic glory.

Brent crude closed at $33.55 a barrel on the London-based ICE Futures Europe exchange in the first week of January 2016, the lowest settlement since June 2004, just as the stockpiles at Cushing, Oklahoma, nation’s big-gest oil-storage hub, touched 63.9 million barrels by the end of 2015 not much below its work-ing capacity of 73 million barrels; the day may not be far when it

will be able to hold no more and that willcall for an im-mediate halt to production. Where do we go from there ?

To a saner world, I would say, the world we knew as kids. “The world-wide economic and indus-trial boom since the early 1990s was not indicative of sublime human progress or the break-out of a newly energetic market capitalism

on a global basis. Instead, the approximate $50 trillion gain in the reported global GDP over the past two decades was an unhealthy and unsustainable eco-nomic deformation financed by a vast outpouring of fiat credit and false prices in the capitalmarkets,” says Stockman. After the binge, the fall was invitable.

*The author is an investment consultant. Readers can send

their comments and queries to investment.ideas.shop@gmail.

Parliamentary proceedings will guide rupee’s trajectory

Parliamentary proceedings coupled with announcements on the upcom-ing union budget and global cues, are expected to guide the Indian rupee’s trajectory during the coming week

according to experts. They pointed out that

the currency market par-ticipants will keenly fol-low parliament’s budget session which commenc-es on Tuesday. Any signs of a washout in the initial few days will dampen sentiments and dent the rupee, said, Anindya Baner-jee, associate vice president for currency derivatives with Kotak Securities. He elabo-rated that an “over-valued rupee” will come under pressure from February 22 onwards as a string of US macro-economic data points released till date are expected to keep the dollar well

supported. The rupee had crashed to an all time low

at 68.89 to the dollar in the overseas cur-rency markets on Friday and ended the day’s trade at 68.72. Domestically, the rupee had closed unchanged from its previous close of

68.47 to a greenback on Thursday. The domestic currency markets were

closed on Friday. “There might be

some pressure on the rupee on Mon-day. We can expect the Reserve Bank of India (RBI) to intervene heavily to stem any wild

moves in the ru-pee’s value,” Banerjee predicted. Over the next week, we can see

some volatility as the market grapples with uncertainty surrounding the budget and the global market developments. In addition, investors will look out for any

positive budgetary announcements and news on expected banking sector reforms, he said.

Market participants are hopeful that the central government may increase expendi-ture, announce tax concessions and pave the way to reduce the NPAs (non-performing as-sets) levels of the banking sector.

“Sentiments are currently down and any positive announcement is surely going to trigger a relief rally in the equity markets. This rally might spill-over to the currency markets,” Banerjee added. Even the interest of foreign investors in the country’s equity and bond markets will set the tone for the Indian rupee.

The weakness in the India rupee’s value indicates a massive outflow of foreign funds from the equity and debt markets. The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) sold Rs.3,307.47 crore or $484.42 million in the equity and debt mar-kets from February 15-18. Data with stock exchanges disclosed that the FPIs divested stocks worth Rs 2,608.87 crore during the week under review. IANS