The nifty is set to
break the 5650 mark resistance in the coming weeks. Why?
The past couple of
weeks have been a turn around time for the Congress. But the bricks were laid
months ago. I always felt that Sonia Gandhi is a smart politician and smart
does not necessarily mean 'un-corrupt'. Smart politician means who keeps her calm
when everyone is shouting, does the requisite work while others are thinking
they have got her and snaps back when no one is aware. And Sonia Gandhi
fits the bill perfectly. How?
Well, remember the
time when we were hearing scams on a daily basis? 2G, Coalgate, CWG, Jija-G
etc etc.? Right, that's the present time. And Congress has been the one criticized
for each and everything. With Kejriwal and company's constant 'Name and Shame'
policy, most of us had believed that this (Congress) party is useless and
corrupt and should be kicked out from the center as soon as possible. In a
democracy, that 'soon' means the next elections. And only a month back, if
anyone would have asked me if congress is going to come back in 2014
elections, I would have said that it's very difficult, close to impossible.
The so-called 'Aam Aadmi' is frustrated with Congress and is not going to vote
for them this time around. And thus, Congress would see a huge fall in their
number of seats in 2014 elections and if Modi's charm works out in the
upcoming elections, NDA can be back in power.
The scene has
suddenly changed.
2G Auction failed.
And failed terribly. As I mentioned in my previous blog that this failure
will give Congress leaders the courage
to bark back at CAG and question their relevance. All those 'zero-loss' theories are back in the print and
CAG has gone mute. The former Director-General of CAG, Mr. RP Singh, stated
that he was given a 'written' order to sign the Rs 1,76,000 L Cr presumptive
loss theory on 2G scam, and the actual loss was a meager Rs 2,645 Cr according
to his calculations! In comparison to Rs 1.76 L Cr this figure is close to 'zero'. Again, 'Vibhishan'
is being used to win this war of presumptions. He also alleged that PAC
chairman, Mr. Murli Manohar Joshi, a BJP leader, influenced the reports on the
loss figure. It completes the mythology! You have got a 'Raavan' to doubt each and everything which
you have been hearing for the past 2 years. It seems a 'big, hairy, audacious'
political conspiracy unfolding. After all, how has the CAG been being so
defiant of the government so far in questioning them on each and every thing
but for a rival politician heading it. Sonia Gandhi breaks her silence right
at this moment to utter these simple words, " Yes, I certainly think
so," to a question about BJP's indirect contribution to the 2G report.
I
don't remember her commenting anything on the unabated accusations of mammoth
scales so far. It always used to be one or the other of Congress'
spokespersons like Digvijay Singh or Manish Tewari who would make the
statements as they are the designated spokesperson. Doesn't matter even if
they speak bullshit; it engages the media to discuss and infer what they said.
If someone starts to get too mired in controversial statements, he is replaced
by the other. This serves two purpose. First, the first spokesperson gets the
time to relax and free his mind. Second, the new spokesperson does not have to
bother about what has been said by the previous one and can go on speaking
more crap. Media and people forget (or choose to ignore) what the previous one
said and the focus is back on the present one. All this while, Congress
prepares its ground to get back at the opposition.
Like a game of
chess, she engaged the opponents without getting too hurt to finally trap them
in their own plot.
The government creates an
auction policy which is so designed that it would fail by any probability
model. Why it failed? I have discussed some of the issues in the previous blog
itself. The high base price for pan-India 5MHz 2G spectrum at Rs 14K Cr was
not going to fetch the government anything but peanuts as no one (Telcos)
would have been interested in buying the spectrum at such high prices now when
the tele-density in India has increased dramatically over the past 5 years or
so. With government intervention on the prices that the Telcos can charge
their subscribers, the sector is becoming increasingly unattractive for the
businesses. Bharti posted its 11th consecutive quarterly decline in Sept'12 to Rs
721 Cr.
Availing bandwidth at higher prices would have only strained their
balance-sheets while the Return on the fresh
Investments would have been low. On top of that, the Rs 14K Cr figure valued
the Mumbai-Delhi-karnataka circles at
around 48% of the total pricing (approx. Rs 6.72K Cr) , which was too high
given the revenue that telcos generate from these circles. There were other
circles which have better Cost-Revenue ratio like Bihar, UP, Gujarat and West
Bengal and they were the ones which eventually brought whatever collection the
government got. The top three circles, which sold like hot cakes during the 3G
spectrum sale, failed this time around as the speculation of garnering
incremental returns for the 3G services in these areas petered down as the
cost ineffectiveness of 3G services has not helped telcos realize their expectations.
Hence, it was unlikely that they would have bid anymore on these circles at
these high prices. Add to this, the Spectrum Usage Charges (SUC), which was
suggested by TRAI to be at 1% on the Adjusted Gross Revenue (AGR) of Telcos,
was increased to 3%. The increased SUC would be levied to the previously held
spectrum too. The break-up is as follows:
Upto 4.4 MHz
|
3%
|
At 6.2MHz
|
4%
|
At 8.2MHz
|
5%
|
At 10.2MHz
|
6%
|
At 12.2MHz
|
7%
|
At 15.2MHz
|
8%
|
Courtesy:
Firstpost.com
This is what made
the major difference and de-motivated the incumbents to bid for the fresh
spectrum as the additional spectrum could, if they move from one bracket to
another by adding the new spectrum, charge them for the presently held
spectrum too. Thus making the whole deal unviable. Government got its way when
the spectrum sale failed.
This brought back
the CAG in focus for their exaggerated loss theory which no one wants to be a
part of after the spectrum auction results. With MM Joshi's name popping up as
the real hand behind the show, Congress is taking a vindicating stand. It,
now, hardly matters that Mr RP Singh has modestly reverted his allegations on
MM Joshi yesterday. Congress would use this to shame BJP. Internal rivalry in
BJP against Gadkari has also taken a toll on the opposition party while
strengthened the Congress.
Now, with 2G scam
going other way round and Congress managing to push BJP in a corner even for
the Coalgate scam, the party looks all charged up for the next elections.
Mamta Banerjee's failed attempt at bringing the 'No-Confidence' motion in the
parliament has done only good for the strength of the party. Throwing a slew
of reformist measures (or the so-called reformist measures) in the past couple
of weeks, the government is also acting hard to shed off the
'policy-paralyzed' image of itself, to a good extent. And what could be a
better way to go into the next elections with a dole out of generous money for
the poor and needy. The government has approved the cash-transfer scheme based
on the UID registrations to the poor families in lieu of various subsidies. I believe, if implemented in a proper way,
this could be one of the biggest reforms in the history of the country. It will substantially
cut down the subsidies on imported items and check the unabated
black-marketing and hoarding. This would also increase efficiency in the
system and affect the poorest of the poor in the country in a positive way.
But it is critically hinged to the success of UID/Aadhaar projects and the
progress on these front have been below expectations. It is expected that
these projects would be covering about 50% of the population by 2014
elections. Now, a lot has to be done to make the 'Cash transfer' scheme
successful in real terms. And there my doubts lie.
What if in one of
the months, the cash is not transferred to your (eligible) account for the
subsidies? Who would you go to? How long the grievance re-dressal take place?
Given the pace at which pension grievances are addressed, this could be a big
pain point where the market prices of the essential commodities would be high
and the poor would not have the government subsidy to shield him/herself.
Also, with only
half the population covered under this scheme, there would be price disparity
from one state to another. Thus, encouraging inter-state black marketing and
hoarding. The people living in those states which have not been brought under
the UID scheme would be worse off as the subsidized items from their states
would be siphoned off to the fair-price states covered under the UID.
All these price
adjustments would keep the inflation at higher levels in the coming days and
thus a hawkish stance by the central bank is guaranteed although they would
also understand that these are only adjustments and no real inflation has seeped
into the system (assuming everything else to be unchanged). Thus, the recovery
to the economy can be a prolonged story.
However, this can
be the single most reason for bringing back Congress to power in the next
elections. Awful probably, but true. It's not awful because a new government
other than Congress would have done wonders or anything, its just that the
UPA-III will be a bigger pain than UPA-II. How?
Well, I have a
theory which I am trying to develop. It states that 'Human beings and Stocks
have uncanny similarity and both can be played around with, only if you know
the rules of the game'. Very scathing yet true. Stocks are played around with
based on their supports and resistances. Human beings also have their support
and resistance. With every success in your life, your resistance i.e. your
ability/potential/zeal goes higher while with every failure your confidence
goes down. But it goes down only to an extent where you factor in all the negative effects of the event and survive. That’s where your support is. If another
bad news come along and happen to make you further disappointed, this support
can break and one can go further down. Suicides are the extreme example where the person concerned feels as if he/she has lost all supports of life. Those who understand technical
indicators can see the resemblance. Well, I want to prove it by giving some
examples, but this post is not for that. I would certainly explain this in some
other post.
So, bottom-line is
the resistance to corruption that this country has been posing in expectation
of a change of guards at Delhi will break and the corrupts would get to a new
high. May be DLF would sell the next lucrative plot to Vadra for free instead
of charging even the token amount. Once the government vindicates itself at
the helm, it would try to weed out the pain points, the activists who have
been fighting against the corruption and thus the war against corruption will
see a southwards direction, possibly towards its support levels. The
caretakers of the crony capitalism would be back to the top and the corrupt
industrialists would start reporting increasing margins.
Well, the last few
lines are excessively negative and should be taken with a pinch of salt by the
reader. But what I mean to say is that the big businessmen would feel safe
under a stable congress government and our stock markets will flourish. As
and when markets realize this, and given that the markets realize these things
pretty quickly, our stock exchanges are going to climb from one resistance to
another.
