Budget 2019 – 1.34 lakh crore lifeline to NBFC sector

Government promising to bear the first loss of up to 10% of high rated pooled assets purchased by state run banks brings the much expected lifeline support to the NBFC sector, whereas banks will only be funding high quality NBFC’s. Big players who already have a good clout in the industry have continued to have good business growth.

Like Bajaj Finance, Bajaj Finserve kind of companies already have good growth and more over they are not much dependent on domestic borrowings. Most of the top NBFC’s have moved to foreign borrowings which gives them added cushion of lower interest rates.

Even considering currency risk, they are still at a good advantage when compared to their smaller counterparts who have to borrow at higher rates both due to their own performance issues on ratings as well as due to local borrowings.

The current move of lifeline by the FM, is not going to give a boost to the industry as a whole. It will make the big or quality players more bigger. In fact, this is what is required. “If you are genuine, I will help you get more rich.” This kind of approach by the government, for a shorter period may be against the economy as bad players will be left to die their own death. In the long run, it is going to be a huge positive to the industry and our country.

Liquidity issues in the market is likely to ease at a slower pace because the lifeline is less than half of what is required. And expecting government to bail out all kinds of corporate mess-up is not a good thought too. Let the industry figure a way out, through some support from the government.

Quality NBFC’s which are already enjoying very high valuations in the market will continue to attract capital from investor. So, if you are holding Bajaj Finance, Chola Finance kind of stocks, continue to hold, it will continue to go up for a long time.

TITAN – Biggest single day fall in 11 years

TITAN, one of the darlings of Indian stock market investors and fund managers favourite gave back 13% in a single day, following downgrades from 3 brokerages, Morgan Stanley, Credit Suisse & HSBC. These downgrades come as a surprise after the company reported a slump in jewellery sales due to increase in Gold prices.

Six months of rise in prices which happened at a slow pace was destroyed in 2 weeks. That is stock markets, it is said that ‘Bulls climb by the stairs, Bears jump out of window’. One more classic example for this saying in real time.

Why such a big crash of confidence on the stock, that is the only brand which has international presence from India. That much is the confidence we have on our companies. Gold prices have been going up since beginning June 2019 following tensions in the middle east between Iran and the US.

AS THE STOCK PRICE CRASHES, MEDIA COMES OUT WITH REPORTS THAT THE BIG BULL RAKESH JHUNJHUNWALA HAS ALSO BEEN REDUCING STAKE IN TITAN. THE BIG BULL HAS BEEN HOLDING TITAN FOR DECADES NOW AND THE REDUCTION IN HIS HOLDING IS ONLY 0.04% EACH OF THE LAST 2 QUARTERS.

How media disturbs viewers mind? Here is one good example for it. Last week before the budget who was saying that our market is bullish, it is climbing peaks, getting strong. I 2 days after budget and market turned down, the same media is now crying bearishness.

For long term investors in Titan, the sky will not fall down. This is one of the best managed businesses of India. It has a marketing strength that no other consumer facing business has in our country. It can see some periods of tightness in price, while in the long run, it will still play out strong.

Investors can be rest assured that even their grand children will be using Titan products with price. I remember a beautiful experience from this company’s AGM in its very early days. When JRD Tata chaired the AGM, some of the investors attending the AGM asked why the company did not give any gift to its shareholders, which used to be a norm those days. JRD’s answer was,” your company is creating products that will be cherished by the world, you cannot expect to get them free of cost just because of being a shareholder.”

In the last 30 years since this event happened in its small facility in Hosur, Tamil Nadu, TITAN has grown to be a brand that every Indian prides to have.