Frankly I do not know whether the government’s trick of reduced taxation is going to have a great impact. I wanted to sound far more positive that I am and hence the title. Please don’t hold me to it.

Most of the large cap funds are doing badly. No doubt about that. So now what?

Take Franklin India Bluechip fund. Yes Morningstar calls it a Gold fund, while it gives it 2 stars. However, I am worried. A few years ago when it under-performed I heard the fund house say “we had too much money in PSU and hence the under-performance”. Great. When the fund management team recognises its mistake, you feel you need not make a change. I normally don’t look at the portfolio of a fund in which I invest. However, I was asked to have a look at the FIBC portfolio. I did not seriously like the portfolio – and I was almost shocked the amount of psu domination. I put Icici bank, Axis, LnT…shares which I do not like in the long run. I was happy with the portfolio – for me it is a contrarian portfolio of shares that I will not buy. However, I digress.

The auto industry has grown at 7% even over the past 10 years. This is not great, just that Suzuki has gained market share. Now if Kia and Daewoo or Honda, Merc, Toyota take away market share, remember the equity market is not capturing any of this. I do think that IT and Pharma are attractive, but may not be attractive for the fund manager!

Capex might come back and that could be an investment opportunity. Sadly we are not capturing the sales of Mobile phones – which is really a greatly growing business. We are not capturing a lot of the entertainment business.

One number which I am not liking is the amount of borrowing that the lower end households are doing. People are borrowing money to buy things. I can talk about the software industry – the white collar salaries are JUST NOT GOING UP. Many 45 year old people are happy that they are holding on to their jobs. This means they are buying their tv, phone, marriage, honeymoon….these are funded by Hdfc bank, and not their own savings. Remember our savings rates are falling.

Most of the manufacturing has gone from the biggies – Colgate, Hul, Siemens, or take items like airconditioners, fans,….ALL MOST all the manufacturing has gone to the partnerships and small private limited companies. So the value add is not being recorded in the listed companies.

Our market cap to GDP is fine. Our wheat price is 15% of US Prices. Most of the raw materials in India are at very low prices – so could we see a jump up in the food processing industry? Will the gora make in India and sell it in his country?

Well the best answer (as always) is ” I don’t know”. Likt they say “Famous last 4 words”…

What say?