Predictions for India in 2013
Indian Politics
1. Next general election will be held in 2014 only – congress will survive by whatever means possible because of poor performance expected in general elections
2. Maximum chances of third front coming to power after the elections. Followed by Congress with outside support. Last is BJP.
3. Congress will lose seats in Maharashtra and Andhra. Also lose seats in Kerala, Rajasthan and small states and side player states like West Bengal and Tamil Nadu. Will gain seats in Karnataka. It might gain to some extent in Madhya Pradesh, Orissa, Chattisgarh, Punjab and Jharkhand over current levels but not enough because mostly the home teams of NDA will still get the majority. Congress will lose or stay steady at current levels in Gujarat, Rajasthan, Haryana, Bihar, (where BJP will win with allies, but not by big margins).
4. Communists will win in Bengal and Kerala but only slightly above the 50% mark. Will support third front.
5. Nitish, Navin Patnaik, INLD will win but might switch to third front. Naidu will lose. TRS will win and support third front for the sake of telengana.
6. Raman Singh, Chauhan, Raje will win but only slightly above 50%. Raje result is is not sure either – not a good performer.
7. Modi will win big and that will be the only big BJP win anywhere. Everywhere else they will limp home.
8. UP will see 50/50 split of SP/BSP and increased seats for congress because of muslims voting for congress in central election. BJP will lose.
9. Bihar will also see gains for congress at the expense of Laloo Yadav, again because of tactical voting by muslims. Nitish would still win big overall – so both Nitish and Congress will gain. Nitish might support the third front – but less likely than Navin who is sure to win and support third front.
10. Maharashtra is likely to see NCP win big. MNS might ally with NCP and cause vote splitting. BJP and Shiv Sena might not gain much despite Congress losing a lot because of a quadrangular contest MNS NCP alliance might support the third front.
11. Tamil Nadu and Andhra are too difficult to call as far as Congress is concerned and for who will gain more. Whoever wins might support third front.
12. Because of all this, BJP around 120-130 seats, Congress around 150 seats. That leaves a massive space for alliances.
13. Chances of Third front 50%. Congress 30%, BJP 20%, depending on who stitched up the alliance and ultimate tallies.
14. Third front will crash both RE and stock markets. Hence my hesitation in recommending more investments into RE despite it being the investment of the decade – because RE is illiquid unlikje stocks.
Indian Sociology
1. Two main themes stand out. One is comprehensible. The other is incomprehensible.
2. What is for sure is that India is going to bypass the phase of urbanization. Better roads and communications mean that India will urbanize from the villages and small towns. This will propel the increase in rural productivity from 500 to 2000 dollars per annum from now till 2020 and then the further increase from 2000 to 5000 dollars per annum by 2030 and beyond. Given our genetic potential, 5000 dollars per annum probably reflects the peak productivity which can be attained by rural Indians. Including urban Indians, 10,000 dollars per capita is probably the best we can expect in the foreseeable future. This means a 5-10 times increase in productivity – a massive opportunity which will move us into Mexico/Russia/Brazil kind of situation.
3. What is difficult to get a handle on is what the street demonstrations caused by Anna and the recent rape case mean. Most likely is that the newer young people derived from rural migrations, backward castes and from children of lower middle class have a more angry and active personality. Very unlike the earlier upper middle class of mainly higher castes whose educated children only once came out in protests in the anti Mandal agitations – they are more meek and run away by emigration in adverse situations. Those who don’t have the option to run away will lead the future of urban India.
4. What it means. Our cities will not improve or become on par with cities of the West and East. Urban RE will remain scarce and sought after. Most people will not be able to afford ownership. Just like currently most people live in the urban villages of Delhi or the lal dora unauthorised colonies - at one third the cost, (or in the juggis of Mumbai), similarly the major part of our people will never live or work in cities. The small towns and villages will develop to the level of the outlying poor quality Delhi area. And stop there. Most of our population will live and work from such areas.
5. Big cities and the best apartments will be only for the rich and managerial class. Since the majority of our population is going to at best aspire to reach 10,000 dollars of per capita income i.e. 5 lakh rupees per annum, there is no way these masses will ever get to own decent urban dwellings.
6. But they will be able to afford good quality kothis in tier 2 and 3 cities where land is extremely abundant. The issue of land prices will be less important than the cost of construction. Inflation in the prices of iron, cement and tiles will make more difference than land prices. Since acreage of tier 2 and 3 cities is massively greater than in metros by orders of magnitude, land prices will not increase proportionately to land price increases in metros. The presence of good roads and proximity of infrastructure will determine the rise in land prices here. Blind increases as seen in metros will not occur. Instead increased in prices of bricks, cement and iron will make these houses increase in value – more directly linked to inflation than traditional tier 1 RE
7. There will be increased migration to the metros where jobs of a higher skill level will be available, but only to the really skilled. The stratification of society based on skill levels will become better ordered because of private sector. Competition for the best jobs, the best schools, the best homes and best locations will be intense and will propel further price rises in the metros. However, the price rises will be unaccompanied by increased quality of civic infrastructure. Only scarcity value will increase.
8. Criminal activities by the less well off will increase manifold. Hence the rich will live in walled off areas with high security and increasing tendency to do their own chores because the personal servants will become increasingly unreliable. The best skilled people will leave the country because of these problems. Emigration will increase to 1980s levels (before the liberalization). This will reduce the numbers of the highest skilled people and hence there will be a continuous scarcity of ability (as seen today also – i.e. situation wont improve).
9. Honest people will be few and will be highly valued.
10. The high cost of both real estate and transport will change the workplace location from company oriented to neighbourhood oriented common e-offices. Hubs for offices common to multiple companies will take off – now because the conditions demand it rather than 10 years ago when it was first mooted. Both connectivity and improved office plates in commercial RE (otherwise lying empty) will also help in the transition, as also the traffic congestion, road rage and lack of law and order and safety.
11. So a person will clock into his or her local e-office, regardless of whether he works for Wipro/Infosys or GE. He will log his lap top into a LAN and start working. No driving, no Sumo cabs and no safety problems. So person living in Yamuna Expressway will not need to transport himself to his work – his workplace will be just around the corner and he could work for a company in Bangalore or San Francisco. But the e-office will ensure better discipline than the outsourcers/body shoppers working from home (currently) and will be preferred by companies as being next best to physical presence.
12. The local e-office will evolve into a commerce hub integrating office spaces with connectivity, eating out and crèches for female employees. They will have swipe cards to keep employees on the clock, phones for making calls, office automation and courier services. Females will prefer this for its safety and time saving.
13. Companies will gain in reducing their real estate need, office infrastructure needs and also pay less – for the time and cost of transport saved by the employee, company will pay lesser salary. Both employees and companies will gain.
14. This trend will first start from USA as cities dissipate to smaller towns and village communities, as discussed earlier. The management software will be built there, modelled around social networks. And then get transported to India in a big way because conditions will require it. Starting 2016 and culminating 2020.
15. This trend will also kill the big commercial buildings – or they will sell at lower prices and lower rent. Any further increases in commercial property prices will be met with lack of occupancy – businesses cannot afford such RE prices.
16. Only those who catch these trends earlyand modify their locations and type of buildings being built – the service levels installed and whether it is close to big pockets (of people not wanting to commute) – like Greater NOIDA, Yamuna Expressway, Bhiwadi and Dwarka Expressway – will determine success of commercial buildings.
17. Life will change for ever in these disruptive ways.
18. E-commerce will kill the local durable store. Real estate costs mean they can never match flipcart prices. Phones, refrigerators, washing machines, lap tops and every other kind of toy and gadget will now be ordered and delivered on line – and even cars in the more distant future. The need for warehousing by dealers will reduce inventories and also the heavy real estate costs – with great savings in prices passed on to consumers as well as retained by the manufacturer. There will be demonstration shops in malls for looking at the item – there will be specialization of these malls – say one giant mall where every durable company will demo its products. Purchase will be online with credit cards. This will kill salesman jobs in large numbers as the need to pay commission based remunerations will also go to the company bottom line. Instead, screen presentations of features and benefits of the product in comparision to the competitors will be accessed online through youtube presentations while the person looks at the product and gets its feel. Or he will access you tube on his own tablet. Barcodes on the products will help in retrieving the more specific models – through the bar code scanner. Everything else will be online retail.
19. Organised retail will change the food and clothing retail models for ever – this is well discussed in newspapers already, so wont discuss.
20. Law and order: Major challenges exist in this area. It is necessary to recruit people from college educated background into police force. And import police trainers from Western countries to run a modern police force. If our politicians are able to understand this, then things will get better.
21. I expect political failure in this regard. So law and order will degenerate. There will be complete chaos in the small towns. People will try to escape to cities but face the same problems because the law breakers will also head there. The super rich will try to wall themselves in enclaves and try to escape the law breakers. Prices of properties having good security, good CCTV and guard systems will be very high. Those townships with poor security will not get preferred.
22. Increasingly, self sufficient townships where everything including jobs, entertainment, schools, colleges and hospitals will be preferred. Standalone projects where commuting is required will be less preferred. It will matter little whether the township is in Delhi, Jaipur, Shimla or a village on a highway – as long as people within have the money to procure security and broadband connectivity for themselves. Those projects without security will be abandoned.
23. Mumbai and Bangalore are more likely to have better security than Delhi. In the long run, these places will win over Delhi.
Economics
1. India will not grow to developed country levels. Maximum peak productivity is probably 10-15000 dollars per capita per annum by 2050.
2. Continuous emigration of the highest productive people to foreign countries in search of better security and law and order will cripple India’s increase in prosperity – as the highest productive class continuously bleed out.
3. Roads will develop little from 2013 to 2016, because of the increased capital required and tendency of Congress and Socialists to spend on populist rather than productive schemes.
4. One episode of flight of foreign capital is bound to happen when a crisis of confidence is reached. This is most likely to be in 2014 before elections.
5. Dollar should appreciate to 60 and beyond during the flight of capital. Since the Western economies are also likely to be moribund and poor destination for our exports, this collapse of Rupee is likely to be sudden, drastic and cause enormous stress. A good anticipation by present economists and proper preventive action can greatly reduce the effects – but so far the govt. does not inspire confidence.
6. At this time of currency collapse, inflation is likely. Mostly, it is likely to be imported inflation pushing up the cost of capital, steel, oil and finished products like cars and gadgets.
7. Gold outperformance is likely to be linked to this period of rupee depreciation and inflation. During this time, Gold should give good returns. It will be better than real estate for 1-2 years just during this time. Most likely time is in 2014. So selling stocks and buying gold should work at this time. After 2016 or so, gold should fall a lot in both Rupees and in dollars. Gold will cease to be important as an asset class after the rupee depreciatin event and the US inflation event. Both expected to be over by 2016-2018.
8. FDs will give stable returns going forward, because central bank will not be able to lower interest rates. RBI and FD rates will have to rise a lot in the 2014 period when dollar will increase in value and there will be flight of capital. You should not be in bonds at this time because bond funds will fall a lot. Lowering of rates by RBI from 2016 onwards as the markets stabilize should make bond funds give great returns from 2016 onwards.
9. Stocks will respond to even the half hearted measures taken by the govt and should beat the FD returns in 2013 till 2014. There is likely to be a major disruption in stock market in 2014 because of coming together of many factors both internal and external. From 2016, stocks should outperform.
10. RE in NCR should be stagnant till 2014 followed by a liquidity crisis as massive deliveries in NCR and pulling out of capital by NRIs fearful of currency crash – causing chaos. Many projects will be undelivered or abandoned and many builders will go belly up. This disruption should last 2-3 years at least. Prices of UC property will collapse. But RTM prices will rise because of scarcity value and because nobody will want UC property and all will try for RTM. People who pull out of stocks in time will be sitting on cash and will be able to buy the RTM. Those hurt in the stock crash will not be able to buy into the crash. Net net, deals in even RTM will dry up because of the doom and gloom feeling. Those planning to sell in this time should anticipate such possibilities.
Predicting the rest of India’s decade assuming no wars:
1. Stocks outperform in 2013. Buy stocks now. Keep 30% in FD/bond funds to benefit from 8% plus returns. Hold RE. Sell gold, global funds and other dollar denominated assets.
2. Sell stocks and bonds in 2014 beginning. Buy gold. Hold RE.
3. Wait out 2014, 2015 and 2016 H1, riding on gold and RE.
4. Sell gold when inflation gets over in USA, probably when republicans return to power after 2016. Buy bonds at their peak interest rate levels around the same time
5. Switch from bonds to stocks as the India and global crisis dissipates.
6. Hold stocks for a phenomenal bull run from 2018 to 2020 and beyond. Switch to new bookings in RE from 2016 – 2017 or so – keeping the new trends of townships, jobs etc as detailed above in mind.
7. Sell current holdings in RE in 2022 and beyond, at the cusp of the RE bull run which will follow the stock bull run. So 10 year holding period.
If war starts before 2014:
1. Abort the stock and bond holdings immediately. Shift from bonds to FD and gold. Hold RE.
2. If war starts between 2014 and 2016, it will accentuate the above cycle effects. Ride it out by shifting from bonds to FD, hold current RE holdings and make fresh gold purchases.
3. Likelihood of wars in the vicinity are maximum from 2014 to 2016.
4. My previous prediction of Iran China pipeline have so far failed to materialize. Economics indicate overwhelming likelihood of this happening but it hasn’t so far, despite deployment of missiles by China in tunnels of Aksai Chin. So I am downgrading this as a flashpoint for war.
5. US engagement of Pakistan continues to be effective. So complete abandoning of USA by Pakistan and switching to China also has become less likely. Again downgrading this possibility.
6. Complete degeneration of Pakistan into chaos is also not happening. That is the third major possibility that I am downgrading from predictions made 2 years ago.
7. Main flashpoint seems to be US bombing of North Korea and subsequent efforts by Iran to prevent similar bombing.
8. US seems to be having a wait and watch attitude. In Iran, waiting for pro-democracy forces to topple the regime or reduce its extremist tendencies, based on internet penetration and social networking. In North Korea, waiting for economic collapse similar to Russia. And in Pakistan, waiting for the Jehadi madness to abate in the minds of the masses.
9. So far, above US strategy seems to be working. Most likely, North Korea will be the first to try US patience.
Predictions for 2013:
1. Stocks up. Possibly 25% return can be expected. Sensex 25000. Main propelling drivers will be some governance improvement and US climbing over the fiscal cliff (happened already after I wrote this) and unleashing another round of liquidity. Stocks should remain steadily up throughout from now till 2014 budget at least. SIP should continue and any dips should be used to buy.
2. Best sectors: cyclical and infrastructure, construction, cement, banks.
3. Avoid: FMCG and durables because of saturation and belt tightening and overvalued share prices.
4. Bonds: Mild 0.25 % fall in Repo rates is the best that can be expected. RBI unlikely to reduce further. Returns are not enough to justify eschewing stocks in favour of bonds – so if you are overweight bonds, sell now and shift to stocks.
5. FD: Returns of 8% plus will continue. Best safe and high returns available. At least 30% should be here or in PF.
6. Real estate: Stagnant markets are likely. No need to increase exposure at this juncture – but also no need to sell existing investments – hold what you already have.
7. Best RE market (for those underexposed to RE currently) for 2013 is likely to be Bangalore, Chennai, Chandigarh, Bhubaneshwar and certain locations of Mumbai – although 2014 will be better for Mumbai than 2013 on the back of good stock market performance.
8. Steady markets will be Gurgaon flats, NOIDA extension, Jaipur, Lucknow, Coimbatore, Mangalore, Kolkata, most of Mumbai, Pune and Dehradun.
9. Falling or steady with slight downward trend type of markets will be in NOIDA central, Kundli, Delhi builder floors and Lal Dora, Gurgaon plots, Dwarka expressway, NOIDA expressway, Yamuna Expressway, Faridabad, Bhiwadi/Daruhera, Neemrana.
10. Gold: Stagnant prices. Rupee strengthening will wipe out the returns of the fiscal cliff being climbed.
11. Dollar: Weak at 51-53 levels for most of the year.
12. Oil: Weak. NYMEX 85-90. Brent 100-110. Not much movement
13. RBI repo: maximum 0.25% cut.
Caveats:
1. Govt falls. This will kill the Rupee, Real estate and stock markets. Gold will shoot up. Same effect as war = do the same things, sell stocks, bonds and buy gold.
2. War involving us, Pak, China, South Korea, Argentina or Iran: Same results as above.
ASSETS FOR INDIA:
Asset of 2013 = stocks
Asset of the decade = Real estate
Asset of the next 3 decades = stocks
Asset to avoid in 2013 = gold.
Asset to avoid in the next decade = gold. With 2014/15/16 being short term exception as detailed above. You can avoid gold altogether and ride out disturbances in FD plus RE also.
Asset to avoid in next 3 decades = gold. It will extinguish as asset after 2018 or so.
Value is what humans place on a thing – if a thing is prized, it is priced high. If a thing is no longer prized, it will not be priced. Not even gold.
1. Next general election will be held in 2014 only – congress will survive by whatever means possible because of poor performance expected in general elections
2. Maximum chances of third front coming to power after the elections. Followed by Congress with outside support. Last is BJP.
3. Congress will lose seats in Maharashtra and Andhra. Also lose seats in Kerala, Rajasthan and small states and side player states like West Bengal and Tamil Nadu. Will gain seats in Karnataka. It might gain to some extent in Madhya Pradesh, Orissa, Chattisgarh, Punjab and Jharkhand over current levels but not enough because mostly the home teams of NDA will still get the majority. Congress will lose or stay steady at current levels in Gujarat, Rajasthan, Haryana, Bihar, (where BJP will win with allies, but not by big margins).
4. Communists will win in Bengal and Kerala but only slightly above the 50% mark. Will support third front.
5. Nitish, Navin Patnaik, INLD will win but might switch to third front. Naidu will lose. TRS will win and support third front for the sake of telengana.
6. Raman Singh, Chauhan, Raje will win but only slightly above 50%. Raje result is is not sure either – not a good performer.
7. Modi will win big and that will be the only big BJP win anywhere. Everywhere else they will limp home.
8. UP will see 50/50 split of SP/BSP and increased seats for congress because of muslims voting for congress in central election. BJP will lose.
9. Bihar will also see gains for congress at the expense of Laloo Yadav, again because of tactical voting by muslims. Nitish would still win big overall – so both Nitish and Congress will gain. Nitish might support the third front – but less likely than Navin who is sure to win and support third front.
10. Maharashtra is likely to see NCP win big. MNS might ally with NCP and cause vote splitting. BJP and Shiv Sena might not gain much despite Congress losing a lot because of a quadrangular contest MNS NCP alliance might support the third front.
11. Tamil Nadu and Andhra are too difficult to call as far as Congress is concerned and for who will gain more. Whoever wins might support third front.
12. Because of all this, BJP around 120-130 seats, Congress around 150 seats. That leaves a massive space for alliances.
13. Chances of Third front 50%. Congress 30%, BJP 20%, depending on who stitched up the alliance and ultimate tallies.
14. Third front will crash both RE and stock markets. Hence my hesitation in recommending more investments into RE despite it being the investment of the decade – because RE is illiquid unlikje stocks.
Indian Sociology
1. Two main themes stand out. One is comprehensible. The other is incomprehensible.
2. What is for sure is that India is going to bypass the phase of urbanization. Better roads and communications mean that India will urbanize from the villages and small towns. This will propel the increase in rural productivity from 500 to 2000 dollars per annum from now till 2020 and then the further increase from 2000 to 5000 dollars per annum by 2030 and beyond. Given our genetic potential, 5000 dollars per annum probably reflects the peak productivity which can be attained by rural Indians. Including urban Indians, 10,000 dollars per capita is probably the best we can expect in the foreseeable future. This means a 5-10 times increase in productivity – a massive opportunity which will move us into Mexico/Russia/Brazil kind of situation.
3. What is difficult to get a handle on is what the street demonstrations caused by Anna and the recent rape case mean. Most likely is that the newer young people derived from rural migrations, backward castes and from children of lower middle class have a more angry and active personality. Very unlike the earlier upper middle class of mainly higher castes whose educated children only once came out in protests in the anti Mandal agitations – they are more meek and run away by emigration in adverse situations. Those who don’t have the option to run away will lead the future of urban India.
4. What it means. Our cities will not improve or become on par with cities of the West and East. Urban RE will remain scarce and sought after. Most people will not be able to afford ownership. Just like currently most people live in the urban villages of Delhi or the lal dora unauthorised colonies - at one third the cost, (or in the juggis of Mumbai), similarly the major part of our people will never live or work in cities. The small towns and villages will develop to the level of the outlying poor quality Delhi area. And stop there. Most of our population will live and work from such areas.
5. Big cities and the best apartments will be only for the rich and managerial class. Since the majority of our population is going to at best aspire to reach 10,000 dollars of per capita income i.e. 5 lakh rupees per annum, there is no way these masses will ever get to own decent urban dwellings.
6. But they will be able to afford good quality kothis in tier 2 and 3 cities where land is extremely abundant. The issue of land prices will be less important than the cost of construction. Inflation in the prices of iron, cement and tiles will make more difference than land prices. Since acreage of tier 2 and 3 cities is massively greater than in metros by orders of magnitude, land prices will not increase proportionately to land price increases in metros. The presence of good roads and proximity of infrastructure will determine the rise in land prices here. Blind increases as seen in metros will not occur. Instead increased in prices of bricks, cement and iron will make these houses increase in value – more directly linked to inflation than traditional tier 1 RE
7. There will be increased migration to the metros where jobs of a higher skill level will be available, but only to the really skilled. The stratification of society based on skill levels will become better ordered because of private sector. Competition for the best jobs, the best schools, the best homes and best locations will be intense and will propel further price rises in the metros. However, the price rises will be unaccompanied by increased quality of civic infrastructure. Only scarcity value will increase.
8. Criminal activities by the less well off will increase manifold. Hence the rich will live in walled off areas with high security and increasing tendency to do their own chores because the personal servants will become increasingly unreliable. The best skilled people will leave the country because of these problems. Emigration will increase to 1980s levels (before the liberalization). This will reduce the numbers of the highest skilled people and hence there will be a continuous scarcity of ability (as seen today also – i.e. situation wont improve).
9. Honest people will be few and will be highly valued.
10. The high cost of both real estate and transport will change the workplace location from company oriented to neighbourhood oriented common e-offices. Hubs for offices common to multiple companies will take off – now because the conditions demand it rather than 10 years ago when it was first mooted. Both connectivity and improved office plates in commercial RE (otherwise lying empty) will also help in the transition, as also the traffic congestion, road rage and lack of law and order and safety.
11. So a person will clock into his or her local e-office, regardless of whether he works for Wipro/Infosys or GE. He will log his lap top into a LAN and start working. No driving, no Sumo cabs and no safety problems. So person living in Yamuna Expressway will not need to transport himself to his work – his workplace will be just around the corner and he could work for a company in Bangalore or San Francisco. But the e-office will ensure better discipline than the outsourcers/body shoppers working from home (currently) and will be preferred by companies as being next best to physical presence.
12. The local e-office will evolve into a commerce hub integrating office spaces with connectivity, eating out and crèches for female employees. They will have swipe cards to keep employees on the clock, phones for making calls, office automation and courier services. Females will prefer this for its safety and time saving.
13. Companies will gain in reducing their real estate need, office infrastructure needs and also pay less – for the time and cost of transport saved by the employee, company will pay lesser salary. Both employees and companies will gain.
14. This trend will first start from USA as cities dissipate to smaller towns and village communities, as discussed earlier. The management software will be built there, modelled around social networks. And then get transported to India in a big way because conditions will require it. Starting 2016 and culminating 2020.
15. This trend will also kill the big commercial buildings – or they will sell at lower prices and lower rent. Any further increases in commercial property prices will be met with lack of occupancy – businesses cannot afford such RE prices.
16. Only those who catch these trends earlyand modify their locations and type of buildings being built – the service levels installed and whether it is close to big pockets (of people not wanting to commute) – like Greater NOIDA, Yamuna Expressway, Bhiwadi and Dwarka Expressway – will determine success of commercial buildings.
17. Life will change for ever in these disruptive ways.
18. E-commerce will kill the local durable store. Real estate costs mean they can never match flipcart prices. Phones, refrigerators, washing machines, lap tops and every other kind of toy and gadget will now be ordered and delivered on line – and even cars in the more distant future. The need for warehousing by dealers will reduce inventories and also the heavy real estate costs – with great savings in prices passed on to consumers as well as retained by the manufacturer. There will be demonstration shops in malls for looking at the item – there will be specialization of these malls – say one giant mall where every durable company will demo its products. Purchase will be online with credit cards. This will kill salesman jobs in large numbers as the need to pay commission based remunerations will also go to the company bottom line. Instead, screen presentations of features and benefits of the product in comparision to the competitors will be accessed online through youtube presentations while the person looks at the product and gets its feel. Or he will access you tube on his own tablet. Barcodes on the products will help in retrieving the more specific models – through the bar code scanner. Everything else will be online retail.
19. Organised retail will change the food and clothing retail models for ever – this is well discussed in newspapers already, so wont discuss.
20. Law and order: Major challenges exist in this area. It is necessary to recruit people from college educated background into police force. And import police trainers from Western countries to run a modern police force. If our politicians are able to understand this, then things will get better.
21. I expect political failure in this regard. So law and order will degenerate. There will be complete chaos in the small towns. People will try to escape to cities but face the same problems because the law breakers will also head there. The super rich will try to wall themselves in enclaves and try to escape the law breakers. Prices of properties having good security, good CCTV and guard systems will be very high. Those townships with poor security will not get preferred.
22. Increasingly, self sufficient townships where everything including jobs, entertainment, schools, colleges and hospitals will be preferred. Standalone projects where commuting is required will be less preferred. It will matter little whether the township is in Delhi, Jaipur, Shimla or a village on a highway – as long as people within have the money to procure security and broadband connectivity for themselves. Those projects without security will be abandoned.
23. Mumbai and Bangalore are more likely to have better security than Delhi. In the long run, these places will win over Delhi.
Economics
1. India will not grow to developed country levels. Maximum peak productivity is probably 10-15000 dollars per capita per annum by 2050.
2. Continuous emigration of the highest productive people to foreign countries in search of better security and law and order will cripple India’s increase in prosperity – as the highest productive class continuously bleed out.
3. Roads will develop little from 2013 to 2016, because of the increased capital required and tendency of Congress and Socialists to spend on populist rather than productive schemes.
4. One episode of flight of foreign capital is bound to happen when a crisis of confidence is reached. This is most likely to be in 2014 before elections.
5. Dollar should appreciate to 60 and beyond during the flight of capital. Since the Western economies are also likely to be moribund and poor destination for our exports, this collapse of Rupee is likely to be sudden, drastic and cause enormous stress. A good anticipation by present economists and proper preventive action can greatly reduce the effects – but so far the govt. does not inspire confidence.
6. At this time of currency collapse, inflation is likely. Mostly, it is likely to be imported inflation pushing up the cost of capital, steel, oil and finished products like cars and gadgets.
7. Gold outperformance is likely to be linked to this period of rupee depreciation and inflation. During this time, Gold should give good returns. It will be better than real estate for 1-2 years just during this time. Most likely time is in 2014. So selling stocks and buying gold should work at this time. After 2016 or so, gold should fall a lot in both Rupees and in dollars. Gold will cease to be important as an asset class after the rupee depreciatin event and the US inflation event. Both expected to be over by 2016-2018.
8. FDs will give stable returns going forward, because central bank will not be able to lower interest rates. RBI and FD rates will have to rise a lot in the 2014 period when dollar will increase in value and there will be flight of capital. You should not be in bonds at this time because bond funds will fall a lot. Lowering of rates by RBI from 2016 onwards as the markets stabilize should make bond funds give great returns from 2016 onwards.
9. Stocks will respond to even the half hearted measures taken by the govt and should beat the FD returns in 2013 till 2014. There is likely to be a major disruption in stock market in 2014 because of coming together of many factors both internal and external. From 2016, stocks should outperform.
10. RE in NCR should be stagnant till 2014 followed by a liquidity crisis as massive deliveries in NCR and pulling out of capital by NRIs fearful of currency crash – causing chaos. Many projects will be undelivered or abandoned and many builders will go belly up. This disruption should last 2-3 years at least. Prices of UC property will collapse. But RTM prices will rise because of scarcity value and because nobody will want UC property and all will try for RTM. People who pull out of stocks in time will be sitting on cash and will be able to buy the RTM. Those hurt in the stock crash will not be able to buy into the crash. Net net, deals in even RTM will dry up because of the doom and gloom feeling. Those planning to sell in this time should anticipate such possibilities.
Predicting the rest of India’s decade assuming no wars:
1. Stocks outperform in 2013. Buy stocks now. Keep 30% in FD/bond funds to benefit from 8% plus returns. Hold RE. Sell gold, global funds and other dollar denominated assets.
2. Sell stocks and bonds in 2014 beginning. Buy gold. Hold RE.
3. Wait out 2014, 2015 and 2016 H1, riding on gold and RE.
4. Sell gold when inflation gets over in USA, probably when republicans return to power after 2016. Buy bonds at their peak interest rate levels around the same time
5. Switch from bonds to stocks as the India and global crisis dissipates.
6. Hold stocks for a phenomenal bull run from 2018 to 2020 and beyond. Switch to new bookings in RE from 2016 – 2017 or so – keeping the new trends of townships, jobs etc as detailed above in mind.
7. Sell current holdings in RE in 2022 and beyond, at the cusp of the RE bull run which will follow the stock bull run. So 10 year holding period.
If war starts before 2014:
1. Abort the stock and bond holdings immediately. Shift from bonds to FD and gold. Hold RE.
2. If war starts between 2014 and 2016, it will accentuate the above cycle effects. Ride it out by shifting from bonds to FD, hold current RE holdings and make fresh gold purchases.
3. Likelihood of wars in the vicinity are maximum from 2014 to 2016.
4. My previous prediction of Iran China pipeline have so far failed to materialize. Economics indicate overwhelming likelihood of this happening but it hasn’t so far, despite deployment of missiles by China in tunnels of Aksai Chin. So I am downgrading this as a flashpoint for war.
5. US engagement of Pakistan continues to be effective. So complete abandoning of USA by Pakistan and switching to China also has become less likely. Again downgrading this possibility.
6. Complete degeneration of Pakistan into chaos is also not happening. That is the third major possibility that I am downgrading from predictions made 2 years ago.
7. Main flashpoint seems to be US bombing of North Korea and subsequent efforts by Iran to prevent similar bombing.
8. US seems to be having a wait and watch attitude. In Iran, waiting for pro-democracy forces to topple the regime or reduce its extremist tendencies, based on internet penetration and social networking. In North Korea, waiting for economic collapse similar to Russia. And in Pakistan, waiting for the Jehadi madness to abate in the minds of the masses.
9. So far, above US strategy seems to be working. Most likely, North Korea will be the first to try US patience.
Predictions for 2013:
1. Stocks up. Possibly 25% return can be expected. Sensex 25000. Main propelling drivers will be some governance improvement and US climbing over the fiscal cliff (happened already after I wrote this) and unleashing another round of liquidity. Stocks should remain steadily up throughout from now till 2014 budget at least. SIP should continue and any dips should be used to buy.
2. Best sectors: cyclical and infrastructure, construction, cement, banks.
3. Avoid: FMCG and durables because of saturation and belt tightening and overvalued share prices.
4. Bonds: Mild 0.25 % fall in Repo rates is the best that can be expected. RBI unlikely to reduce further. Returns are not enough to justify eschewing stocks in favour of bonds – so if you are overweight bonds, sell now and shift to stocks.
5. FD: Returns of 8% plus will continue. Best safe and high returns available. At least 30% should be here or in PF.
6. Real estate: Stagnant markets are likely. No need to increase exposure at this juncture – but also no need to sell existing investments – hold what you already have.
7. Best RE market (for those underexposed to RE currently) for 2013 is likely to be Bangalore, Chennai, Chandigarh, Bhubaneshwar and certain locations of Mumbai – although 2014 will be better for Mumbai than 2013 on the back of good stock market performance.
8. Steady markets will be Gurgaon flats, NOIDA extension, Jaipur, Lucknow, Coimbatore, Mangalore, Kolkata, most of Mumbai, Pune and Dehradun.
9. Falling or steady with slight downward trend type of markets will be in NOIDA central, Kundli, Delhi builder floors and Lal Dora, Gurgaon plots, Dwarka expressway, NOIDA expressway, Yamuna Expressway, Faridabad, Bhiwadi/Daruhera, Neemrana.
10. Gold: Stagnant prices. Rupee strengthening will wipe out the returns of the fiscal cliff being climbed.
11. Dollar: Weak at 51-53 levels for most of the year.
12. Oil: Weak. NYMEX 85-90. Brent 100-110. Not much movement
13. RBI repo: maximum 0.25% cut.
Caveats:
1. Govt falls. This will kill the Rupee, Real estate and stock markets. Gold will shoot up. Same effect as war = do the same things, sell stocks, bonds and buy gold.
2. War involving us, Pak, China, South Korea, Argentina or Iran: Same results as above.
ASSETS FOR INDIA:
Asset of 2013 = stocks
Asset of the decade = Real estate
Asset of the next 3 decades = stocks
Asset to avoid in 2013 = gold.
Asset to avoid in the next decade = gold. With 2014/15/16 being short term exception as detailed above. You can avoid gold altogether and ride out disturbances in FD plus RE also.
Asset to avoid in next 3 decades = gold. It will extinguish as asset after 2018 or so.
Value is what humans place on a thing – if a thing is prized, it is priced high. If a thing is no longer prized, it will not be priced. Not even gold.
5 comments:
Hi Venky,
I could not understand why Gold will cease to exist as an asset. Gold has been the only asset being put against the currencies. US has exploited this phenomenon for a long time now and seen serious fallbacks due to that.
As you are saying that it will not be considered an asset after 2018, so it means US is going to get rid of its huge Gold godowns and put something else in those godowns.
Please share your analysis done behind this discovery. It will helps us in analysing it better.
Thanks
In Karnataka 2013 assembly pools my ASTROLOGICAL Predictions below.
My predictions based on Hindu astrology interpreting both by starting letter of covering Cong, BJP, JD(S),KJP,BRSC and date of elections.
Congress will not form the government next term.
Congress may end up securing more seats. When compared to last elections.
BJP with alliance will form the government - More chances for JD(S) Kumaraswamy for king maker.
KJP will win around single digits not more than 14 seats --- 6-14 seats based on mathematical calculation interpreting astrologically.
Congress - 45 --- 77
BJP -- 59 --- 86
JD(S) -- 23- 45
BRSCong-- 6-14
Independents -- 11 +
BJP will rule with partners. --
Karnataka will have fractured mandate.
Request you to publish my predictions post elections.
Thanks
Girish
8453332971
Amazing analysis. Impressed.
Nice.. I Am More Curious About Ur Predictions. I ll See What It may Happen In karnataka Elections 2013
Nice.. I Am More Curious About Ur Predictions. I ll See What It may Happen In karnataka Elections 2013
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