Never miss a great news story! Get instant notifications from Economic Times Allow Not now. Move towards the exit the longer and higher the market goes up: We may have to live with a stronger Rupee: Extra liquidity partly causing rupee plunge: Jamal Mecklai, Mecklai Financial. We need to acknowledge that there will be much more volatility: Choose your reason below and click on the Report button. This will alert our moderators to take action. Get instant notifications from Economic Times Allow Not now You can switch off notifications anytime using browser settings.
Technicals Technical Chart Visualize Screener. NIFTY 50 10, Drag according to your convenience. Past experience with consolidation in the public banking space has not been very good. Let us start off really with the currency action. Well yes as far as exporters are concerned, it is not a very happy situation at all.
So when you look at the exchange rate , it all depends on exporter or an importer. So I am sure the importers are celebrating and the exporters and not and the problem really is that corporates in India typically do not hedge themselves and that creates an additional problem which I am sure Jamal must be dealing with with his clients day in and day out.
But before I go to the forex markets, I just wanted to ask you since today is a D-day for GDP numbers, what kind of GDP numbers are you expecting in the sense not specific numbers but are you expecting the numbers to look up or look down and how do you think this will impact the view on India particularly as far as forex flows are concerned and of course flowing from that the exchange rate.
Well I think that the specific numbers are unlikely to be dramatically different than what people are talking about. So I mean unless that happens, the foot is on the accelerator. India is looking good at least on marco level. I mean the reforms are going forward, I mean they have got lots of glitches as we know on the ground but I think global investors there are two aspects.
One is that everything globally seems benign despite Trump, despite North Korea , despite everything although there is a question mark is to how long that will continue but hey while the music is on to use an old phrase, so the global investment environment appears good if you will and India looks good.
So money should keep coming in. The only issue I have is that our stock prices, I am very happy because my portfolio is going up but the stock prices are getting little… So you could see a little slowdown but fundamentally everything looks like the same game that we have been seeing the last few months.
You are sceptical about the stock prices and yes markets really have no bearing with the reality, the underlying fundamentals but you are not as doubtful as far as the forex markets are concerned. Do you not think that the same unreal situation that exits in the stock markets also plays out on the forex markets as well and the rupee today is not properly valued at all? The point is suppose everybody in India agreed with what you said and that the rupee instead of being 64 something you be 68 something, okay.
So what you are going to do? How are you going to take it to that level? The truth is people are finding India attractive. Money is coming in so there is supply of dollars and there is not adequate demand for it. So we have to sort of live with this and in a way the supply of dollars is a good thing because we need capital.
Now whether we are using it effectively is another story but without question this government has certainly got its head down in terms of dealing with the… but people see that. So they are seeing that good. There is a structural change. India is moving forward. If something happens domestically that creates crisis, now failing that I mean it is hard to see what will turn the rupee back, turn it weaker. I agree with your exports are under pressure but the point is how… we have a market which is supply and demand so what do you do?
I mean I have mentioned this before I think one, RBI needs to make some structural changes by allowing different kinds of players into the FX market but again these are not all things that are going to happen tomorrow or have an impact right away. I mean right away companies need to really look at the situation as it is and not look for what they want and they have to really, I mean something I have been saying for about 25 years, they really have to learn risk management.
Most people do not. They just ultimately believe that the market will bail them out or will bail them out and over time it does not. I just want to get in your comments on new like this because consolidation has been rife, the government has openly made claims for the need to have a few large banks instead of many smaller ones, we are seeing steps being taken in this vein what would be your opinion on this?
Well yes it is true that this government as well as the previous government has been a strong believer in consolidation in the public bank space but the fact is that if you merge two, three bad public banks, smaller bad public banks you just get on large public sector bank which is just as bad. So even though you might get some synergies, the fact is it is almost impossible to retrench the staff in public sector banks.
So the benefit from synergies is going to be very minimal. So I am not a great believer in the view that consolidation per se is the answer. The answer really for public sector banks, the problems facing public sector banks really is to allow them to function as commercial entities and until the government is willing to do that and is willing to take on whatever political opposition there might be I do not think you really going to find a solution.
You can keep having merger but it will not really solve the problem, it will not take away the issue of NPAs today or tomorrow. Even if you address the issues of NPA today through whatever means whether bad banks, recapitalisation, whatever means you have that would only be a temporary balm, you need to allow these banks to function at arms length distance from the government and until such time as the government is willing to do that I am afraid consolidation per se will not be any answer at all.
You were talking about the fact that yes you do not anticipate any dramatic change in the forex space but the fact is that what we are seeing right now is a rush of portfolio flows essentially even though FDI has gone up the gross FDI numbers have gone up, the net FDI numbers really have not gone up that significantly.
So if you remember during the previous phase when there was this huge influx of forex into the country there was constant talk of what the dangers of Well I think it is as I said before you know I think the global investment environment is also-- I mean it is playing poker, right.
I mean, the one good spark I think is this European consolidation looks very positive. The US remains under Trump uncertain as to what is happening. But generally people I think for two or three years before people were negative the mood changed at the turn of the year and so people are looking to invest. Of course flows can stop. I heard about two investments in Turkey the other day.
But I think not only because a if the global economy is picking up there is opportunity there but I think sort of the social fabric here, you know while the structural changes on the macro side are good but the cultural changes I think everyone recognises are not good.
But again all of these things take time to play out into the FX market. I am not saying there is nothing dramatic going to happen, I mean something dramatic always happens and it always happens when people least expect it but I am just saying that if you look at your own, not yours but ET, there is a newspaper I have on my desk from the 7th of February which said the rupee is going to go to I believed last week there was an article that the rupee is going to go So I mean people do not know and fundamentally this is groping, I mean, I have been in this trade for a long time and for many- many years that was my view too, you had talk about the Fed and this statistic and that statistic and The truth is nobody knows, you know, so talking about it is fun I always say you can talk about the market with a drink in your hand but what you really need to do is you need to have a program to manage risk which protects you whatever happens and that is really where we spend a lot of time working on it.
But I have a question for you, did you follow my instructions and wear a green saree? Well it will all depend on what the GDP numbers we get today.
If they are really rosy then maybe I will green tomorrow, if not it just might be red. So your point is well taken that two weaker banks may not make that much sense because you double the problem and you do not know how the synergies on the positive side work out, but then how are you looking at this consolidation phase because I was just reading some articles about just essentially tracking this news on Union Bank and there have been talks for about six months where names such Dena Bank came to the fore.
I do not think there were any of the healthy banks that were being talked about for a potential merger. So what is the best way out to draw more efficiency from this consolidation plan? As I said the past experience with consolidation in the public banking space has not been very good. So we have seen past cases really where we have seen PNB and New Bank of India and we also had similar examples in the past and they really have not really made the banks which took over the ailing bank very much better.
The PG Nayak Committee had made some excellent suggestions. Read more on risk management. Congestion fee to unclog some roads? Four Aadhaar linking deadlines you should not miss. India a structural long-term story, but keep away from these 2 sectors: Sanchita Mukherji, Blue Edge.
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