As promised, restarting the blog after a sabbatical. My goal will be to publish it on a monthly basis at least. Let me start off with trying to decode 2 of the hottest events currently namely the budget and the Adani saga.
First of the budget:
1. The budget is a non event in most years and this year the main talking point was the sops given in the New Tax regime. Leaving the numbers aside, let us look at the big picture. The rightly stated goal of the Government is to do away with complex tax exemptions and simplify the tax process. For example till a few years ago we were submitting medical bills of Rs 15000 to get the exemption till the Government gave it to everybody scrapping the cumbersome process.
Similarly it will be better to scrap the home loan exemptions and straightaway give the benefit to everyone who buys an affordable home. When I as a middle class person bought an affordable home in 2015, I was pleasantly surprised to be given a tax refund of 2 lakhs at the time of possession by the Tatas in 2020 because the Government gave them the benefit.
The Old Regime will be sunset in a few years and only the new Regime should exist.
2. The second point which everyone missed was increasing the Senior Citizen Scheme limit to Rs 30 lakhs from 15 lakhs. While this is laudable, the rates of 8.1 pc are too low. The original rate of 9.3 % was correct. It is too much to expect people in the evening of their life to gamble in the markets. This anomaly needs to be addressed.
Rest all are policy issues and have almost no bearing on our day to day life just good entertainment.
Next is coming to the Adani saga:
1. It is purely a commercial short selling attack as very common in the US. As per the pro and anti Adani camps various stories are being embellished. Remove the outer layers and few things stand out.
a. The stock prices in PE terms are overpriced at 200 and 300 PE
b. Adani groups how solid assets like airports, ports, power distribution which have solid moats around them. So, the in the years ahead, the PE multiples will shrink as the profits catch up.
c. Such projects have long gestation periods and when they start spewing out cash, they become cash cows.
d. The correct PE to buy is 20 to 30 multiples for the kinds of businesses Adani is in.
It is best to cast away the hype and focus on the fundamentals. I assure you that is a very good way to get sound sleep at night.
So, enjoy the dramatics, focus on fundamentals and sleep well at night.
I feel the markets should do well till May. Let us see.
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