The Street is never short of hope and events to look forward to
“Don’t be too excited about the New Year. Only the calendar has changed,” the WhatsApp viral goes, “the spouse, the job and the boss remain the same.” That might be broadly true for the stock market, too. Yet, the Street is never short of hope and events to look forward to. Here are the Sweet 16, a mix of predictions and wishes that might help you begin the new year in the right spirit:
A new chairman for Sebi: Fresh faces and a new approach can inject life into the market. The process has been set on roll, with an advertisement inviting applications a little over three months ago. But, no hint of any further process like interviews has led to speculation that there could be short extensions for the incumbent. Some random names are also in circulation. Things should be clear by mid-February, when the current chairman’s term ends.
Decision on FTIL-NSEL merger: Mid-February will also bring the date set by the courts for the government to pass the final order on the merger between scam-hit National Spot Exchange and its parent, Financial Technologies. While a lot of people on the Street want it to happen, there are others who do not. The new year would tell us who wins.
An inspiring Budget: The finance minister, though under unprecedented personal attack for something not related to the government, has begun the consultation process ahead for his annual ritual. The market would expect that the mini crisis inspires him to let the Budget do the talking. Lower taxes for individuals and companies, higher allocations for infrastructure and a win-win solution for huge corporate debt that could revive the investment cycle might make investors happy.
Stable commodity prices: Soft commodity prices, especially of oil, have helped the government with the fiscal deficit numbers. The Street would hope that the prices stabilise around the current levels for a bit, as a strong move either way could upset a lot of calculations.
Rupee below 70: Its depreciating much beyond 70 to a dollar can kick-start a vicious cycle for foreign investors, already in two minds about their emerging market bets after the rate hiking cycle began in the US.
Ample foreign inflows: One thing that can keep the currency stable is inflow from portfolio investors. After a so-so 2015, in which domestic investors played a big part, a bumper year is due from the movers and shakers of the market. Will they oblige?
A bumper year for IPOs: Steady inflows from foreign investors could encourage more companies to look for listing. The exchanges themselves, both BSE and NSE, are ripe candidates for going public. Several private equity-backed companies have filed offer documents. Some reports have predicted $5 billion (Rs 32,500 crore). Not a bad number.
More KYC hassles: All types of abbreviations such as Fatca (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) mandated by foreign countries and those by local regulators such as KYC-II and UBO (Ultimate Beneficiary Owner) might hassle you if you have investments in capital markets. These are part of an ongoing global war against tax evasion and undisclosed money. But, if these result in a cleaner, more transparent environment, genuine investors wouldn’t mind.
International financial centre (IFC): The run-up to the previous budget saw a lot of talk around the GIFT City in Gujarat and its potential to become an international finance centre. Reality struck towards the end of the year, when the project became a subject of a public interest suit that alleges fraud and conflict of interest. Will the GIFT of Modi survive or is Mumbai back in the reckoning to be the IFC? 2016 will decide.
Successful new products: Over the past several years, the regulators have conceived and introduced a number of new products but the success rates of these have been minimal. Interest rate derivatives, stock lending and borrowing and corporate bonds platforms have bombed, to name a few. Copycat products imported from the West do not often suit local investor needs.
A new finance minister? This is a wild one. But, rule out at your own peril. Who will say no to a dashing finance minister, with a better understanding of global markets and a greater courage to administer the bitter pills of reforms that will lead to long-term dividends?
Unified regulator: A large majority of investors are individuals. They would prefer to have a one-stop shop that regulates their financial transactions in various instruments such as bank deposits, mutual funds, stocks, provident funds and insurance. Unification of umpteen regulatory bodies in the financial sector would simplify things for the common investor. Simplification is the ultimate sophistication.
Integration of commodity & equity markets: First steps in this direction have been made by merging the commodity derivatives market regulator, Forward Markets Commission, with the Securities and Exchange Board of India (Sebi). A seamless integration between these two markets, from both the intermediaries and exchange side, is still a work in progress. The new year should see the emergence of a stronger market that combines the strengths of both its components.
Honest intermediaries: It is an eternal wish of the consumer that the intermediary works in his interest, rather than for the producer. But, often the intermediary plays the monkey that wants to make money on both sides of the transaction. This year would provide us proof on the efficacy of various Sebi moves such as framing analyst and financial advisory regulations.
Conservative fund managers: The JP Morgan mutual fund’s debacle on the debt papers of Amtek Auto came as a rude reminder of the lackadaisical manner in which fund managers take decisions on our hard-earned money. They wax eloquent on due-diligence but outsource it to rating agencies and other third parties, who are dictated by their own vested interests. Let us see more fund managers who will not leave things to chance in the new year.
Some returns to smile about at the end of the year: There is nothing more painful than seeing your hard-earned money diminish in value at the end of the year. It is always easy to justify things in hindsight. You might have already heard umpteen such excuses from fund managers whom you paid to lose your money for you. The government, the regulators and the media -- they all led you the wrong way. Let them all be luckier in 2016. May the new year be the one in which you smile more at the end than in the beginning.