Craters – Not Cracks – Are Finally Emerging at ICICI Bank

The bank’s shocking performance in the last financial year should raise serious questions about its management

File photo of ICICI Bank headquarters in Mumbai. Credit: Wikipedia

ICICI Bank, India’s largest private sector bank by assets, posted shocking results for the quarter ended March 31, 2016 few weeks back. The consensus analyst forecast for the bank’s net profit was Rs. 3,100 crores; the bank reported a paltry Rs. 702 crores. This was an annual decline of 76% (compared to Rs. 2,922 crores in 4QFY2015) and a quarterly decline of 77% (Rs3,018 crores in 3QFY2016).

The main culprit for this precipitous fall was the “exceptional item” and “over and above” provisions made for non-performing and restructured loans as per Reserve Bank of India guidelines” of Rs. 3,600 crores. The management’s commentary indicated that this supposedly exceptional item was a prudent measure fulfilling the RBI’s “early and conservative recognition of stress and provisioning.”

In fact, the results were far worse than the reported numbers suggest.

Overall profits were inflated by including exceptional items – Rs. 2,131 crores of profits on sale of part of ICICI Bank’s shareholding in ICICI Prudential Life Insurance and ICICI Lombard General Insurance, and a deferred tax asset of Rs. 2,200 crores. These items in effect considerably negated the impact of the special provision of Rs. 3,600 crores. Excluding these two items, ICICI Bank has posted a huge loss for the quarter. The stock market penalised the bank, and the stock closed at Rs. 215 on May 5, a decline from Rs. 240 on April 28. With that, ICICI Bank lost its position as the second largest private sector bank by market capitalisation to Kotak Mahindra Bank.

ICICI Bank also finally reported that it had Rs. 44,000 crores “below investment grade” in power, iron and steel, mining, cement and rigs sectors. This was in addition to its net non-performing loans of Rs. 12,963 crores and net restructured standard loans of Rs. 8,573 crores. The bank expects its future non-performing loans to emerge from the category of below investment grade.

Negative reaction from stock market

The stock market reacted negatively to these numbers as all along the expectation had been that the new (set up post-1991) private sector banks’ asset quality, credit monitoring and appraisal management was superior to that of the government banks. The latter had started reporting losses in 3QFY2016, and hence most sell-side analysts were positive on private sector banks and negative on government banks.

The under-performance of ICICI Bank vis-à-vis the broader market since it posted its dismal results, indicates that the market does not believe the bank is being overly conservative in identifying future problems. Rather, the market feels that the skeletons of the past are tumbling out and problems will persist in the future. However, equity analysts who cover the stock, and who have consistently under-estimated the asset quality issue in the bank, continued to give a “buy” recommendation even as they slashed future profit projections by 8-25%.

These analysts’ continuing faith (“risk seems to be priced in”) in new private banks, despite everything, is because financials (banks, housing finance companies and non-bank finance companies) have high weightages in stock indices. For example, in the Sensex, financials account for around 28-30%. So institutional investors cannot be significantly underweight on financials; and since government banks are reporting poor results, they have to be overweight the new private sector banks. The latter have so far have been defying the broader economic slowdown by reporting growth in profits.

Not many in the analyst community question how these banks continue to report strong profits and low non-performing loans when there has been a long stagnation in the index of industrial production, anaemic sales growth by the large companies, collapse in corporate capital expenditure, faltering imports, fall in exports and a huge build-up of poor quality loans by the government banks. As long as private sector banks report profit increases, or any signs of faltering can be explained as a one-off, analysts are content in maintaining their optimistic outlook for this special breed of banks.

ICICI Bank, in its press release attributed the decline in profits to the “weak global environment, the sharp downturn in the commodity cycle and the gradual nature of the domestic economic recovery,” and stated that senior management will forego their performance bonus for FY2016.

In foreign banks, when significant problems arise, the senior management is replaced as it is unlikely that the management, which created the problem will reveal the true extent of the loss; secondly there will be a lack of confidence among investors whether the same management can address the issue. In India, the government banks periodically reveal the problem as the tenure of the CEOs tend to be short but in the new private banks, the tenure is lengthy (for example, Chanda Kochhar has been the ICICI Bank CEO since May 2009) and hence the problems may not emerge for a long period of time. Hence not giving performance bonus for FY2016 is a mere rap on the knuckles for the senior management of ICICI Bank considering the remuneration they enjoyed while taking on excessive risk for the bank.

No questions asked 

No questions are asked and no one is held to task on why the bank under the same management took on such huge exposures to leveraged business groups like Essar and Jaypee and aggressively financed high risk infrastructure projects. Media reports in November 2015 highlighted that ICICI Bank, Axis Bank and Standard Chartered Bank had lent US$3.5 billion to Essar Global, the London-based unlisted holding company of the Essar group. All such large credit sanctions and disbursements in ICICI Bank had to have been endorsed by the CEO, Head of Credit and Head of Risk Management apart from being cleared by the Board of Directors.

The executive directors at ICICI Bank, including the CEO earn annual remuneration in excess of Rs. 5 crores each apart from stock options. Indeed, in the last 5 years, the remuneration of Chanda Kochhar, ICICI Bank CEO and its executive management kept increasing with a significant performance bonus in each year, when presumably the bank was taking on these high-risk exposures. When the bank reports increase in profits, it is attributed to their managerial skills, but when significantly lower profits are declared, the external environment is held responsible.

Remuneration
Source: ICICI Bank Annual Reports
Chanda Kochhar
Rs	FY2011	FY2012	FY2013	FY2014	FY2015
Basic	11,520,000	13,260,000	15,249,000	17,536,440	20,166,960
Performance Bonus	8,286,336	12,996,000	17,989,541	15,516,081	16,655,570
Allowances & Perquisites	8,000,493	11,510,057	14,882,587	15,664,964	17,631,924
Contribution to Provident Fund	1,382,400	1,591,200	1,829,880	2,104,373	2,420,036
Contribution to Superannuation Fund	1,728,000	1,989,000	–	–	–
Contribution to Gratuity Fund	959,616	1,104,558	1,270,242	1,460,785	1,679,908
Total	31,876,845	42,450,815	51,221,250	52,282,643	58,554,398
Increase (%)		33.2	20.7	2.1	12.0
Stock Options (nos.)	210,000	210,000	1,250,000	1,450,000	1,450,000

By contrast, when Standard Chartered Bank’s India operations similarly took on exposures to stressed business, and as a result reported a loss of US$981 million in 2015, not only were the senior management of its Indian operations removed, the global CEO was also sacked. In contrast, ICICI Bank’s board of directors appears to be being unduly charitable to the executive management and withholding the annual bonus is deemed to be the only punishment.

ICICI Bank’s Rs. 44,000 crores of risk assets may not be the end of their asset quality problems. Although they maintain that it includes their small and medium enterprise (SME) exposure, that may not be the whole story. There are huge problems in this sector and extending further loans to defaulting SMEs and not classifying them as non-performing is a rampant industry practice. This is especially for those SMEs that have limits of Rs. 100 crores and less, to which the regulator does not pay close attention. Two years of consecutive drought and lack of water for even drinking will result in a huge surge in agricultural and rural non-performing loans, and even the much fancied retail (mainly urban) loans of banks may start getting impacted.

The market is belatedly acknowledging that there may not be much difference between ICICI Bank and the government banks. While other new private banks still report growth in net profits or a marginal decline in earnings, a similar fate awaits them, as there is unlikely to be a significant difference between the corporate portfolio of the government banks and the new private sector banks.

Nifty..

ENJOYED NIFTY YESTERDAY???

Buy Nifty @ 8255-8215

Stoploss 8180

NBFC 2.0

Nifty

Buy Nifty @ 8230-8190

Stoploss 8160

The biggest ever fire sale of Indian corporate assets has begun, to tide over bad loans crisis

For sale’ tags on airports, roads, ports, steel plants, cement units, refineries, corporate park, among others, are visible.

We are seeing what is effectively India Inc.’s biggest ever fire sale. It’s even bigger than the government’s planned divestment target.

The Reserve Bank of India’s (RBI) has decided to clean up the balance sheets of Indian banks, which are collectively saddled with Rs five lakh crore of bad loans, by the end of this fiscal. So, the banks have started cracking the whip on Indian companies for repayment of loans. For most affected firms and groups, this will mean they will be forced to sell prized assets to repay their ballooning debts.

We are seeing ‘for sale’ tags on airports, roads, ports, steel plants, cement units, refineries, malls, corporate parks, land banks, coal mines, oil blocks, express highways, airwaves, Formula One teams, hotels, private jets, and even status symbol corporate HQs. Substantial stakes in firms, and in some cases entire companies, are on the block.

The Hindu reviewed leading corporate houses with billion-dollar loans riding on them, and the results are startling. The top 10 business house debtors alone owe Rs 5,00,000 crore to the banks. They will be forced to sell assets worth over Rs 2,00,000 crore.

Reliance Group (Anil Ambani)

The Anil Ambani-led Reliance Group alone owes Rs 1,21,000 crore of loans to the banks and had an annual interest liability of Rs 8,299 crore against earnings before income tax of Rs 9,848 crore. Some of the group’s firms, like Reliance Infrastructure and Reliance Defence, don’t earn enough to service the interest outgo.

Assets put on sale by the Reliance Group include about 44,000 telecommunications towers (valued at Rs 22,000 crore) and optic fibre and related infrastructure (Rs 8,000 crore) from Reliance Communications (RCom), its flagship firm. Weighed down by about Rs 40,000 crore of debt, RCom has posted a loss of Rs 154 crore in FY14-15, and has continued to post losses in the first three quarters of FY 15-16, accumulating losses of over Rs 2000 crore until December 31, 2015; it is likely to end that fiscal with a net loss too. The company is valued at Rs 13,440 crore, less than a third of its total debts. However, RCom plans to reduce its debts to Rs 10,000 by selling Rs 30,000 crore of telecom assets.

Reliance Infrastructure (R-Infra) is sitting on a pile of debt of Rs 25,000 crore as of February. In November 2015, it agreed to sell a 49 per cent stake in its electricity generation, transmission and distribution business in Mumbai and adjoining areas to Canadian pension fund Public Sector Pension Investment Board (PSP Investments). The transaction is expected to reduce debt of Rs.7,000 crore attached to the distribution business. It agreed to sell its cement business to Birla Corporation for Rs 4,800 crore in February, and is looking to sell its entire roads portfolio, valued at Rs 9,000 crore, for which three international bidders have been short-listed. R-Infra’s EBIT stands at Rs 1,686 crore, against interest liability of Rs 1,974 crore. Its market capitalisation at Rs 14,476 crore is Rs 10,000 crore lower than its debt. By sale, of cement, road and the Mumbai power distribution businesses, the company expects to be debt free on standalone basis by the end of this fiscal.

Reliance Capital, with debt of Rs 24,000 crore has sold stakes, in phases, in its mutual fund and life insurance businesses to Nippon Life Insurance for Rs 3,461 crore to allow the latter to increase its stake to 49 per cent in each of the businesses. It further plans to raise another Rs 4,000 crore by the end of 2016-17 by selling non-core assets, including proprietary investment book and by inducting a partner in its general insurance business. Reliance Capital’s debt includes its lending portfolio – commercial lending and housing finance- of about Rs 18,000 crore and claims to have a debt-equity ratio of 1.77, the lowest in the industry, as of December 31, 2015.

Mr Ambani is also looking to exit the media and entertainment businesses, under Reliance Broadcast Network Ltd (RBNL), for Rs 1,500 –Rs 2,000 crore.

His foray into defence — the recently-acquired Pipavav Defence & Offshore Engineering, rechristened Reliance Defence — is sitting on debt of Rs 6,800 crore against its current market capitalisation of Rs 4,895 crore. The loss-making company with negative EBIT of Rs 306 crore has an interest liability of Rs 347 crore a year.

Ruia’s Essar group (Shashi and Ravi Ruia)

Shashi and Ravi Ruia’s Essar group has gross debt of Rs 1,01,461 crore. The group is looking to sell about 50 per cent stake of its family silver, i.e., Essar Oil’s 20mtpa (million tonnes per annum) Vadinar refinery, for Rs 25,000 crore. It also plans to bring in a financial partner for its 10mtpa steel business that currently has a debt of Rs 40,000 crore; a 49 per cent stake in the steel facility will be valued at about Rs 25,000 crore. The debt-laden group is also looking to sell stake in its ports business. Essar Steel and Essar Oil each account for one-third of the group debt, and Essar Power, one-fifth.

Adani group (Gautam Adani)

The billionaire Gautam Adani’s Adani group, with Rs 96,031 crore debt, is under pressure to sell its stake in the Abbott Point coal mines, port and rail project. The Adani Group’s debt stands at Rs. 72,000 crore. Last year, Standard Chartered bank had recalled loans amounting to $2.5 billion as part of its global policy of reducing exposure in emerging markets. Global lenders have backed out from funding the $10-billion coal mine development project. State Bank of India has also declined to offer a loan despite signing an MoU to fund the group with $1 billion. An Adani spokesperson declined to offer any comments on the issue.

Jaypee group (Manoj Gaur)

Manoj Gaur’s Jaypee group’s debt is over Rs 75,000 crore. The group has agreed to sell its 20mtpa of cement assets to Kumar Birla-led Ultratech for Rs 15,900 crore. This will leave its listed entities with about 6mtpa of cement capacity, three thermal power plants, one hydropower plant, an expressway project and land parcels. It is looking to sell most of these assets at the right price, but buyers are not easy to come by. Aside from selling stake in its land parcels and the Yamuna Express Highway, the group is looking to sell its remaining cement plants for Rs 4,000 crore and its Bina thermal power plant for Rs 3,500 crore. In the last year, the group has defaulted on payment obligations worth $350 million. Analysts say its capacity to service its debt has not improved.

GMR group (GM Rao)

G.M. Rao’s GMR group was one of the first debt-ridden companies to sell off assets; it has already offloaded stake worth Rs 11,000 crore in its roads, power and coal assets in the last two years. Despite this, its total debt has actually gone up: from Rs 42,349 crore at the end of FY13 to Rs 47,738 as of March, 2015. The group is planning to raise about Rs 5,000 crore this year by selling land parcels, energy assets and stake in airport subsidiary. Last month, it announced it was selling part of a road project in Karnataka, to help reduce debt by more than Rs 1,000 crore. It also plans to sell 30 per cent of its stake in its airport arm, which is valued about Rs 10,000 crore.

Lanco group (L Madhusudhan Rao)

The Lanco group has debts of Rs 47,102 crore. It completed the sale of its Udupi plant in FY16 for Rs 6,300 crore (15 per cent of FY15 debt). Debt levels have continued to rise, up 6 per cent in FY15. The group plans to sell power assets worth Rs 25,000 crore to de-leverage its balance sheet and retire debts of about Rs 18,000 crore. It is also planning to sell a one-third stake in the Australian coal mine it acquired in 2011 for $750 million.

Videocon group (Venugopal Dhoot)

Despite the Videocon group selling its stake in its Mozambique gas fileds for Rs 15,000 crore, gross debt has continued to rise: it is up 10 per cent year-on-year to Rs 45,405 crore, while net debt has remained largely flat at Rs 39,600 crore. Last month, it sold its spectrum to Bharti Airtel for Rs 4,600 crore. “If you minus last month’s spectrum sale amount of Rs 4,600 crore which will be paid directly to the banks, then debt comes to Rs.34,000 crore. To decrease debt further, we will be liquidating assets worth Rs 5,000 crore this year so the net debt of the group will be around Rs 29,000 crore,” Videocon Industries chairman Venugopal Dhoot told The Hindu adding that out of this net debt, Rs.21,000 crore has been taken for oil and gas ventures in Brazil, Indonesia and across the globe, where the group and ita partners have discovered oil and gas reserves. So, domestic debt of around Rs 8,000 crore will be serviced.

GVK group (G.V. Krishna Reddy)

To repay some of its debt of Rs 34,000 crore, the GVK group is in talks to sell 49 per cent of its airport subsidiary, which has an enterprise value of Rs 10,000 crore. Last month, it agreed to divest its 33 per cent stake in BIAL to Fairfax India Holdings Corp for an aggregate investment of Rs 2,149 crore. The company is also exploring the possibility of bringing in equity investors into Hancock Infrastructure Pvt Ltd, its holding company for its rail and port projects in Australia. A GVK spokesperson in reply to an e-mail query by The Hindu said, “As part of our corporate policy, we do not comment on any speculation in the media. While it's public knowledge that we are considering various options for reducing our debt, we regret we cannot respond to any of your queries.”

Reliance Industries (Mukesh Ambani)

India’s largest debtor, Mukesh Ambani’s Reliance Industries (RIL), has a total debt of Rs 1,87,079 crore (up from Rs 62,500 crore as on March 31, 2010, mainly because of the Rs 1,50,000 crore roll-out of Reliance Jio), the biggest among all corporate houses, and the largest ever in Indian corporate history. But it’s also one of the best-rated firms in servicing its interest, so banks are happy to offer RIL loans at competitive rates. Analysts believe that huge debt may weigh down the profitability due to interest outgo and depreciation after the commercial roll-out of Reliance Jio, if it is not able to scale up quickly.

Company	Gross debt (2014-15)	Assets for sale (Rs.Cr)
Reliance Industries (Mukesh Ambani)	187070	-

Tata Group

The Tata Group, India’s largest corporate group, with over 100 companies, wants to sell its UK steel business, which came as part of the $12.9 billion acquisition by Tata Steel of Corus in 2007. Tata Steel had invested over $ 2 billion as capital expenditure in its UK steel business and it has now written down the value of its investment of $2.9 billion, meaning the value of its UK steel business is almost zero. The company’s consolidated debt was $10.7 billion on September 30, 2015, with the total long-term debt of its Europe business at about $4.3 billion.

The others

Among other corporates,

• Naveen Jindal-led Jindal Steel and Power Limited has agreed to sell a 1,000 MW power plant to his elder brother Sajjan Jindal at an enterprise value of Rs 6,500 crore and is looking to sell other assets to reduce debts of Rs 46,000 crore.

• DLF Ltd, India’s most valuable property developer, has sought expressions of interest from several top global investors to sell a 40 per cent stake in its rental assets arm as it seeks to pare debt. The rental assets arm holds about 20 million sq.ft of leased-out office space and is valued at about $2 billion,

• India's largest sugar producer Shree Renuka Sugars Ltd has declared its Brazilian unit bankrupt and has filed for protection in the country. The company plans to fully exit from the National Commodity & Derivatives Exchange (NCDEX), as part of a strategy to sell all its non-core assets to reduce debt.

• The Sahara group’s sale list is long: 86 real estate assets, a 42 per cent stake in Formula 1 team Force India, four airplanes, and its hotels: the Sahara Hotel in Mumbai, Grosvenor House, London, the New York Plaza Hotel, and The Dream New York Hotel.

• Almost all of Vijay Mallya's assets are on sale by the banks.

Quenching the fire

Despite all the desperate deleveraging, the financial stress at these groups has intensified: all of them saw further increases in debt in FY15. These debts have grown seven-fold over the past eight years and account for 12 per cent of system loans, according to Credit Suisse

As groups like Jaypee and GMR cut back on capex and sold assets, their debt and EBITDA have deteriorated further, mainly because they sold their best assets, which were contributing to as much as 70 per cent of their EBITDA. For Jaypee, Lanco, Essar, and GMR, about half their debt has already been downgraded to Default by rating agencies. For GMR and Videocon, absolute debt has continued to rise despite asset sales. Lanco’s Udipi plant sales reduced debt levels by 15 per cent, but that project contributed to 69 per cent of its FY15 EBITDA. Videocon too hasn’t seen any reduction in debt levels.

Investment advisor SP Tulsian said that when you have gangrene in your body, you need to chop off that part to survive; “Similarly, Indian firms need to sell off assets to deleverage their balance sheets or they will die sooner or later. For, banks will take control of their assets and sell them to recover dues.”

However, Morgan Stanley, the global financial services firm believes that the worst of India's corporate debt crisis seems to be over as companies are reporting positive Free Cash Flow (FCF) for only the second time in two decades.

In its Asia Insight Report tilted “India – Macro meets Micro,” Morgan Stanley said that the distress in corporate India's balance sheet is unchanged for the past four years and lists out the following problems of corporate sector:

It’s a balance sheet recession

-Corporate debt to equity is at all-time high

-The debt service ratio is at a new low. The BSE 500 index companies have about 4 times their operating income to pay interest expenses compared to around 10 times in the boom years

-Interest to sales is approaching an all-time high, hurting net margins and impeding debt serviceability.

-Excess return on capital (ROCE minus the prime lending rate) is at all-time lows and in negative territory. This means that companies are earning less on their investment than the cost of their debt.

Tulsi Tanti’s Suzlon became the first casualty of the banks' recovery drive. In 2015, it was forced to sell its largest international subsidiary, Senvion, bought for €1.4 billion euro in 2007, for around €1.1 billion. The sale helped Suzlon cut down its debt of Rs 16,500 crore to Rs 10,500 crore, and reduce its interest liability from Rs 1,600 crore to Rs 800 crore a year. More companies from indebted sectors — power, infra, steel, realty for example — will be forced to emulate Suzlon and go for rapid asset sale in the hope of staying afloat until better times.

Nifty..

Buy Nifty @ 8225-8165

Stoploss 8150

When Is the Right Time to Sell Big Winners?

The largest gains are enjoyed by investors with the longest time horizons. Let’s take Amazon, obviously an extreme example. From the time of its IPO through the end of 2014, Amazon gained 12,600%. Even after such a remarkable run, Amazon is up over 100% through the first ten months of this year! However, the reality is having any sort of risk management would make it all but impossible to enjoy these outsized returns as even the best performing stocks have experienced massive drawdowns.

Thinking about these long-term gains is mostly an academic exercise as there are probably just a handful of people with the ability to receive multi-thousand percent returns on stocks. Nonetheless, it’s interesting to dip a toe into fantasy land and think about the giant winners.

Philip Fisher, in Common Stocks and Uncommon Profits had this to say on the matter: “If the job has been correctly done when a common stock is purchased, the time to sell it is- almost never.”

Here is Fisher on the idea that it is the prudent investor who sells his biggest winners.

There is still one other argument investors sometimes use to separate themselves from the profits they would otherwise make. This one is the most ridiculous of all. It is that the stock they own has had a huge advance. Therefore, just because it has gone up, it has probably used up most of its potential. Consequently they should sell it and buy something that hasn’t gone up yet. Outstanding companies, the only type which I believe the investor should buy,  just don’t function this way. How they do function might be best understood by considering the following somewhat fanciful analogy.

Suppose it is the day you were graduated from college. If you did not go to college, consider it to be the day of your high school graduation; from the standpoint of our example it will make no difference whatsoever. Now suppose that on this day each of your male classmates had an urgent need of immediate cash. Each offered you the same deal. If you would give them a sum of money equivalent to ten times whatever they might earn during the first twelve months after they had gone to work, that classmate would for the balance of his life turn over to you one quarter of each year’s earnings! Finally, let us suppose that while you thought this was an excellent proposition, you only had spare cash on hand sufficient to make such a deal with three of your classmates.

At this point, your reasoning would closely resemble that of the investor using sound investment principles in selecting common stocks.You would immediately start analyzing your classmates, not from the standpoint of how pleasant they might be or even how talented they might be in other ways, but solely to determine how much money they might make. If you were part of a large class, you would probably eliminate quite a number solely on the ground of not knowing them sufficiently well to be able to pass worthwhile judgement on just how financially proficient they actually would get to be. Here again, the analogy with intelligent common stock buying runs very close.

Eventually you would pick the three classmates you felt would have the greatest future earning power. You would make your deal with them. Ten years have passed. One of your three have done sensationally. Going to work for a large corporation, he has won promotion after promotion. Already insiders in the company are saying that the president has his eye on him and that in another ten years he will probably take the top job. He will be in line for the large compensation, stock options, and pension benefits that go with that job.

Under these circumstances, what would even the writers of stock market reports who urge taking profits on superb stocks that ‘have gotten ahead of the market’ think of your selling out of your contract with this former class-mate, just because someone has offered you 600 per cent on your original investment? You would think that anyone would need to have his head examined if he were to advise you to sell this contract and replace it with one with another former classmate  whose annual earnings still were about the same as when he left school ten years before. The argument that your successful class-mate had had his advance while the advance of your (financially) unsuccessful classmate still lay ahead of him would probably sound rather silly. If you know your common stocks equally well, many of the arguments commonly heard for selling the good one sound equally silly.”

Enjoyed the rise in Nifty yesterday????

Today Buy Nifty @ 8210

Stoploss 8150

The ultra long-term Perspective for DOW JONES

Let's put aside the the multi-month time frame for the market just for a second and focus on the really big picture. This is a good exercise for the simple purpose of maintaining focus, which is a sorely needed attribute among modern market participants.

I presented the chart below in January as a means of assuaging the then persuasive fears of a secular bear market. According to the very simple chart below going back nearly 100 years, the markets are in a powerful secular bull market that really just started recently.

With that said, there are going to be numerous corrections (you can even call them cyclical bear markets) between 10 to 20 percent that convince market participants of an impending secular bear market that is both long-lasting and deeper than 25% from peak to trough. We, in fact, just had one. And it worked perfectly in that it completely threw market participants for a loop, causing all varieties of sordid analysis of the septic variety that were more or less a product of fear rather than facts.

What is important to note about the evolving ecology of the markets over the past 100 years is that secular bears have become progressively shorter in duration while secular bull markets have become progressively longer in duration. There are probably multiple reasons for this, most of which has to do with the involvement of central banks and evolving liquidity experiments.

Given this evolving pattern is it too far off to believe that this secular bull may last longer than anybody expects? The last secular bull market lasted about 17 years give or take. The one before that about 10 years.

Is it unfair to assume that the unintended consequences of what is really the first global concerted effort at providing liquidity at any cost will be a progression of asset prices along both time and scope of returns?

According to the chart above, it is not out of the realm of possibility and is in fact, very likely.

Nifty

Buy Nifty @ 8175-8100

Stoploss 8070

A Wall Street Deal That Turns Taxes Into Profits

Nifty

Buy Nifty @ 8160

Stoploss 8100