Trigger for the Market to Fall … Part 1

 

I prayed for my guest to come and when he arrives I want him to leave my house immediately. This is what is being observed by every investor.  Every investor is looking for buying at the lowest and selling at the highest.  Well as I said last time cheap may not be the cheapest.  Being in the industry for around 20 years I observe that in India market fall is prayed when markets are overvalued and the same fall is criticized later.  The reason for the market is being searched like a sniffer but one must understand that we have U.P state elections and a few other state elections. 

Last 2 years there has not been much business hence selling of shares for political use does not need a new definition.  Omicron is a reason but the definition of FII’s has also changed since most of the Mauritius accounts defined as FII’ s are nothing but Indian politician's accounts. Well, the public domain is filled with such articles. I am just drawing your attention.  We all know the impact and the helpless situation of the government in 2^nd wave and also the decision impact of sudden lockdown in the 1^st wave and all the agony of losing the loved ones dying on the street.  Hence this particular state election and all the elections are key important for the 2024 elections.

U.S economy and mostly the European economy are under the worst phase. The EU interest rate hike has thrown an open challenge to the G7 nations and it this now very much clear that other nations have to follow the suit. Further to this the 3^rd wave possibility in many countries has created panic, as well as an interest rate hike, leading to shifting of funds into bonds and fixed income products. Easy money winding up and free money winding up leads to the redemption of equities and pays back the borrowers and creates opportunities for fresh new investment. Further, the trigger for easy money and a low base on YoY is now history. The markets need fresh triggers for an upward rally and the same is missing. On another way round that capitalist minds are creating the opportunity for triggers through the free fall of the market. Tapering has created a reshuffle in the bond marked across categories and junk bonds and the safer bonds battle is now a fearful one.  The EU action was no doubt is a hasty act but it's more towards attracting and balancing its equity redemptions into the debt asset class.   

EU is focusing on Green Bonds and the EU will become one of the major borrowers in Europe in the coming years—up to around €800 billion, depending on the amount of loans member states take out. It will already issue €80 billion this year and could issue up to €150 billion per year in the next five years, putting it on a par with major European sovereign issuers, such as Germany, France, and Italy. The EU needs finance to fund its member states and this is why they have come up with raising interest rates so as to attract inflows and fund them through debt.  EU as a whole has different categories of fixed income rated products the euro-zone has a longstanding shortage of safe assets: those rated ‘AAA’ or ‘AA’ represent only 37 percent of the gross domestic product in the EU, compared with 89 percent in the United States. Hence EU has no option but to raise the interest rates to pull funds.

 Further high inflation is cutting down manufacturing and also purchasing power. This is the 1^st time in my career I am witnessing inflation creating a massive impact on both the market demand and supply.   Even if the Omicron vaccine resolution comes up the fundamentals of the global macro towards tapering and withdrawal of easy money will not change.   In other words it omicron becomes a nightmare then the tapering might be paused and some helicopter money might come up into the rescue.    

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COST CONSULTANCY NEW DIMENSION SERIES 1

 

Do you know consultancy is all about thought and nothing about saving costs?  Do you know that even that cost management itself is nothing but a thought-driven process-created system created by professionals?  The IT industry evolution is a perfect example where from a back-end-driven service provider we are now the biggest technology innovator creating new economies of business models. Further when the domestic IT Company moves to an overseas market the pricing changes but the human labor remains the same. In short, the thought remains the same but only the location change makes the difference. It means that we are quoting ourselves much below the level of our ability. Cost advisory is no longer low-cost advisory or cost reduction but of value creation in the organization.  The talent of advisory remains the same but it’s the branding that plays its dice and that is the place where one needs to think about changing the dynamics of the profession.

Today the client does not want advice on how to save cost or reallocate cost but they need how business value, new propositions, and new IT frameworks could be added to drive valuation.   The branding of the profession as a consultant needs to be given its correct valuation. The same talent, when disguised under the global outfit one, gets significant value where we as the same at home (India) gets low valued. . But the talents remain the same then why we get these differences? The difference is in the thought process of presenting the firms and talent accordingly.

Today the Indian economy has entered into the world of valuations where business is no longer seeking cost advisory since the same has been replaced by the IT framework.  Every business has reduced its cost of operating and has significantly made efficient strategic cost management. Now a CFO is expected to know how IT systems will add value to the business and will drive valuations for growth. The surprising part is that the definition of valuations itself has also changed dramatically in the last couple of years. Longer business growth with multiple business models linked with or without profits is the new valuation model.  It's a change of thought and hence you being an advisor need to upgrade and bring yourself to the international levels now. Gone are the days of being a low thought organization.

 Why your advisory business needs to be a low fee? Why your consultancy fee needs to below under the disguise of competitive rates? The advisory or consultancy services need not be at a low cost to keep your clients intact. On the other way round you are focusing and narrowing down your area of focus and compromising on prices where your quality is high in terms of deliveries. We need to understand that the Indian economy is no longer the same old economy and we are having around 40 UNICORNS in India.

The climate of investments, the change of process and function at the corporate level as well as in the Indian economy gives a significant opportunity for getting consultancy firms like McKinney. Now please don’t underestimate yourself since the startup community of India does not make one ashamed of thinking big. Today, India has around a 550,000-strong base of founders, managers, and employees with ample experience working in startups, and this is estimated to reach 3.25 million by 2025.

The quality of Indian corporate has increased to multifold but on the other hand, the consultancy or advisory business fess has just come down in order to be competitive. The fact is that professional values have been lowered with quality service whereas the appropriate valuation of the “Industry” has been diluted.  The advisory business is no longer a low-cost model but a change of thought-based value identification.

The point is that we need to think big and upgrade the level of advisory in terms of the Quality and Value proposition we are creating for the clients.  But clients are willing to pay for talent whereas the location does not matter now.  You are being paid for your thoughts and now for your low fees. In fact, low-cost fees lead to raise questions about quality and standards. This is the new India. One must understand and keep in mind those overseas companies often buy out or take up stakes in Indian consulting firms. These are based on quality standards and not based on low-cost fees.  Hence lowering the fess and doing consultancy at a low-cost fee is no more a profitable business.

It's time to expand and grow and come together to form world-class quality and standards followed by pricing standards. Your talent is not for providing low-cost advisory services but for providing quality advisory services. The thought leadership in advisory services needs to be identified and tagged with a price. India is No longer an Emerging Economy It’s a Developing Economy… Cost Accountants Think on the same.

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