The markets also gave this number a cold shoulder and ignored it completely. But it surely got the economists excited, as this was a first. Negative inflation which is also referred to as deflation is the biggest indicator of recession in the economy. But here, in Indisa, it was touted by all as a “historic statistical curio”, that’s all it was. A statistical aberration.

So does this mean that the Indian economy is in recession? Definitely not! For a economy to be officially declared as being in recession, it has to show a negative real economic growth or falling GDP consistently for at least two quarters. Deflation in economic parlance means fall in price level of goods and services, resulting in an increase in the real value of money.

Deflation occurs where there is a fall in demand and prices are also down. In deflationary economy, people typically delay their buying until prices fall further  which in turn reduces overall economic activity, leading to huge idle capacities thus contributing to the deflationary spiral.

Deflation is usually counteracted with a cut in interest rates, increasing supply of money and announcing economic stimulus. Now this is something which we see in USA – the stimulus, the bailout leading to increased money supply and interest rates are at their lowest levels.

In India, there was a time when people delayed their buying’s but this was seen only in realty sector but not all around. It’s not like people have been putting off buying cars because they expect prices to come down further. One has to just go the shopping malls on any given weekend to see if people have stopped buying. And rate cuts? There is no way that RBI is going to initiate any rate cut now based on this negative inflation as it is simply not needed.

Then there is the question of increase in the real value of money. Apart from the rupee rising vis-à-vis the US dollar, there is no real rise in the value of money. We were paying Rs.20/kg for banana, supposedly the fruit of the poor six months ago and even today, the rate is the same if not higher. Price of commodities is up, pulses and grains, vegetables and fruits costs’ more. So where is the price going down to say we are into deflation?

Yes, we did have economic stimulus and lowering of interest rates but that was at a time when the entire world was reeling under recession and we had huge piles of inventories. At that time, if someone had said that we had deflation it was more believable. But today, when the April IIP numbers have come in the positive and some sectors are showing sure signs of revival, how can we say this -1.61% is deflation?

So then why do we have a negative inflation? The biggest reason is the base effect. Due to higher prices last year as measured by the WPI, we thus have a negative inflation. It is more of a statistical fall and does not indicate any systemic deficiency. Consumer price index is over 9% and India’s GDP is growing at the rate of 6%.

The struggling-to-survive man on the street, the woman haggling with the vendors to save a few pennies more and the elderly having to do away with healthy fruits simply because they are unaffordable all point in one direction – prices need to come down. On one had we have deflation and then life becoming tough due to mounting costs on the other. This means, we need to urgently change the way we calculate our inflation rates as it seems to have no connection whatsoever with the ground reality.

Inflation rates have become a joke and unless it is linked with the CPI, it makes a mockery of the entire system. Maybe that is why the markets pay no attention to it any more?

§ Logistics as a sector is still an emerging sector in the country and, hence, has a huge untapped growth potential, especially so for containerisation.

§ The company has vast infrastructure network, well-diversified port portfolio and large wagon fleet, market leadership and strong balance sheet (sufficient cash and zero debt company) unlike some of its peers.

§ The company has a total capex plan of Rs 3,000 crore over a span of five years.

§ The company is mulling a special package to boost movement of containerised traffic by rail between the North-Eastern States and the rest of the country. The focus will be on providing additional capacity and better services at competitive rates.

§ The company will set up a freight logistics park; spread over 151 acres at Khodiyar in Gandhinagar at an estimated investment of Rs.1 cr. It is expected to help manufacturers, distributors, retailers, and exporters and importers to reduce costs and frictions in their supply chain.

§ At the current market price of Rs.736.1, stock is trading at 11.46x P/E and 2.51 P/BV and as per market estimates for FY10E at 10.83x P/E and 2.07 P/BV.

§ Bucking the general trend, the FMCG companies are likely to pull off a healthy performance for the quarter ended March 2009. Along with the growth in volumes, value growth will be the primary driver of revenues.

§ Dabur has launched three new variants of anti-dandruff shampoos under its premium hair care brand Vatika and has signed actress Preity Zinta as the brand ambassador for the Vatika shampoo range. Hair Care segment contributes about 85 % of the personal care business for Dabur and is eyeing a 10% share in the Rs-600 crore domestic anti-dandruff shampoo market.

§ With over 300-odd products and SKUs in the market, the company has channelised its sales network into three clear verticals of Foods, HPC and Healthcare. This will ensure that the sales force is more productive than in the past, as there will be greater focus and the company will be able to derive better bang from its promotions. This move is aimed at creating focus groups within its sales force and the sales personnel with the company’s stockists, to enable them to sell products more efficiently. This new sales strategy, will seek to empower its sales force and create greater bandwidth to beat any potential slowdown in the market.

§ At the current market price of Rs.95.15, stock is trading at 22.82x P/E and 10.15 P/BV and as per market estimates for FY10E at 18.12x P/E and 7.86 P/BV.

§ Marico has focused on achieving sustainable earnings growth. Top line growth has been accompanied by a healthy bottom line growth. The top line has grown at a CAGR of 20% from past 5 years whereas bottom line has grown at a CAGR of 25% during the same period.

§ Marico has also posted an impressive quarterly result showing a consistent growth in top line as well as bottom line. The total revenue has witnessed a growth of 28%, 30% and 23% in FY09 Q1, Q2 and Q3 respectively over the same period previous year. Similarly, the net profits have shown a growth of 15%, 12% and 11% in FY09 Q1, Q2 and Q3 respectively over the same period previous year.

§ Marico is leading with some of its strong brands in their own segment. Parachute coconut oil, which is a leader in its market with 48% share, Saffola and Sweekar are Marico’s brands in health and vitality segment which comprises of 23% sales of Marico’s total sales and have a significant share in their market.

§ The prices of key raw material like copra, coconut oil and safflower oil have seen a decline in the current quarter as compared to the previous quarter. The raw material prices have started to come down with effect from December 2008.

§ At the current market price of Rs.60.50, stock is trading at 23x P/E and 8.86 P/BV and as per market estimates for FY10E at 16.01x P/E and 5.94 P/BV.

Investment Rationale

· Recently, Gujarat Gas has committed Rs.4 billion crore in expansions of gas distribution networks.

· Domestic Demand for Gas and CNG is continued to rise. Right now, more than 80,000 vehicles ply on natural gas in the company’s markets.

· Gujarat Gas` s service area covers one of the highly industrialised belts in India, which has helped the company maintain a strong growth momentum in gas volumes. Moreover, Gujarat is strategically located as it is the landfall point for more than 60% of India` s natural gas supplies from Bombay High, onshore and offshore gas production fields of Gujarat, and liquefied natural gas (LNG) terminals. The company` s service area is well connected to the trunk pipelines and also to the statewide gas grid.

· Company’s top line rose by 17% and bottom line by 15% on a consolidated basis for the quarter ended September 2008 compared to corresponding previous year quarter.

· Company’s CARG at 20.80% is quite healthy.

· India’s natural gas industry is entering a golden phase with the availability of natural gas expected to double in two years. This will help gas transportation companies like Gujarat Gas, which will witness healthy profit growth in the near term.

Well, results are not expected to be good in most of the sectors. But there are some sectors, which have shown a positive trend and would post a good performance, providing the balance.

Among all sectors, the worst performance is expected to come from the Auto sector, which has been facing the toughest time ever. With huge inventory pile-ups and lack of demand, also with the added burden of closure of plants to cut down inventory and some companies even resorting to cutting down production, naturally, the outlook is not too good.

The major worry for the sector is the slump in the sale of new vehicles. For instance, both Maruti and Hero Honda have reported 10% drop in their latest data for the month of December. Also, for the whole quarter, truck manufacturers have seen as much as 50% volume drop in some cases.

Same with Auto components sector and Tyre makers, both will show a downfall in the earnings.

Realty is another sector, which will show a poor result. There were fall in demand and lack of liquidity in the quarter. Big time realty companies might show a drop in performance but they will not go down as in the quarter they somehow managed to stay afloat by selling land or by stalling projects. But it is actually a question of survival for midcap and small cap segment.

Infrastructure companies might post a mixed bag of performance because companies whose projects got postponed would have a negative impact while companies which managed to carry on with the projects, though at a slower pace, would still manage to reflect a positive earnings. Moreover, with the fiscal and monetary stimulus package, this is one sector, which is expected to get benefited substantially in the coming months.

Banking is one sector, which is expected to have a good Q3. PSU banks are estimated to post a reasonably good performance. Private sector banks with lower forex exposures would also do better. But this is the sector, one need to keep a close watch because the sector is on a strong rebound with the interest rates coming down and with RBI injecting liquidity into the system. So this sector looks promising.

Cement would show disappointing earnings because of the slowdown in the realty, construction and infrastructure sector. Prices have come down and unless there is enough demand, there isn’t much hopes in the second half too.

Telecom is one sector that is poised to do very well. The sector has been growing exponentially, irrespective of the slowdown. Those who provide telecom services and those who provide equipments to the sector are expected to report in a robust performance, though companies with high MTM forex losses might pull down the earnings.

Then comes IT sector. With the US economy, the largest customer base of the Indian IT industries is also rolling under a slowdown; most of the IT companies are expected to show a fall in the performance.

Power is again one sector that will do well. There is no slowdown here as it is domestic driven sector. India has always been a power deficient country.

Another such sector is the Education sector. Companies providing education tools or developing education materials – be it software or books, are doing well. Education is not limited to books only. Not only the existing players expected to expand horizontally, many private and international players are also getting into the Indian education sector.

Textiles sector is again victims of slowdown, mainly those companies which are indulged in exports as their exports have literally halved for the moment. A sharp rise in bankruptcies among US retailers has affected the companies. Textile co. are cutting their production and manpower. US is the single largest export destination for Indian exporters accounting around 13% of total Indian exports. Since September, the average cut in production by the industry is as high as 15%.

Aviation, Hospitality, Tourism are all going to reflect the slowdown.

The Logistics sector too might get affected as shipments have dropped because of the falling exports. The falling crude oil and the cut in production by OPEC also means fall in business for this sector.

FMCG would post a good performance, as consumption growth is always steady than the investment growth. Also, companies are now selling their product more in rural India, where the impact of the slowdown is lower, so FMCG companies are expected to come out with flying colors.

So we can say that sectors like Auto, Realty, Cement, and Textile have really hit the bottom of the pits. Power, Banks, FMCG, Telecom might post good results. The first half would remain tough for India Inc but once the US and the other economy show signs of recovery, India too will propel this growth. The low crude prices, the cut on fuel rates and interest rates cut are all signs of not allowing the economy to slow down.

The glass should always be half full. If Q3 results are better-than-market-expectations, then, we will see major obstacle for the markets going away.

To change and to change for the better are two different things. We are constantly changing, be it a small change, such as the difference in our exact mindset, or profound, such as a move from one location to another, but in doing so, we are not always progressing. A poor man may become rich; through misfortune he may become poor again. His circumstances have changed twice, but he has seen no progress.

Progress simply means, “to advance towards a higher or better stage”, or say “ Progress is a change that benefits us” but a Change may take a positive step forward or may turn into a devastating step. There are aspects of human creativity that do not foster progress, though they may inaugurate change–permanent or temporary…like politics, arts and religion. A political system, for instance, may change from an absolute monarchy to a democracy; but it can also change back again. Similarly, it’s very possible for a progress to occur that, on a personal-level benefits us, but does not benefit the society as a whole. Or sometimes we do not agree with a policy, but it helps society as a whole. Progress is not the greed of one, which allows uncontrolled growth that destroys all the qualities of one’s life. Progress is about maintaining our values and ethics while recognizing that some change is inevitable, and that change can even be an improvement. Little steps can lead us to the path of progress like developing new skills and making perfect the existing ones, meeting like-minded activists or sharing experiences, inspiration and enthusiasm for taking action on the issues we really care about.

But what separates change from progress? Well, we can’t avoid change, it’s mandatory, and progress, however, is optional. Change is inevitable, but what often is overlooked is the fact that neither the passage of time nor change occurring guarantees progress. The challenge is to work towards making inevitable change a positive step — whether it’s in our business or our personal life.

The true factor in progress is character. Character is one’s ethical strength, the ability to judge things unbiased, the capacity to break beyond the bounds of common thought and excel to the best decision overall. When the opportunity to change comes about, it’s up to the individual to take a grasp on that change, and rather than idly sit and allow it to alter him or her.

Change requires nothing, it happens on its own. Progress requires character…therefore, to maintain Progress and advance the pace of positive Change; all of us who strive to improve the lives of people and the nation, must bring to bear the maximum measure of our creativity, skills, resources, and dedication for the mutual benefit…benefit by reacting to change in a positive way.

For the past few weeks, Tata Coffee’s Coorg filter coffee was not available in the Calcutta market. Since I’ve been a long term addict and my morning is incomplete without a strong cup of coffee, I fretted and kept enquiring at local stores and supermarkets. ‘No supply’, ‘Not available’ was the standard response.

As the last 200gm packet (that cost Rs 42) dwindled, I panicked and bought a packet of something called ‘Fresh & Honest’. The only problem was that it had 30% chicory mixed with the coffee and tasted pretty awful. The stock market gloom was adding to my morning coffee doom.

Finally, the local grocer informed that a fresh supply had arrived. As I gleefully picked up 4 packets and handed over Rs 200, I was taken aback when the grocer requested a further Rs 8! The 200 gm packet now cost Rs 52 – nearly a 25% price increase.

My weekly visits to the market has confirmed that the prices of fruits have remained unchanged. So have meat and fish. Same with pulses and rice and spices. Only a slight downward movement in the price of vegetables. The price of petrol and diesel at the pumps have remained unchanged as well.

As far as the “aam aadmi” is concerned, there is no change in inflation. So why are the figures announced by the government going down? My guess is what they call the ‘base effect’. That means the rate is lower than the previous week’s because a year ago the same week’s rate may have been higher than the earlier week’s rate. There seems to be no other explanation.

TNPL manufactures a range of high-quality, surface-sized maplitho paper to suit any kind of printing, sheet-fed or web offset. Its plants are at Pugalur, Karur district. The company has two unique advantages. First, it makes paper out of cheap and fixed-cost bagasse. Second, it can completely switch from newsprint to printing and writing paper and vice versa depending on market conditions.

Investment Rationale

· The Mill Expansion Plan for increasing the paper production capacity from 2,45,000 tpa to 4,00,000 tpa is expected to be implemented by March 2010.

· The company has completed the Rs 565 crore mill development plan that would see its captive pulp production capacity increase from 500 tonne per day to 720 tonne per day. The benefit of this expansion plant would start accruing from May 2008. This will help the company to control the cost of raw material and insulated it from the fluctuating pulp costs in the international market. An added benefit is that the new pulp mill follows the elemental chlorine free process, an environment friendly process.

· The company continues to enjoy its relatively lower reliance on wood as it makes paper primarily from Bagasse- a sugarcane waste product, which is abundant and cheap, as compared to wood, which is scarce and expensive. In order to further de-risk the company’s exposure to volatile wood pulp prices, TNPL has raised its pulpwood plantation in 29,962 acres under farm forestry and captive plantation schemes including 10,616 acres added during current year.

· TNPL is also setting up a mini cement plant having a capacity of 400 tpd at capex of Rs.40-45 crore for producing high-grade cement using the lime sludge and fly ash generated in the process of manufacture of paper. TNPL will be the first mill from Paper Industry to produce high-grade cement from the lime sludge and fly ash, the waste materials in paper manufacturing.

· Company is also proposing to construct an IT Park in the surplus land (63.5grounds) it holds on the outskirts of Chennai.

· TNPL is all set to enter into carbon trading having got its bio-methanation plant registered as a clean development mechanism (CDM) project with UNFCCC (United Nations Framework Convention on Climate Change). This is the country`s first ever CDM project in the waste management sector to be registered with UNFCCC. TNPL emerges as the first paper mill in India that registered a CDM project with UNFCCC.