Till I started blogging, I was not aware that I could enjoy writing so much. While spreadsheets and mathematical models have always enticed me, I have always procrastinated presentations and memos. While in school, I always focused on mathematics and science. At business school I opted for strategy electives only after exhausting all finance alternatives. I once even owned a coffee mug that said “I love spreadsheets”! It is sad, I know!
In light of my past, my current attempt to write and communicate is evolving into a fascinating experience. With sluggish markets, maybe this is my opportunity to do a part time course in journalism and try my hand at financial journalism (a marwari baniya, I do not think finance can ever be absent from any part of my life!). With all due respect to Indian financial dailies and their staff, I think all of them have a long way to go. Well structured articles are lacking and intricate topics are written about without being researched.
Take for example, an article in Economic Times (most widely distributed and read Indian financial daily) on 20th April 2008, on the low retail participation in Sensex stocks (http://economictimes.indiatimes.com/Market_Analysis/Retail_investors_hold_meagre_share_in_majority_of_Sensex_cos/articleshow/2965952.cms). This article was simply a list of stocks and their respective retail holdings. I am not sure what the purpose of the article was. Was it trying to state that retail investors should have more participation in the top 30 companies of the country, or that their participation has decreased over time? By the sheer nature of wealth distribution, institutional investors have more investing power than retailers. So was the article not stating merely the obvious? There was no sector split, no historic data presented and no comparison made with holdings in mid-cap stocks or for that matter patterns in mature economies. It was an uninspiring and flat piece, almost like the story which ends even before it started. I am still scratching my head on this one!
Moving on, I am just reminded of a recent headline “Indian listed AIM stocks beat the Sensex”. AIM, is the Alternate Investment Market of the London Stock Exchange. This is predominantly a platform for global small and mid-cap growth stocks to make their debut. Sensex on the other hand, is an index of the top 30 companies in India by market capitalization. Is this not in itself a comparison of apples to oranges? Also, I would like to ask the journalist to remove the two top performing AIM listed Indian stocks, KSK Power and Eros International and then see the pattern. Is the growth still as stunning? Articles such as this often cloud minds of individuals in India who are slightly far removed from the reality of the markets. In this case one fact to be noted is that the liquidity and free float of AIM stocks is lower than that of Sensex companies. Hence any single trade done on AIM has more of an impact on the stock price. AIM in itself is a great platform for Indian firms as it offers them an incremental investor base, a place among peers (rather than being on BSE and NSE and getting lost with the larger names from the same sector) and more importantly an international setup which allows easier future debt or equity fund raising. However, comparison with the Sensex is not the right measure. If a statement such as this needs to be made, then I think the comparison needs to be done over a period of time to justify the claim. Only then can there be solid merit in the reporting.
The most frustrating article published recently, personally for me, was on Foreign Currency Convertible Bonds (FCCB) and how the upcoming redemptions of FCCBs would erode corporate profits. I am just amazed on how reporters can write such articles. FCCB is basically corporate debt, which at maturity can either be paid back in shares (if the share price is above a predetermined level) or it can be repaid in cash. Arguably the current state of equity markets implies that a number of FCCBs are trading below their predetermined equity conversion levels. However, most of them also have 2 – 3 years to go before they are due for redemption. In such a scenario, market movements and industry cyclicality plays a crucial role. The reporter ignores the same. At the same time, there is no analysis done of the money saved for the issuing company as FCCB debt is cheaper than raising straight debt. While the article raises a good point about prudent accounting for FCCBs, it is incomplete and not thoroughly researched as far as FCCB financing goes. Having lived and breathed FCCBs for the last four and odd years, I can say this with conviction.
If my writing seems too aggressive, it is because I would like to read meatier stuff in India financial dailies. Articles that educate and elucidate. With our capital markets growing, Indian corporates becoming global, global interest in India multiplying and RBI and SEBI making policy decisions too quickly, financial reporters have a crucial part to play in bringing about awareness. I am missing the buzz which the Indian economy is witnessing. I want to feel the pace of our growth in our journalism. I want us to debate policy decisions. I want to wake up reading my morning newspaper and not sipping on a cup of coffee. Maybe here I am just being a little too ambitious and I should stop! I do not think there ever will be a day when I will wake up without my morning café latte! Some habits just cannot die!