The Finance Minister presented his budget yesterday. All news channels are busy dissecting it and analysing it. A lot of “experts” become predictors of a lot of things. I remember Macbeth, Scene V, where in the Castle of Dunsinane, Macbeth asks Seyton, “What’s that noise?” and Seyton replies that it’s a cry of women because the queen is dead. And thereafter, Macbeth says his famous quote, “Life..is a tale told by an idiot, full of sound and fury, signifying nothing”.
I can just paraphrase Shakespeare and say, “Budget is an account told by a Minister, full of promises and visions signifying nothing for a stock market investor.”
“Pray Sir”, said milady to me, “Why do you say so?”
“Milady “,said I, “I have my reasons. And since you seem so agitated, as the Earl of Nagrotam, I must answer your predicament.”
Haven’t lost my sanity, its just the “Downton Abbey” effect on me. I have started having hallucinations of being an Earl of Grantham reborn. He, he ,he…
The budget is just an exercise to make an account of the government. Just like in a house we plan how much of income we will have, and how much of that will be spent on which all necessities and requirements, the Finance minister does the same. It may tell you how much of saving he will do, it may also tell that this year he plans to spend more on his house redesigning than education of his kids or on his security guards than his maids but that’s about it.
For a stock market investor it should be of little concern that the government is proposing opening up of FDI in defence and as a result start speculating on companies, quantum of profits and getting swept away in this euphoria.
For a good investor, the bottomline is past performance, cash flows of business, debt free or debt reducing businesses, integrity of management and dividend payouts. Rest all is lot of noise and bull.
Every budget there are staple stocks which keep yo-yoing and give hardly any returns. Kalindee Rail, Texmaco, Titagarh Wagons, Hind Rectifiers…..these are staple rail budget stocks. Budget does not improve their profitablility. Same way ITC gets hit by excise hike every successive budget but it still makes humongous profits every year. Smart businesses understand policies and accordingly modify their business plans.
Every stock market investor knows L&T is a good Capital Goods Business, Bharat Forge is a good forging business, SBI is the biggest and most profitable bank and so on. Does that itself make them good businesses to own?
I prefer to buy same or similar businesses when they are being hit by Tsunamis. As I did with United Spirits, Standard Chartered and Indraprastha Gas. Have a buy list of your stocks of good businesses. Wait for a fleeting opportunity when it occurs. Remember in business as well as in life, good times never last, bad times never last, all times never last. When a good business hits a bad patch grab it. Otherwise listen to budget speech or swim in the pool it has same effect on your portfolio’s health. Personal health, also swimming against the tide is healthier. Keep swimming. Ciao