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Even as the market seeks direction following its recent sell-off, some interesting trends are flashing on the screen. It may be premature to conclude much from the pattern of a few days but the initial signs may be telling us something. In the last few sessions, there is clear buying interest in sectors that were considered “unexciting” in 2007. It may be the first indication that 2008 may herald the return of the good old steady-state businesses.

The year 2007 was about dreams. Dreams are so much more exciting than going through the mundane routine of everyday life. Last year was thus a year of excitement till people got carried away and burnt their fingers. So, this year, investors appear a bit shy of ascribing crazy valuations to dreams and announcements and seem more intent on getting back on the straight and narrow.

Steady 20 per cent earnings growth, robust cash-flows, high return ratios, quarter after quarter of growth delivery- all things which seemed staid and boring last year, are suddenly back in vogue. So what if they appear somewhat less exciting than “exponential” growth projections four or six years down the line. Once again, a bird in hand is worth two in the bush. About time, too.

So we are now seeing steady buying in FMCG stocks, in select pharmaceutical names which are delivering good numbers, in some autos and even technology. In dated jargon we would have called this “defensive” buying, implying a return to steady cash-flow generators in unpredictable and uncertain markets. High beta sectors do well in momentum markets and the general perception now, for right or wrong, are that we will see less by way of momentum in 2008.

Now, momentum can certainly return to the market sooner than we expect, yet there is something fundamentally comforting about what is happening now.

 There was something surreal about the way investors were ignoring companies which churned out hundreds of crores of profits every quarter, even as they fell in love with stocks with no current revenues and distant promises. The disconnect was just too wide and had to be bridged. The process may well have begun. So, as you tailor your portfolio for this year, do throw in some of the old blue chips. At best they will make you feel a bit bad if the markets rediscover their crazy bullish mood of 2007 but you will feel much better on the rainy days when 70 per cent of your portfolio won’t get knocked off in a week. Financial markets are not always about generating supernormal profits, sometimes they are about preserving capital too. Just like the middle overs of a one-day cricket match.

I yield to nobody in my regard for Aamir Khan as a fundamentally decent human being. I doff my (metaphorical) hat at his courage to follow his politics and I applaud from my heart at Taare Zameen Par (TZP) as a sensitive, socially relevant film that every parent, teacher and thinking adult should watch. Yet, even I have to question the wisdom of Khan’s opting to attend the Jaipur Literature Festival recently, not as a participant - because surely it was his right to attend an event that has free entry for all- but as a delegate.

Now Khan may be a fine actor and a sensitive director, but he’s no writer; not at least to the best of anyone’s knowledge although he does post occasionally on his blog. His conversation with Tehelka‘s Shoma Chaudhury had little to do with books (though someone from the audience did ask what he had read in recent times) and more to do with films, particularly TZP. Quite clearly, even Shoma, a Lit Fest veteran, was aware of the awkwardness, beginning her conversation by wondering aloud what Aamir was doing at a festival that celebrates literature.

Predictably, the actor had a sell-out session held not at the hall of the Diggi Palace hotel where lesser mortals (Ian McEwen included) spoke, but in the lawns, decked out as if for a beloved bridegroom. Gem exporter Naresh Goyal was there with his family of eight, including his parents and children clutching autograph books. So, how many other sessions had he attended at the Lit Fest? What had been his favourite so far? Goyal confessed that he hadn’t had the time to attend any other sessions, but was planning to on the last day. Any favourite books? Oh, he said, he didn’t have the time to read.

To say that Khan’s session was a media circus would be an understatement. Local channels and national networks all scrambled to grab a sound bite everywhere he went, surrounded by burly bodyguards (he stayed on for dinner later that night, and even attended a session the next morning with Pakistani women writers, Shahbano Bilgnimi, Kamila Shamshie and Moni Mohsin moderated by Urvashi Butalia), he was followed by cameras and fans, detracting attention from those who were the real stars of the festival- the writers.

Even that would have been tolerable but for a caustic comment Khan made amid much applause that he didn’t really have a problem with news channels as long as they were prepared to call themselves “entertainment channels”.

Now it’s all very fine to sit on a podium, surrounded by adoring fans and take pot-shots at the news media (no paragons of virtue). But to turn the very venue to which you’ve been invited into a bit of a nautanki, even if inadvertently, and then take the high moral ground does smack of hypocrisy, doesn’t it?

Then again, why blame Khan if the news/entertainment channels couldn’t get enough of him? Why blame him for the adoring fans? And, surely, as Harsh Sethi of Seminar, pointed out, if Aamir’s presence could encourage a love for books then is that a bad thing?

My point is simple: Khan had to have been aware of the commotion that his very presence would result in. He should have had the humility to say that he was not qualified to be a delegate or a speaker. And I’m willing to take a bet with Sethi that nobody went back home that night to grab a copy of William Dalrymple’s City of Djinns, the book that Khan said he has most recently read.

The Jaipur Lit Fest has been around for just three years. It began in 2006 with a reading by Dalrymple - one of the organisers - in a hall with little more than a handful of people and 16 other authors. The next year, this festival was back, overcoming all odds (lack of sponsors, no sarkari support and just the will of a few determined people) with 26 authors - many of them heavyweights like Salman Rushdie, Kiran Desai and Suketu Mehta.

Remarkably, the Lit Fest had arrived. This year, the festival has seen some serious sponsorship money (including from two construction companies, D.S. Constructions and Hindustan Construction) and the participation of close to 80 authors including Khan’s colleague, Dev Anand who’s just out with his autobiography.

or the first time, the festival has been handed over to a professional event management company (Teamwork Productions says it will definitely have a hand in drawing up the author list for next year) and while it’s easy to understand that the organisers, William Dalrymple, Eleanor O’Keeffe and Namita Gokhale cannot possibly handle a festival of this magnitude, they’d do well to remember that professional event organisers are not necessarily attuned to the subtleties and nuances of a literature festival. Getting a huge crowd is easy enough if you’re going to invite film stars. Who’s up for next year? Salman Khan? Sachin Tendulkar? Raakhi Sawant? They’ll all guaranteed crowd-pullers.

By inviting Khan to attend as a delegate, many of the Lit Fest’s well-wishers, including myself, believe that the festival is in danger of selling its soul. In a literature festival, the only stars should be the writers. All other taaras should stay in another Zameen.

It was heartening to read the Prime Minister’s address to the National Development Council in December last year, where he argues that the main concern of the 11^th Plan, in its aim to achieve 9 per cent growth rate is equity; and it is the purpose of building that equity which can brand the 11^th Plan as being inclusive.

He said: “Equity is the foundation on which our democratic polity has to rest and thrive. It is the basis on which our citizens develop a sense of ownership of the state and its organs. Inequity can lead to large scale migration, disaffection and discord”.

He acknowledges what the public has been pointing out across political and social spectrums, that in this last phase of rapid economic growth, there has been an intensification of regional disparities, urban-rural disparities, though he skirts the frontal issue of intra people disparities.

The prescription is more investment in education and health and industrialization of rural areas, while bemoaning the slowing of growth in agriculture and calling attention to the challenge and the threat of food insecurity - put more boldly, of hunger and deprivation.

The concern on increasing disparities has been expressed somewhat differently by other groups - with a greater questioning also of the interpretation of the new buzz word or mantra ‘inclusion’, and inclusive growth.

The word is evocative and mesmerising perhaps because it is derived from a word that has been powerful, especially as articulated by dalits, of social “exclusion”. Inclusion as its opposite, thus has an evocation, emotive, political, powerful. However, what is almost totally left out of not merely the PM’s speech, but the entire exercise of the 11^th Plan are people.

Examining sectoral chapters - especially key chapters such as agriculture, labour and employment, industry and especially the foreign exchange earning special industries such as export oriented industries and services and SEZ, apart from a break up of the sector called industry - it is found that women are some of the predominant contributors to this growth.

Women are 40 percent of agricultural workforce and the percentage is rising; The unorganised sector’s contribution to overall GDP is 56.7 per cent; 60 per cent of total savings comes from informal sector; 73 per cent of informal workers contributions come from home based work; 53 percent of all women workers are home based workers, women are more than 90 percent of workers in the informal economy; and 44 per cent of all women workers are involved in unpaid work.

In that value chain, women are the predominant ‘contributors’, often as unpaid family workers or self employed. Going to export oriented production of goods and services, women are predominant, if not the major value adders, whether it is BPO or SEZ. A study has found that savings, that the PM celebrates, largely comes from the SME.

In other words, it could somewhat imprecisely be argued that India’s women are the growth agents on which our Prime Minister and his colleagues are building the Indian dream of a powerful economic actor - and the informal economy is the base.

Interestingly, a deeper analysis of Chinese growth has also similar shades of being somewhat heavily borne on women’s backs. Perhaps if Mao Tse Tung was alive, he would say women hold up half the sky: Truly, women hold up half the economic sky. Perhaps if we had today a woman leader of high visibility - somewhat lacking in today’s globescape, she would have added ‘yes’. But their feet are in dirt and deprivation, even exclusion - if exclusion can be described as not being recognised, not being given an opportunity to participate intellectually, apart from valued physically.

Inclusion can be more than rhetoric. It has to be participation through provisioning of the knowledge which a social or an economic category has. Inclusion can also be an engine of growth as those who are knowing will bring their knowledge to bear on design and that knowledge can add value, as was recently revealed by a committee set up by the Planning Commission of women economist.

But as the late Raj Krishna with his graphic imagery had deplored or lamented, those in  positions of decision making- and in those days he meant his colleagues on the cabinet as he used to be invited to cabinet meetings were “knowledge proof’. ‘Wo bathi nahi chalthi hai Saab ‘, he used to say with his characteristic laughter, using his hands to demonstrate a bulb that would not light up in the minds of those around the table. This neglect of who is adding value even for those who are obsessed with a particular kind of growth will be the Achilles Heel of this growth path.

It is also alarming that almost immediately after the NDC meeting, it is being staled that Naxalism has to be crushed with commandos. Another expert group set up by the Planning Commission on tribal areas and the analysis they made, clearly showed that the same point that the Prime Minister makes- disparate development, exclusion from development in tribal areas, in fact exploitation by the developers,  was responsible for driving youth in tribal areas into Naxalism.

Thus Raj Krisha’s knowledge proof comment does seem somewhat on target. The regional disparity issue has to be broken down into more sophisticated classifications. Inclusion has to be respectful in that the excluded have to  be  included in articulation not only what they want, but their analysis of what is exclusion, as  was pointed out by the committee of women economists.

Economic contributions and the way those contributions are either encroached upon or neglected, not even known if not valued, needs to be brought out to the screen. Evening out inequality requires bread, water and salt for those on whom Indian growth is riding.

Fist they ran to sell; now they can’t buy easily. Despite the recovery in equity markets after a seven-session long fall, retail investors remain a worried lot. While many witnessed wealth made over years washout at the blink of an eyelid, a lot of them who missed the four-year long bull run are still notable to buy stocks after the falling Sensex offered what many believe to be a buying opportunity. 

According to market participants, despite the bounce back from the recent fall, 1000-odd brokers’ terminals remained closed because they had not paid additional margins to the stock exchanges. Investors and brokers need to pay up additional money; called margins, to compensate for the decline in the prices of partly paid-for stocks. 

Amid weak global cues, domestic equities ended a highly volatile session in the red. Mumbai’s 30 share Sensex, which had lost 918 points about 5 per cent - in intra-day trade, staged a smart recovery to end at 18,152 points (down by 208 points or 1.14 per cent), as banking and automobile stocks tallied ahead of the Reserve Bank of India’s credit policy meeting. The broader Nifty of the National Stock Exchange closed at 5274.10 points, down by 109 points or 2 per cent. 

Brokers, however have a different version. Angry investors attacked brokerage branches in Mumbai on Monday for not accepting buy orders, dealers said. Brokers themselves have overshot the margin limit given by stock exchanges and are yet to cough up additional money or sell shares, dealers said. Rumours of brokers’ inability to pay-up additional money to the stock exchanges and thus being forced to sell shares, has scared off many investors. 

“I had transferred my shares last year to a large retail brokerage firm to be managed under their portfolio management scheme. Hearing about the problems brokers are facing after last crash, I wanted to pull my shares back from the PMS and transfer them into my demat account. But the broker first said he would pay cash and not transfer my shares. However, now they have agreed to transfer my shares into the demat account,” said a 65-year-old woman investor. 

It is not the brokers’ or the investors’ fault that the markets crashed. Margin calls get triggered in cases of such big falls and brokers will be forced by the exchanges to sell shares if margins are not paid. 

Meanwhile, the NSE is understood to have increased value-at-risk margins on several speculative stocks by around 30 per cent from week-ago levels. However, analysts expect markets to stabilize in course of the week on sustained buying interest at current levels. 

 How much easier it would have been for traders if Federal Reserve Chairman Ben Bernanke was the governor of the Reserve Bank of India. Given market conditions, one could then have safely played for a rate cut and got it right. Of course, the management of the economy would have been a right mess but that’s a different matter. Sadly, there are no sure bets with the good Dr Reddy; he’s very much his own person, utterly uninfluenced by market expectations. 

 So today, there may be a surprise or two. Having been disappointed in the past, its best not to go in expecting goodies and have a strategy in place to play the interest rate sensitives from here on. My own sense is that, whether he cuts this time or not, rates will start easing soon, perhaps by mid 2008. It’s simply a matter of time. The Fed will cut more going forward and that will weigh more and more on the RBI’s mind.  

 The Indian economy is already slowing down and if the rise in asset and commodity prices is reined in by a global downturn, the case for rate easing only becomes stronger. So, if for some reason the RBI does not deliver a cut and rate sensitives sell off today, it could be an opportunity. PSU bank stocks have already come off 20-30 per cent from their recent peaks and some of their over-ownership driven froth has be skimmed off.  

 Ranks are the best rate sensitives. Real estate is the higher beta one, i.e. they will give you sharper trading swings depending on the news but they run a valuation risk which banks don’t. It’s true though that real estate stocks have corrected 25-50 per cent in the last fortnight. If rates do indeed come off, these stocks may give you a good trading bounce but those trading profits then need to be channelised into the safer banking sector.  

Autos have already seen some accumulation and perhaps at their valuation levels, there is a defensive quality about them as well. They aren’t the best rate sensitives but one can build a case for a 20 per cent upside in many auto stocks in 2008. I wouldn’t get too worried if the RBI didn’t move today. The central bank is the best judge of monetary policy, at least in this country. We are in a tough global environment; the RBI’s eye needs to be on the woods, not the trees. Targetting policy action to please the market is a dumb thing to do; it suits the Yanks, not us.