# 16 In Whose Image? Ukraine and Indian Equities
In Whose Image?
My wife is mortified of monkeys.
A few years ago, a baby monkey in the park aroused her maternal instincts. Koochy-kooing, she made towards it, when she was set upon by the monkey-mum, who sunk her teeth deep into my wife’s thigh. Last week, she texted me from the same spot,
“Big monkeys back in the park. Just had a narrow escape with one. Hanuman protect me”. Hanuman, “Sankat Mochan”, the Remover of Obstacles, the loyal, rosy-cheeked companion to Lord Ram, his image sold as a child’s toy at village melas and temple fairs.
A few years ago, a different Hanuman appeared on car windscreens across India, a dark, aggressive visage, the Angry Hanuman. It appeared as the visual leading edge of a muscular Hindutva, representative of the trope that Hinduism had been emasculated by centuries of conquest, especially Muslim conquest, and needed to reassert itself. Much later, I discovered that Karan Acharya, the designer, had no such intent for his image. “My Hanuman has attitude, not aggression.. But that is the problem with art. There is no limit to interpretation.”
What is true of art is equally true of religion, especially of the Hindu tradition, with its multiplicity of Gods. Lakshmi is largely represented as the Goddess of Wealth, but I regard her as the Goddess of Beauty. Last Diwali, I reminded myself that wealth is only a means; “beauty is a greater pursuit, and my journey should be a search for deeper meanings of beauty, within and without.”
When you think of Shiva, do you think of cosmology, of tandav, the eternal dance of creation and destruction? Or do you think of deep contemplation in the Himalayas, finally leading to the elimination of desire? The way in which we regard our Gods is shaped by our own beings, our own urgings and inner search.
A piece I read recently traced how society has shaped the image of God, even in monotheistic Christianity. In The World Ahead 2022, Catherine Nixey reminded us how far the church has traveled since God rained brimstone and fire upon those guilty of sodomy. Same sex marriages are now blessed by more than one arm of Christianity; brimstone has been replaced by confetti.
Instead of “‘On earth as it is in heaven’. .. the divine chain of command runs in the opposite direction: in heaven as it is on earth. Liberal, democratic nations get democratic, liberal deities; undemocratic, illiberal countries get the opposite. Just ask an Afghan.”
I no longer see as many Angry Hanumans on windscreens. I pray for each of us to be a Sankat Mochan to our fellow beings, to manifest the solidarity and fraternity of our constitution into our lived experience. And into our iconography.
Ukraine and Indian Equities
In NL# 13, I asked whether our Finance Minister had a budgetary plan to deal with higher crude prices. Russia’s violent invasion into Ukraine was certainly not on my mind, but since the budget, the price of crude has surged from 88 dollars a barrel to 118, which means the FM has a tough choice - allow higher diesel and petrol prices to stoke inflation, or buffer the impact by lowering taxes and allowing the fiscal deficit to balloon.
There are the ‘other’ oils, too. The ones we eat, and don’t produce enough of. Ukraine and Russia are major exporters of sunflower oil, but the threat of supply disruptions rippled into the entire matrix of edible oil prices. As with crude petroleum, we import the bulk of our edible oil; last week, the cost of palm oil rose 15%, to a new high of Rs. 1450 per 10 kg. The rise in edible oil prices has been relentless over the last 18 months, and palm oil now costs three times as much as it did in mid-2020.
The wheat market, too, has gone out of whack; while the Food Corporation of India (FCI) has enough stocks to feed the Public Distribution System (PDS), a flour miller I spoke to said the open market for wheat virtually froze last week; when buying opened up, the cost of wheat had been marked up by 10%. This will feed into the cost of everything from bread and cookies to naans and kulchaas.
Before Ukraine, the RBI had maintained that inflation was transitory, as had the head of the US Fed. I was always sceptical, and feared that we would import inflation into a weak and slowing economy. This last week has shifted the calculus, from complacent to urgent.
The downward pressure on the rupee doesn’t help. One source of pressure is our trade deficit, which has been rising with the cost of commodities. The other, since the beginning of this year, is the sale of Indian equities by foreigners invested in Indian companies. When they send the sale proceeds home, they exchange rupees for dollars, pushing up the cost of the dollar. As of Friday, equity sales by foreign institutions (FIIs) had hit 83,000 crore rupees for 2022, roughly 11 billion dollars. I tried to put this number into context. The total value of Indian equity is a little over 3 trillion dollars - 3,248 billion on Friday, as per BSE data. Foreigners own roughly 20% of this, or 650 billion, so a net sale of 11 billion is less than 2% of their holding.
In this very consolation lies the threat: If FIIs decide to shed a significant proportion of their Indian equities, our equity markets could be severely impacted, with the collateral damage of further pressure on the rupee. This leads to the obvious question - who will buy these shares from FIIs? On days when FIIs sell Indian equities, data typically shows that domestic institutions, or DIIs, have bought in equal measure. But if FIIs flock to the doors, the tug-of-war could become demanding. Between our mutual funds, insurance companies, and Employee Provident funds, our DIIs own almost as much stock as the FIIs. However, they don’t typically hold much cash in their books, so beyond a point, they would need fresh inflows to absorb FII sales. This is not in their control, whereas FIIs can trigger large sales without any external constraints.
Roughly 50% of Indian equity is owned by ‘promoters’, those who founded and/or run the business. For most majority owners, the value of their equity holding dwarfs their cash balances. Buying and selling of their own equity is also governed by various regulations. Their holdings in their own companies tends to be very stable, and is not going to respond to FII exits in a hurry.
Which leaves retail investors. As a category, we tend to freeze up when equities drop sharply; only seasoned players have the cojones to buy when there’s blood in the streets. They would tend to be HNIs, or High Networth Individuals, who own only 2.5% of Indian equities. Retail investors, who typically enter the market near the top, hold 7% of Indian companies. If the history of past market cycles repeats, they will not hold out for long. The old dictum holds “Tezi mein tez, mandey mein manda”, colourful Hindi for “Follow the trend.”
If the global sentiment doesn’t improve in a hurry, I strongly fear that we could see a self-reinforcing downward spiral in Indian equities, as Indian investors turn hesitant.
This will, of course, test my own temperament, my ability to buy when the ticker tape is bleeding red.