Great Risks on the Horizon

In India, as much as in many other parts of the world, markets have shown that they are looking beyond Covid for better times ahead

Rajeev Dubey, Editor, Business Today Rajeev Dubey, Editor, Business Today

Stock markets have continued to defy gravity despite 18 months of relentless onslaught of Covid. The Sensex, for instance, currently rules at 32x the price-earnings multiple - 25 per cent higher than 25.5x PE multiple of the world's best known index, the Dow Jones Industrial Average. The Sensex is also the most expensive in Asia, almost twice as expensive as the Shanghai Stock Exchange.

In India, as much as in many other parts of the world, markets have shown that they are looking beyond Covid for better times ahead. They expect an uptick in sales across sectors as economies get back to life, and due to superior corporate earnings arising out of enormous belt-tightening, better debt management and expenditure management. That's as far as hope goes-just what the stock markets rely on.

But if wishes were horses, beggars would ride. The world of business and economy may have other ideas in store. Especially, when great risks are building up on the horizon. BT lead story this issue deals with the top risks markets and investors must ignore at their own peril.

In an accompanying piece, this issue's markets package explores the long-term prospects of the market which continues to stay buoyant. In fact, almost all markets specialists agree a host of sectors are going to shine in the long run. What are those sectors, after all? Explore in Niti Kiran's sectoral analysis which five sectors will continue to soar... and why.

Meanwhile, the Centre's Rs 111-lakh-crore mega infrastructure building plan over the next five years was bound to face one big hurdle - financing. India badly needed a Development Finance Institution on the lines of predecessors such as IFCI, IDBI, SIDBI, NABARD, etc. On March 25, the last day of the Covid-19 curtailed Budget Session of Parliament, the government passed the National Bank for Financing Infrastructure and Development (NBFID) Bill, 2021. It's a unique institution that will raise resources, provide loans, create markets for bonds, derivatives and other instruments for infrastructure financing. Even project structuring and monitoring services and technical assistance will be part of its mandate. But there are hurdles galore. Joe C. Mathew identifies the challenges before the new DFI. More importantly, can the Centre ensure this DFI doesn't repeat the mistakes of its predecessors and avoids the pile of non-performing assets nearly all government-run lenders are known to create?

And last but not the least, check out Ajita Shashidhar's fascinating account of how a pure-play FMCG CEO Anand Kripalu entered the murky business of liquor and changed the rules of the game in the industry. Diageo's acquisition of Vijay Mallya's United Spirits in 2013 may well go down in history as the game-changer for the industry. USL brought scale to the British alcohol maker, but it also came with losses of Rs 5,103 crore and debt of over Rs 5,000 crore. Kripalu was tasked with turning it around in an industry where unscrupulous practices ruled, pricing is tightly controlled by state governments and excise duties are over 60 per cent of the price of the product. Read how Kripalu changed the company - and the industry.