Ask me why I don't buy PSU bank stocks. Or why I stock up on sugar stocks...!
If you own any business, you’re supposed to have a say in its affairs. You expect to be consulted, at least by postal ballot, before taking critical decisions. But in PSU banks, it's as if you've surrendered all your equity so that it solely rests with the government. You just commit the capital and shut up. The government plays the big brother and writes off huge loans. It has happened before and it has happened in 2008 budget as well. Farmers owe banks $15 billion that stand as assets in the bank’s books. Last week FM wrote off all of them in one swoop, before you said bottomline.
The finance minister P.Chidambaram walked out from a live post-budget television interview, upset at repeated questions on how the government would fund the Rs 600 billion ($ 15 b) loan waiver by public sector banks he had announced. Of course, he returned to complete the interview.
That’s why I don’t own PSU bank stocks. Exactly why I stock up on sugar… You get it cheap and the business benefits from populist largesse like this. Remember, you live in a democracy and it's the election eve stupid !