Sunday, March 25, 2007

Depth of the Indian Markets

So as predicted in my previous article reality check did begin for the Indian market . It has somewhat recovered though and I expect further recovery. I am keenly watching the recovery. FII’s pulled out about INR 3500 Cr . once RBI raised interest rates .What is interesting is the total downfall tereafter.So if FII’s pull out less than a $ billion out of Indian markets , they fall by more than 10- 15% . This is bad performance as compared to other BRIC and developing markets .This certainly indicates one important factor which cannot be overlooked i.e. the depth of the Indian markets. Such a shallow depth will cause sharp ups and downs , some of which we have already seen.

Now how to deepen Indian market ?

This will eventually happen when lot of long term money flows in like life Insurance premium and Pensions money. This money typically stays in the market for good 15-20 years and provides stability to the market. Second is the participation by the Indian public in the market . In most developed countries investments in mutual funds roughly equal to bank deposits. In India we do have along way to go to achieve this although we are rapidly moving in that direction. Third and less significant is the participation by smaller but well informed investors. We either have traders type retail investors or a completely naïve kind .

I’m quite confident of long term prospects ( 5-10 years) of the Indian market.

Tuesday, March 06, 2007

Parkinson's Law

I'm always fascinated by this law.An amazing piece of work by Dr. Parkinson's almost half a century ago will remain relevent for good. Here's an abstract :


WORK EXPANDS SO AS TO FILL THE TIME AVAILABLE FOR ITS COMPLETION’




General recognition of this fact is shown in the proverbial phrase 'It is the busiest man who has time to spare.' Thus, an elderly lady of leisure can spend the entire day in writing and dispatching a postcard to her niece at Bognor Regis. An hour will be spent finding the postcard, another in hunting for spectacles, half an hour in a search for the address, an hour and a quarter in composition, and twenty minutes in deciding whether or not to take an umbrella when going to the pillar box in the next street. The total effort that would occupy a busy man for three minutes all told may in this fashion leave another person prostrate after a day of doubt, anxiety, and toil.

Granted that work (and especially paperwork) is thus elastic in its demands on time, it is manifest that there need be little or no relationship between the work to be done and the size of the staff to which it may be assigned. A lack of real activity does not, of necessity, result in leisure. A lack of occupation is not necessarily revealed by a manifest idleness. The thing to be done swells in importance and complexity in a direct ratio with the time to be spent. This fact is widely recognized, but less attention has been paid to its wider implications, more especially in the field of public administration. Politicians and taxpayers have assumed (with occasional phases of doubt) that a rising total in the number of civil servants must reflect a growing volume of work to be done. Cynics, in questioning this belief, have imagined that the multiplication of officials must have left some of them idle or all of them able to work for shorter hours. But this is a matter in which faith and doubt seem equally misplaced. The fact is that the number of the officials and the quantity of the work are not related to each other at all. The rise in the total of those employed is governed by Parkinson's Law and would be much the same whether the volume of the work were to increase, diminish, or even disappear. The importance of Parkinson's Law lies in the fact that it is a law of growth based upon an analysis of the factors by which that growth is controlled.

The validity of this recently discovered law must rest mainly on statistical proofs, which will follow. Of more interest to the general reader is the explanation of the factors underlying the general tendency to which this law gives definition. Omitting technicalities (which are numerous) we may distinguish at the outset two motive forces. They can be represented for the present purpose by two almost axiomatic statements, thus: (1) 'An official wants to multiply subordinates, not rivals' and (2) 'Officials make work for each other.'

To comprehend Factor One, we must picture a civil servant, called A, who finds himself overworked. Whether this overwork is real or imaginary is immaterial, but we should observe, in passing, that A's sensation (or illusion) might easily result from his own decreasing energy: a normal symptom of middle age. For this real or imagined overwork there are, broadly speaking, three possible remedies. He may resign; he may ask to halve the work with a colleague called B; he may demand the assistance of two subordinates, to be called C and D. There is probably no instance, however, in history of A choosing any but the third alternative. By resignation he would lose his pension rights. By having B appointed, on his own level in the hierarchy, he would merely bring in a rival for promotion to W's vacancy when W (at long last) retires. So A would rather have C and D, junior men, below him. They will add to his consequence and, by dividing the work into two categories, as between C and D, he will have the merit of being the only man who comprehends them both. It is essential to realize at this point that C and D are, as it were, inseparable. To appoint C alone would have been impossible. Why? Because C, if by himself, would divide the work with A and so assume almost the equal status that has been refused in the first instance to B; a status the more emphasized if C is A's only possible successor. Subordinates must thus number two or more, each being thus kept in order by fear of the other's promotion. When C complains in turn of being overworked (as he certainly will) A will, with the concurrence of C, advise the appointment of two assistants to help C. But he can then avert internal friction only by advising the appointment of two more assistants to help D, whose position is much the same. With this recruitment of E, F, G and H the promotion of A is now practically certain.

Seven officials are now doing what one did before. This is where Factor Two comes into operation. For these seven make so much work for each other that all are fully occupied and A is actually working harder than ever. An incoming document may well come before each of them in turn. Official E decides that it falls within the province of F, who places a draft reply before C, who amends it drastically before consulting D, who asks G to deal with it. But G goes on leave at this point, handing the file over to H, who drafts a minute that is signed by D and returned to C, who revises his draft accordingly and lays the new version before A.

What does A do? He would have every excuse for signing the thing unread, for he has many other matters on his mind. Knowing now that he is to succeed W next year, he has to decide whether C or D should succeed to his own office. He had to agree to G's going on leave even if not yet strictly entitled to it. He is worried whether H should not have gone instead, for reasons of health. He has looked pale recently – partly but not solely because of his domestic troubles. Then there is the business of F's special increment of salary for the period of the conference and E's application for transfer to the Ministry of Pensions. A has heard that D is in love with a married typist and that G and F are no longer on speaking terms – no-one seems to know why. So A might be tempted to sign C's draft and have done with it. But A is a conscientious man. Beset as he is with problems created by his colleagues for themselves and for him – created by the mere fact of these officials' existence – he is not the man to shirk his duty. He reads through the draft with care, deletes the fussy paragraphs added by C and H, and restores the thing to the form preferred in the first instance by the able (if quarrelsome) F. He corrects the English – none of these young men can write grammatically – and finally produces the same reply he would have written if officials C to H had never been born. Far more people have taken far longer to produce the same result. No-one has been idle. All have done their best. And it is late in the evening before A finally quits his office and begins the return journey to Ealing. The last of the office lights are being turned off in the gathering dusk that marks the end of another day's administrative toil. Among the last to leave, A reflects with bowed shoulders and a wry smile that late hours, like grey hairs, are among the penalties of success.


C. Northcote Parkinson, Parkinson's Law: The Pursuit of Progress, London, John Murray (1958)