Monday: My visit to Mumbai begins. Despite its status as one of the most domestically demand-driven stories, India has suffered along with emerging market peers amid forced liquidity selling and a flight to safety.
The contrast with my two-month trip at the end of 2007 could not have been greater. In October of that year news headlines were dominated by stockmarket activity as index levels soared to new highs, while the Ambani brothers (of Reliance Group) were swiftly becoming the wealthiest men on the planet. Luxury cars were commonplace, the city’s top restaurants were fully booked and property prices in selective parts of Mumbai were comparable with Mayfair, Manhattan and Roppongi. India was booming. Today, this week, this year, it is a different place.
Tuesday: Market performance has affected local sentiment. Today is Diwali and celebrations are particularly muted, with the traditional fireworks bonanza and banquets replaced by family-orientated gatherings. India’s stockmarket may only directly affect 20m people (out of 1.2 billion) but many more are indirectly hit.
With the roads quieter than usual, I spend the afternoon touring the property hotspots (Bandra, Worli, BKC) before heading to Daravi, Asia’s biggest slum.
Wednesday: Today the mood is more sombre. News headlines make for grim reading – a spate of co-ordinated terrorist attacks in New Delhi kill 67, while the economic data continues to worsen. Airline routes have been scaled back, hotel room rates are down and consumer spending is on the decline. The explosion of private equity deals that were seen during the bull market run of 2003-07 have all but dried up.
Thursday: I spend the day with analysts. Blue-sky target prices that were conceived on the back of sum-of-the-parts valuations and extrapolating growth and revenue streams are a distant memory. During several corporate meetings questions invariably revolve around operating and free cash flow, gearing, short-term debt exposure and capital expenditure plans. Every sector has seen significant earnings downgrades and it could get worse. In the evening, I manage to secure a table at a popular fish restaurant – unthinkable this time last year.
Friday: A drive to Nashik (four hours north-west of Mumbai) reminds me of the long-term potential of the India story. Deemed the third most industrialised city in Maharashtra after Mumbai and Pune, the city has a population of about 1.5m people and is also home to a flourishing agricultural industry, yet there is no organised retail sector. I go to one of our property interests, which is the site of the first shopping mall. The grand opening is scheduled for January and 75% of the space is occupied. A local radio competition to decide the name is met with more than 100,000 responses.
Saturday/Sunday: I spend some time shopping in the malls, catch a Bollywood movie, and reflect on my visit. While domestic markets have been among the hardest-hit globally, the simple fact is that the Indian economy is in much better shape than those at the epicentre of the crisis.
Prudent management from the central bank means that toxic assets within the system are negligible, while the correction in the oil and commodity complex is helping alleviate pressure on the current account deficit. I expect India to be one of the first economies to turn in the middle of next year.