"Nothing gives us
courage more readily than the desire to avoid looking like a damn fool."
—Dean Koontz (American,
1945—)
Word for the day
Churrasco (n)
Meat cooked over an open
fire.
Malice towards none
Is
it time to appoint a Rural Economist as RBI governor?
Since,
we have already tried market economists, development economists, career
bureaucrats and bankers.
First random thought this morning
Close to full marks in quantitative subjects like Mathematics and
Physics is fine.
But in humanities?
This is absurd!
This suggests that we still living under the Macaulay's spell. We are
not allowing our children to think freely and express their thoughts in their
language. We want them to be conformist in the colonial sense.
FA-u-Q
With so many emotions running concurrently, the present atmosphere
in the Indian equity market distinctly resembles a traditional Indian wedding
ceremony.
The market participants are happy, greedy, fearful, somber,
repentant, hopeful, jealous, boastful, swaggering, inebriated, hasty and ruined
all at the same time.
This is neither new, nor unusual. Most periods of market surge
against all odds have seen witnessed similar scenes. The most recent being
1Q2015 and prior to that 1H2007.
In these times, it is common to frequently hear some uncomfortable
questions (FA-u-Q). Overwhelmed with hope, fear and greed, these questions are
uncomfortable because I cannot answer those questions with any degree of
certainty or confidence in the argument. Some of the questions, I am afraid to
hear are as follows:
How much more from here?
The potential upside in a rising market and downside in a falling
market are always daily rolling targets. Technical targets are usually
conditional (e.g., “if market rises above this level, it could go to that level
else…) and generally do not account for exceptional moves. Price targets based
on fundamental valuation and historical discounting trends are dependent on
materialization of multitude of complex forecast regarding likely revenue,
profitability, cash flows, capex, project execution, policy environment etc.
At the close of the market on 12th July 2016 I
could say that if Nifty sustains above 8418 level and manages to close above
8530, we could see it going to 8650 level soon. Else, it would fall to 8328 and
then to 8060 level. However, if 1QFY17 results disappoint, GST bill is not
passed in monsoon session, CNY devaluation accelerates, Brexit process starts
earlier than expected, and/or July sales figures for auto and cement remain
sluggish, we may see market correcting sharply.
If this does not make sense, well it actually does not. I am just
trying to evade a straight answer to an uncomfortable question.
This stock is 2x in past three month. Is it still a buy?
The broader market indices are at all time high. Over 100 stocks
have risen more than 100% in past three months. The question is how much more
these stocks could rise?
Again there could be no straight answer to this. I can just remind
that the markets are not that inefficient these days. The information arbitrage
has diminished materially in past few years. The 'Eureka' movements have to be
rare. If these are frequent, there must be something seriously amiss.
Should I buy midcap or large cap
Large cap ‑ midcap-small cap; long term ‑ short term; value
investor – speculator etc. is nothing but jargon created to unnecessarily
complicate the process of investment and compel investors to seek professional
advice.
Stocks like Nestle, Britannia, Colgate, ABB, AB Nuvo, Ashok
Leyland, Hind Zinc, BEL, Bharat Forge are termed midcap.
Investors who bought large cap RIL, HUL, Sun Pharma, Bharti Airtel
etc. a year ago are regretting. While those who bought micro cap stocks in
sugar, textile, cement etc. sectors are rejoicing.
In my view, the approximate correct answer would be buy the companies which
are relevant in today’s context, for the period they are likely to remain
relevant at today’s price.
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