"There is no subject so
old that something new cannot be said about it."
—Fyodor Dostoevsky (Russian,
1821-1881)
Word for the day
Ninny (n)
A fool or simpleton.
Malice towards none
Choose your tragedy:
(a) Stephen Hawking died.
(b) Zyan Malik and Gigi
Hadid broke up.
(c) BJP losing UP Lok Sabha
bypoll.
First random thought this morning
In a "revolutionary" solution to prevent bank frauds RBI
has directed all banks to immediately stop issuing Letters of Undertakings
(LoUs) and Letter of Comforts (LoCs) usually issued for trade credits for
imports into India by Category 1 Authorized Dealer Banks!
This solution comes after the Finance Ministry made an admission
that the fugitive diamantaire Nirav Modi got 1213 fraudulent Letter of
Undertakings issued by the state owned Punjab National Bank.
This admission of the so far known quantum of the fraud complicates
the issue further, far from solving it.
How and why FM is so confident that it was only Nirav Modi who
misused the LoU facility and there are no more manipulators? Secondly, how and
why FM is confident that Nirav Modi used only PNB to perpetrate this fraud, and
no other bank has issued unaccounted LoU to Nirav Modi et. al.?
What is bothering Indian markets - 6
One of the factors bothering Indian equity markets is the
reversing rate cycle in US.
US Federal Reserve is unambiguously committed to the normalization
of monetary policy. Between 2013-2017, the Federal Reserve completely withdrew
the bond buying program (QE) that was started in the wake of global financial
crisis in 2008-09. The Fed started to address the near zero interest condition
from December 2015 and has already effected five hikes of 0.25% each in the
bench mark Fed Fund Rate, which currently stands at 1.5%.
Though FOMC of US Federal Reserve has never indicated a rethink on
its decision to normalize the policy and rates, the market participants keep
debating it based on the multitude of data released every hour.
At present the popular opinion on the likely Fed action is
somewhat divided. A large majority is betting on 3-4 hikes of 0.25% each in
2018; whereas some believe that Fed may have a long pause before hiking
anymore.
Anticipating the rate hike trajectory, the yields on US bonds have
already started rising rather steeply.
I would like to go with the official version of Fed and expect a
sustained and orderly normalization of policy rates over next few quarters.
Other things remaining the same, we may thus see US yields rising in tandem (or
even sharper) with Fed rate hikes.
Given that Sensex has a strong negative correlation (-0.74) with the US
yields (based on data since April 2000), I would presume that Indian equities
may continue to be negatively impacted by the rise in US yields.
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