First random thought this morning
When in school, the thing I hated most was learning to spell English
words correctly. I was often subjected to scorns, both at home and at school, till
I managed to come over this weakness. I came over, certainly not by learning the
correct spelling. Rather I used some Jugaad (ingenious methods for which most
Indians are genetically trained). I deliberately spoiled my handwriting. I
started writing like doctor prescription. The teachers would allow me the
benefit of doubt and give me decent marks. The parent would be happy with the marks.
Who cares how these marks were scored.
When I completed school, all three things remained pinned to me
- (a) poor spelling capabilities; (b) bad handwriting; and (c) Jugaad mindset.
Thanks to Bill Gates, I could mange poor spelling capabilities
and bad handwriting skills very well. Instead of writing, I type on computer
with spell check on. No worries. The Jugaad mindset though keeps nagging every
few days.
This all was before I started using a smart phone equipped with the
magical WhatsApp. Now I am totally at the mercy of a Goblin mischievously named
"autocorrect".
I mean, I would love to have it only if it is merely a tool
which works totally as per my command. But unfortunately, I seem to have no
control over it. It changes whatever I type to whatever it likes.
Unfortunately, most of the time I would realize the mischief, only after I had
pressed the "send" button.
I feel it's my Karma. I cheated in school by disguising my poor
spellings with bad handwriting. Now I am wedded to this Goblin, who will keep
distorting whatever I type, even if I spell it right. Someone rightly said,
"you can dodge law of the land, but how would you evade the consequences
of your Karma".
I am now cursed to live with "Autocorrect";
"Smartphone", and "WhatsApp". I have no motivation left to
learn correct spelling or improve my handwriting or write by hand. If someone
gets an absurd or abstract sounding message from me, and wants to shower some choicest
expletives, I shall accept that with all humility as my Karma.
I feel like an accomplished politician, who accepts all
condemnation and keeps smiling!
Chart that caught my attention yesterday
Instituionalization of Indian equity market might be a myth
The phenomenal rise in Indian stock prices, in past couple of
years especially, has been attributed to the rise in domestic investor
participation in stock markets. Rise in equity AUM of domestic mutual funds in
past few years has been popularly cited as an indication of this trend.
As indicated yesterday (see here),
the household finances have become bit worrisome in past few years. It is
therefore important to analyze this trend, to assess (a) the sustainability of
household flows to domestic market; and (b) impact on overall economy if the
household sector finances weaken.
Of course a much deeper study is needed to make this assessment.
Here I am just highlighting few data points that indicate that
(a) Small investors
still dominate the trading activity in markets, as observed from the average
trade size at NSE.
The average trade size at NSE has remained mostly in the range
of Rs20,000 to Rs30,000. Even in most Euphoric periods of end 2007 and January
2018, it has been around Rs36,000. If markets were institutionalized, we would
have seen much larger average trade size.
(b) Institutionalization
of market is still a long distance away, as day trading activity of
non-institutional traders still dominate the overall market volumes.
Currently less than one fourth of the total traded volumes are
resulting in actual delivery, implying that three fourth of the market volume
are day trading activity. The delivery percentages are fast approaching the GFC
bottom, in fact.
(c) Ever since
market recovered from GFC, the trading volumes had been very low. However, in
past four months they have started to pick up and already reached the level
where market peaked in 2008. The volumes around March 2009 market bottom were
materially higher. This suggests that we are presently in a massive
distribution phase.
The monthly trading volumes have risen from 3.3% of market cap in
April 2013 to 4.4% of market in August 2018. April 2008 volumes were 4.8%. The
bottom of the market in March-April 2009 was marked by much higher volumes of
7.7%.
(d) The net new money
flowing into market is at lowest level, at least since 2007.
Net monthly pay-in of funds at NSE in August 2018 was just 0.24%
of the total market cap, almost 50% of April 2009 and April 2015 levels, and
lowest since 2007 at least.
(e) The growth of
equity AUM of mutual funds has materially outpaced the growth of Indian markets
during four year period between April 2014 to March 2018.
The total market cap of NSE has doubled during this period from
Rs73467bn to Rs150920bn. In the same period the equity AUM of domestic funds
has increased by ~390% from Rs1917bn to Rs7498bn.
Out of the Rs5581bn incremental rise in equity AUM of mutual
funds, Rs4726bn (~85%) is contributed by the domestic household investors.
The high networth households (Rs2206bn) and retail investors (Rs.2519bn)
have contributed almost equal amount, though in numbers Retail investors
comprise almost 99% of the total mutual fund portfolios.
My prima facie conclusion is that small householders have not changed
their investment habits much.
It is the high networth household that has increased its
exposure to Indian equities in past 4years. My experience is that investments
from this segment are not very sticky and prone to move fast to other asset
classes. We had witnessed this in 2009.
You may also like to glance through the following links:
Some food for thought
"A life lived of choice is a life of conscious action. A
life lived of chance is a life of unconscious creation."
—Neale Donald Walsch (American Author, 1943)
Word for the day
Tautology (n)
Needless repetition of an idea,
especially in words other than those of the immediate context, without imparting
additional force or clearness, as in “widow woman.”
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