Do it yourself

In a significant move for the banking industry, the central government has proposed to lift the embargo on grant of government business to private banks. Whereas, de facto the government has always favored public sector banks for grant of government business, the de jure embargo was imposed in 2012 post global financial crisis to protect the small savers and public entities from a potential collapse. Initially the embargo was imposed for a period of 3years; but it was extended further in 2015; through some private sector banks with public sector legacy (ICICI, Axis etc) were continued to be permitted to conduct some part of the government agency business. As per the latest announcement, the embargo is proposed to be lifted completely. This announcement has come at a time when the government would be starting the process privatize couple of public sector banks (PSBs), and diluting its shareholding in other PSBs. In past couple of decades, many public sector undertakings have faced s...

The latest earning season (3QFY21) has been one of the best in recent times. Companies across sectors reported encouraging revenue growth. The margins also improved on the back of lower input cost and wage rationalization. Accumulated demand (due to two quarters of lockdown) and festive season may have a significant role to play in the demand growth during 3QFY21. It is anticipated that as the economy continues to open up further as vaccination drive accelerates and mobility restrictions are eased further, the demand growth may sustain for few more quarters. The demand environment is also supported by the counter cyclical fiscal policy and continued accommodative stance of monetary policy. The quarterly earnings surprised many analysts on both EBIDTA and PAT level; while on top line the surprises were lesser in number. For Nifty companies, on aggregate basis, EBIDTA margins and PAT margins were flat. However, after adjusting for exceptional losses in Bharti Airtel and Tata Motors, pict...

Crypto currency (e.g. Bitcoin) is proving to be the best asset class for the Covid-19 infected FY21. Most crypto currencies have yielded astronomical returns in a year that suffered the worst synchronized global recession since the great depression of 1930s. Against this, the traditional safe haven Gold, Swiss Franc (CHF), USD and US Treasuries have yielded insignificant return. USD Index (DXY) in fact has declined over 10% YTD FY21. Silver is the only traditional asset, besides equities, that has yielded strong return in past 11 months. Regardless, the overwhelming consensus amongst global strategists appear to be favouring gold and silver as overweight in asset allocation of non-institutional investors. Most wealth managers and investment strategists are suggesting upto 15% allocation to gold ( for example see here ). Many globally popular and prominent traders, chartists and strategists have suggested a massive bull market in Silver in next couple of years ( see here ) Meeting w...

For a large part of 20 th   century Coal was a very important part of our lives. Railways, which were the largest medium of long distance inland travel, operated mostly on coal. An overwhelming proportion of electricity was generated using coal. The black gold was also a key ingredient for producing steel, cement, aluminium, copper, and a variety of chemicals. Things began to change slowly in second half of 20 th   century and change accelerated in the last quarter of the century. Petroleum and Natural Gas started to gain share as major source of transportation fuel, electricity production, industrial feed stock and medium for cooking. From last decade of 20 th   century, the share of renewable sources in India’s energy mix is also rising consistently. Nonetheless, coal remains the most important source of energy for Indian consumers and industry. As per the latest data published by USEIA, “primary energy consumption in India has nearly tripled between 1990 and 2018, reac...

In Sri Ganganagar town of Rajasthan, the retail price of petrol has reached in three digits for the first time in Indian markets. This is culmination of a series of price hikes over past one year. Over 25% rise in domestic retail fuel price has happened when the average global crude prices have been much lower. Even on yoy basis, the brent crude prices are almost unchanged presently; and INR is stronger by over 5% as compared to USD. The consistent rise in transportation fuel, when the consumers were deep in distress, economy was struggling and crude prices were falling sharply, has invited sharp criticism of the government. It is pertinent to note that all subsidies on transportation fuel were removed some years ago and presently none of the transportation fuel is subsidized. Therefore the rise in fuel prices cannot be attributed to rationalization of subsidies. Social media is also full of satirical memes about the consistently rising fuel prices. In this context, it is also pertinen...

One of the key features of the Union Budget for FY22, that needs to be noted by the investors, is the proposal to implement some important reforms in the power sector. The finance minister mentioned the following in her speech on this subject: “61. The distribution companies across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition. A framework will be put in place to give consumers alternatives to choose from among more than one Distribution Company. 62. The viability of Distribution Companies is a serious concern. A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of Rs3,05,984 crores over 5 years. The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.” Budgetary outlay for the sector has also been enhanced by 22...

The pace of vaccination across the globe is accelerating with each passing day. It is hopes that in next 6 months, we may have a reasonable number of people inoculated against Covid-19 infection; and the life may begin to normalize (even if it is new normal!) and become more predictable as compared to the life in 2020. However, from investors’ perspective a rather strange thing seems to be happening. Many investors had bought shares of leading vaccine manufacturers in the hope of extraordinary gains. To their disappointment, many of them are suffering losses. Pfizer Inc. (-8.1% in one year) and AstraZeneca (-4.75% in one year) are two examples; though Moderna Inc (up 740% in one year) has done well. In Indian context, AstraZeneca (-20% YTD 2021); Pfizer (-13% YTD 2021) Dr Reddy’s Lab (-8% YTD 2020) have all performed poorly on stock exchanges. The other listed vaccine prospect Cadila Healthcare (-2% YTD 2021) is also doing poorly. Obviously, it is a case of the excessive exuber...

 A year ago, no one would have listed “container shortage” as one of the primary constraints in global trade. But the fact is that there is acute shortage of containers in global supply chains and it is severely constricting the global trade. This has also led to significant rise in logistics costs. In that sense, this condition in global supply chain may at least qualify to be a grey swan (if not black). There are multiple reasons for shortages of containers in global supply chain. The prominent amongst them being the following: (a)    Chinese economy has recovered faster than any other major economy in the world. The Chinese exports to the western countries have mostly normalized whereas western countries are not in a position to export the things back. This has led to the empty containers being stuck on major western ports. (b)    Chinese exporters are paying huge premium for empty containers. Consequently, it has become profitable for shipping lines to...

 From the queries I receive from friends and readers these days, one thing appears certain – these are most challenging times for small and HNI investors, especially those who decided to raise substantial cash in their portfolios last spring as the pandemic fear gripped the markets. Many of these investors are not convinced about the sustainability of current stock prices and continue to expect a sharp correction is in the offing. Nonetheless, they find the daily rise in stock prices alluring and difficult to resist. In this intense struggle between their convictions, expectations, beliefs, fear of missing out (FOMO) on a secular rally (if their conviction is misplaced), and greed to make some quick money, some of them appear to have already surrendered to their fears (FOMO) and greed and invested in stocks which normally they would have avoided due to inferior quality of management, earnings and/or balance sheet. I personally do not support – (i)      A b...

 Delhi APMC’s Azadpur Mandi (wholesale market) is the largest fruit and vegetable market in Asia. Farmers and traders from across the country bring their produce to this market for selling. This Mandi is also one of the largest import and export hub for fruits and vegetables in India. A visit to this Mandi is always fascinating. From the lorry drivers travelling from all corners of India one can gather first-hand account of the socio-economic state of affairs in the country. Azadpur Mandi is an ideal reflection of socialist and secular society. One finds very rich traders & commission agents and very poor laborers together struggling to pass through filthy and narrow by-lanes of the Mandi. Hindu, Muslims and Sikhs work, eat and live together here most amicably. The social and legal issues like child labor, drugs, labor exploitation, human rights violation, labor’s dignity etc. are mostly meaningless here; and no one seems to be bothered about these “mundane” issues here. Her...

Promoting tourism has been a key priority of the Indian government since former Prime Minister Rajeev Gandhi started the famous Bharat Utsav programs in various countries in mid 1980s. As per the headline numbers, India has seen some steady growth in number of tourist arrivals in past 20years. The share of India in international tourist arrivals increased over 3x from 0.37% in 2001 to 1.24% in 2018. The share of India in international tourist arrivals in Asia Pacific region has increased from 2.22% in 2001 to 5.05% in 2018. India ranked 34th in Travel and Tourism Competitiveness Index, improving significantly from its rank of 65 in 2013. Tourism contributed 5% share to India’s total GDP in 2018-19. From pure statistical purpose, we may seek some comfort from this data. However, if we consider the rich historical and cultural legacy, treasure of architectural marvels, and geographical diversity of our country, this data appears pathetic. It reflects on the poor tourism infrastructure, p...

 In past couple of years some state governments have announced reservation for local residents in private sector jobs. Some other states are also considering to implement similar provisions. Given that the word “reservation” itself is not liked by a large section of Indian population due to legacy reasons, this trend has evoked strong reactions from the businesses and job seekers from other state who fear losing out to the local population in these states. Many issues like, Right to Equality, likely productivity loss due to lack of competent people, likely higher wage cost due to limited supply of qualified people within particular state, etc., have been raised by the concerned people. Concerns have been raised about flight of businesses to other states, further worsening the regional inequalities. In my view, it is a very good idea, of implemented pragmatically. If the state governments work with the private entrepreneurs to develop the education, skill and training ecosystem ...

 The finance minister seems to have reinvigorated the animal spirits of Indian entrepreneurs and financial market participants. The Union Budget for FY22, is perhaps the most celebrated budget after the “Dream Budget” presented by the then Finance Minister P. Chidambaram in 1996. This is also perhaps the first time when markets have cheered higher fiscal deficit. This ought to be taken as a sign of rising assertive India, which is fully aware of its importance in global order and refuses to be bogged down by unreasoned views of global rating agencies. The market also cheered the fact that after dithering for six years, this NDA finance minister has picked up the threads from Vajpayee led NDA. The finance minister has spoken about “privatization” of a majority of CPSEs, instead of “disinvestment of minority stakes”, as was the case in NDA-1. The massive thrust on infrastructure building to ward off the impact of economic sanctions imposed in the wake of 1998 nuclear tests an...

  “Progress lies not in enhancing what is, but in advancing toward what will be.” —Khalil Gibran (Lebanese Thinker Poet, 1883-1931) Allaying all fears, the finance minister presented a brave budget. She took all Covid-19 blows on (fiscal) body and refused to yield to fiscal pressures. She prudently refused to indulge in allurements of raising resources through additional taxation. The Budget for FY22 is continuation of various measures announced during 2020 to support the economy. The recognition of the need of new economy (ecommerce workers, startups, e-learning, new education techniques etc.) and willingness to let go the control over even strategic CPSEs are signs of pragmatism. This is perhaps the only budget in independent India that does not propose to make any change in income tax rate structure. It is now upon the administrative ministries, departments and state governments responsible for executing the proposals. Like Rishabh Pant, who went to Australia with a poor r...