Do it yourself

  The tremendous rally in US technology stocks and global chip shortages have been two prominent themes that prompted many rich Indians to invest in US an Greater China equities in past one year. The investment advisors have used the opportunity to push for a global diversification of portfolios. The number of mutual funds offering global investment opportunities have multiplied in past one year. Recently, a number of advisors of have started pushing for a material exposure in European equities. The push has gathered more force after the recent FOMC meeting. This seems to be a global trend as most investors and traders are finding the valuations in European equities much cheaper; ECB and BoE more supportive, and volatility lower. In fact, over the past few weeks, European equity flows have been at the highest levels in three years. It seems that lot of investors might be crossing the Atlantic to land at European shores this summer. Some adventures ones may even cross the Caspian Se...

The US Federal Reserve in its latest policy briefing hinted that  “it might begin to think”  that  “when it should begin to think”  about the change in its policy stance of near zero interest rates. From whatever the 18 members of the US Central Bank might have uttered at the meeting of FOMC or thereafter, a broad conclusion has been drawn that the wolf might be sighted sometime in the year 2023. There are few who  “fear”  that wolf may surprise the markets by advancing its appearance in 2022 itself. Notwithstanding, there is a sizable number of experts who continue to believe that wolf of rate hike may not be coming in 2022 or 2023 or even 2024. Some also believe that this wolf does not exist only. Ms. Market, on its part, has realized that there is nothing to worry for next 12months, insofar as the Federal Reserve’s monetary policy is concerned. She has therefore decided to follow the  “will cross the bridge when we reach there”  approach. The y...

  I have been a morning person all through my life. The morning chirping of birds is my favorite music. The rising sun has always been a source of motivation and positivity for me. Watching the amber ball rising from the darkness at dawn and gaining light and energy in an hour, lends hope. It reminds me the classical poem of legendary Sahir Ludhyanavi “ रात भर का है अंधेरा , किसके रोके रुका है सवेरा” (The darkness is ephemeral, dawn is inevitable). I regularly go for a walk in the morning to listen to my favorite music and look at the rising run. I find it a perfect start to the day. However for few days something has been bothering me. Whenever I go for the morning walk, the security guards posted in our housing society salute me with a distinct display of servitude. They might have been instructed to greet the residents by their managers, but I could distinctly see the subservience in their attitude. The guards tired after struggling with mosquitoes the whole night, rising from...

 About a quarter of a century ago, I had just joined a midsized investment banking firm. My team of three people was assigned a mandate for IPO of a real estate company. We worked very hard (of course on our Excel Sheets and without the help of Saint Google) on the mandate and prepared a proposal which suggested that IPO may be priced in the band of Rs12-15. After the initial presentations were made, the team went to the promoter with the promoter of our firm for final presentation. After a detailed slide show was made, our boss told us to excuse them for 10minutes. After 10minutes, our boss came out and instructed, “IPO is in Rs28-30 band, prepare to file the documents for approvals.” This being my first experience, for a moment I was in a position of shock. I found the pricing ridiculous. I even told my senior that this IPO cannot be sold at this price. My senior who had experienced many such situations before just smiled and told me to shut my mouth and get on the job. Eventua...

 One of the few positives of Covid19 pandemic induced lockdown is the rise in birth rate in the Parsi communities. Reportedly, 61 babies were born to Parsi couple in the year 2020. The central government is motivating Parsi couple to increase their birth rate through Jiyo Parsi scheme. Regardless, it is highly unlikely that Parsi community in India may survive to see 22 nd Century, as their population continues to dwindle consistently. The fertility rate of parsi community is now close to 0.5, much below the replacement rate of 2.1, that is needed to keep the population constant. Amongst other minorities the fertility rate of Sikhs and Jains is also materially below the replacement rate as reflected in the decline in their population. I am mentioning this because of two reasons – (i) the latest popular narrative of population control law; and (ii) the fading prospects of demographic dividend of India, that has formed the basis many investment and business strategies. As per va...

As per the latest data published by Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India was 11.9% (10.18%) in May 2021 (June 2020). The urban unemployment was much higher at 14.73% (11.68%), while the rural unemployment stood at 10.63% (9.49%). As per CMIE data, India’s unemployment rate was 6.5% in March 2021, just before the second wave of Covid19 pandemic hit India. It is therefore possible that the rate of unemployment normalize back to 6-7% range when the economy opens up in next 2-3months, as the intensity of pandemic has already subsided materially. The more worrisome trends highlighted by CMOE data however are- (a)    The labour participation rate is beginning to fall sharply after 55yrs o age. It is below 25% for the 60-64 age group – (b)    Unemployment rate is 35% in 20-24 age group. For youth in 20-29yr age group it is above 10%. (c)     The employment rate is 19.3% for the persons who have college degree....

 Presently, a large part of the market analysis and commentary is focused on the stock rally from the low prices recorded in March 2020. The popular narrative is that investors have made extraordinary return on their equity portfolios, in what was a once in a decade opportunity. In my view, this narrative suffers from a serious lacuna. This narrative assumes that— (a)    Investment is a discreet process and not a continuous one. Investors make investments only on occurrence of some event and exit as soon as the impact of that event dissipates. (b)    The economic behavior of a majority of investors is rational. They are able to control the emotions of greed and fear very well. (c)     Most of the investors have infinite pool of investible surplus, and they are able to invest material amount of money at their will. Unfortunately, none of these is even half true. Investment is a continuous process. Most of the investors stay fully invest...

The principle and overriding function of the securities market regulator, The Securities and Exchange Board of India (SEBI) is to protect the interests of the investors in the securities market. The other functions, viz., orderly development and regulation of securities markets are secondary, in my view. However, there is overwhelming anecdotal evidence to indicate that the regulators have given precedence to market development and regulation over the principle objective of investor protection. There are many instances in past 3-4years alone to indicate this. In the episodes of IL&FS, Franklin Templeton, Yes Bank, Jet Airways, Karvy etc., the interests of the investors in these entities were compromised. Moreover, little efforts were made to ensure that prospective investors are given full disclosures about the risk and reward of investing in the securities of these entities. Recently, we have seen repeat of this tendency. On Monday, the 7 th June 2021, evening, DHFL informed st...

 In recent months the critics of the Indian government have spoken much about the achievements of the neighbour Bangladesh more than India. The point that Bangladesh economy may be recording faster growth rate than India has been emphasized to highlight the underperformance of Indian government. I am not sure if this criticism is valid, given the differences in the size and diversity of Indian and Bangladesh economies. Besides, on purchasing power parity India is presently much better Nonetheless, rising beyond politics, I must say that the performance of Bangladesh is impressive. The country has focused on its strengths (primarily agriculture and abundance of cheap labour) and evolved a sustainable economic model that suits it best. It has followed a conventional labour intensive manufacturing led growth model to fully exploit its demographic dividend As per the latest IMF data Bangladesh has a per capita income of US$2,227, a growth of 9% over previous year. This compares with ...

 Do you remember Tulsi Bhabhi, the protagonist in one of the most popular TV soaps on Indian television? The character was adored by all as it was widely considered to be an epitome of quintessential Indian – caring, selfless, affectionate, tolerant, accommodating, and family person. Even though there are plenty of Indians who may not exactly match this description, but a vast majority does find these characteristics desirable to have. In our cinema and literature, protagonists are not only expected to possess these characteristics; but they are also supposed to demonstrate these in a rather non- subtle manner. Most of the successful and admired product promotion campaigns also target this emotional aspect of Indian populace. The sellers of Insurance, Chocolates, clothes, jewellery, steel, cement, adhesives, real estate, trucks, motor cycles, cars, etc., all try hard to touch the emotional cord of consumer. I am sure all politicians and bureaucrats are cognizant of this phenome...

  Trends in cost of capital in India A recent survey done by the consulting firm Ernst & Young (EY) and National Stock Exchange (NSE) highlights some interesting data about the cost of capital of Indian businesses. “The Cost of Capital Survey” is an “attempt to understand the threshold cost of equity that India Inc. used for its capital allocation and investment decisions, and the process by which practicing finance professionals in the industry make capital costing decisions.” The key findings of the Survey are as follows: ·          India’s average cost of equity is ~14%. This has declined by ~100 basis points since our last cost of capital survey, over a period in which interest rates have declined by ~50 basis points. ·          Real estate, healthcare (including pharmaceuticals and life sciences) and renewables command the highest cost of equity, whereas chemicals, media and entertainme...

As an investor I have always been fond of stories. My strong belief has been that if the story is good, numbers will definitely chase it. To the contrary, if the story is bad, no matter how good the numbers look presently, it may not be worth investing in. Like in any other method of investing, this method also has its own limitations. Sometimes, good stories fail to sustain the momentum and lose the track midway. Sometimes, bad stories change the course and get on the right path with the help of good numbers. Nonetheless, I like the story method of investing, as it suits better to my aptitude. In following this method of investing, I just need to keep my eyes & ears open to the happenings around me and look for stories worth investing. New product in my kitchen; new appliance in my bathroom, new or larger hoarding on street corner, an attractive advertisement in newspaper, a shopkeeper pushing some product harder than usual, some management on magazine cover, your children or ...

The latest GDP data released by the government has evoked mixed reactions. While less than contraction (-7.3% yoy) in overall FY21 real GDP is a matter of comfort, sharp contraction in private consumption and continued weakness in manufacturing (-6%) is a subject to be worried about. The better than expected economic performance has mostly been outcome of strong government consumption expenditure and large subsidies extended as part of various tranches of stimulus. In the last quarter of FY21, India’s real GDP witnessed a growth of 1.6%. This is in spite of a poor base of mere 3% growth in 4QFY20 (disruption started in the base quarter) and significant relaxations in lockdown restrictions. This clearly indicate that normalization of economic activities might take much longer than earlier estimated. I have always stated that quarterly growth data has little relevance for investors. It may hold some relevance for the policymakers to assess if any course correction is needed, but for ...

 Recently, the government published the progress report on Sustainable Development Goals (SDGs). The “Sustainable Development Goals - National Indicator Framework Progress Report, 2021 highlights the progress made so far by India in attaining SDGs. The SDGs are a comprehensive list of global goals integrating social, economic and environmental dimensions of development. These goals lay the blueprint for achieving a better and sustainable future for all by providing “an international framework to move by 2030 towards more equitable, peaceful, resilient, and prosperous societies - while living within sustainable planetary boundaries”. United Nation General Assembly adopted the document titled "Transforming our World: The 2030 Agenda for Sustainable Development" consisting of 17 Sustainable Development Goals and associated 169 targets, in September 2015. This agenda came in to force from January 2016. India is committed to implement the SDGs based on the nationally defined ...