Do it yourself

  “Fourth Industrial Revolution” is one of the most popular buzzwords these days. One gets to hear this almost every day in one context or the other. Business leaders, administrators, policy makers and money managers etc. have been using it in their presentations and interactions. In some cases it is used as a cliché, without intending any specific trend or opportunity. However, in most cases it is used to imply that new technologies and applications being used in the areas like manufacturing, mobility, communication, healthcare, education etc. are bringing remarkable change in the ways we are used to function. Metaverse, Clean Fuels, 5G, Drones, Artificial Intelligence, Convergence of Technologies, Blockchain, etc. are some of the pieces that are putting this revolution together. For the youngest generation, the changes this revolution is bringing to their lifestyle might not appear stark. They were born in a world where technological changes have been fast, dramatic and disruptiv...

  In the past one month, the bond yields in most of the developed world have risen sharply, devastating the bond portfolios, especially the leveraged portfolios. Even most emerging markets have seen their bonds declining in value. Consequently, the global currency markets have also seen high volatility. The USD index has reached the highest level in two decades, as JPY, EUR and GBP have declined to lowest levels in decades. Even PoBC is cutting the reference range for CNY sharply and USDINR is at historic lows. The sharp rate hikes in most parts of the world, and tighter money markets have so far not been able to rein the runaway inflation. It is expected that the central banker may continue hiking aggressively for another quarter at least. Accordingly, the forecast of a severe recession in 2023 in most parts of the western world on both sides of the Atlantic is fast becoming a consensus. Poor demand outlook due to recessionary conditions is causing severe correction in the commodi...

Households in most parts of the world are struggling to manage their finances. The cost of living is becoming unaffordable for most poor and lower middle class households. The basic necessities like housing, food, energy and healthcare have seen material inflation in most jurisdictions. Even middle class households are finding it hard to maintain their current lifestyles as the wealth effect created by bloated asset prices is waning fast; savings are depleting due to massively negative real interest rates; and real wages have declined over the past 3yrs. Historically, such conditions have provided a fertile ground for a workers’ (communist) movement. Countries face widespread civil unrest (anarchy) and anger against the wealthy (burgeon) and capitalist democracies are usurped by the authoritative (dictatorial) leaders. Peoples’ right to basic standard of life takes precedence over liberty and nationalism. The latest election results in Sweden and Italy are surprising in this co...

The latest edition of the Handbook on Indian Statistics released by the Reserve Bank of India (RBI) depicts some interesting trends in domestic savings. Gross Domestic Savings (GDS), which was recovering steadily post demonetization, has again declined post Covid. However, the decline since FY17 is entirely due to lower savings in the corporate sector. The household savings have actually risen sharply, especially during Covid. Contrary to popular perception, the Indian households are allocating much less to the capital market products (shares and bonds) post Covid. Even contributions to the provident funds have declined materially, indicating lower employment in the organized sector. Bank deposits have seen an increase. The contribution of Indian households to Investments (Gross Capital Formation) is stable at the elevated levels seen post demonetization, implying a rising trend towards self-employment. Key trends ·           Gross Domestic S...

  One of the earliest expressway projects in India was the golden triangle expressway connecting the tourist circuit of Delhi-Agra-Jaipur. The project was completed years before the National Highway Development Project (NHDP) was announced in late 1990s. It is only appropriate that the government has planned India’s first National Highway for Electric Vehicles in this golden triangle. Last week, a trial run of NHEV was conducted on a 248km highway between Delhi and Jaipur. Agra-Delhi-Jaipur will be the first 500km EV corridor programmed and to be operated by Advance Services on Social and Administrative Reforms (ASSAR). ASSAR would be operating 12 such corridors marked by the Union Power Ministry. On all these corridors, vehicles, chargers, civil & electrical infrastructure, fleet & station utilities and all other components would be engaged together on Annuity Hybrid E-Mobility (AHEM) model with single capex spend from PSUs and Banks. Agra-Delhi-Jaipur NHEV marks the begin...

  “Higher interest rates, slower growth and a softening labor market are all painful for the public that we serve, but they’re not as painful as failing to restore price stability and having to come back and do it down the road again.” – Jerome Powell, Chairman of the US Federal Reserve The Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed) decided to hike the policy rate by another 75bps taking the federal fund rate to 3.0%-3.25% range; the highest level since 2008. In the post meeting press statement, the Fed chairman Jerome Powell reiterated Fed’s commitment to bring down the inflation to its target level of 2%. The Fed officials indicated that the Fed would keep hiking rates further till the terminal rate of 4.6% is reached next year. This implies another possible 75bps hike in November, followed by a couple of smaller hikes in the two subsequent meetings. Quelling the market expectations of a cut next year, the fed officials hinted that no cut is seen in ...

In a world where almost every central banker is struggling to contain inflation and tightening monetary policy, the People’s Bank of China (PoBC) seems to be facing a different set of problems and hence adopting a divergent policy approach. PoBC has actually cut the key loan prime rate (LPR) twice in 2022. It is pertinent to note that the Chinese economic growth has been on the decline ever since the global financial crisis. The pandemic has slowed the growth even further. The latest growth data suggests that the Chinese economy is growing less than 5% this year, its lowest growth rate in at least three decades. Some part of the growth decline could be attributed to the zero tolerance policy towards Covid and stringent lockdown; but it is important to keep the declining trend since 2010 in mind.   Considering that China has been one of the key growth drivers of the global economy; declining Chinese economy is a matter of concern for all. Besides, China has been one of the primary (...

The Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed) is scheduled to announce its latest assessment of the economy and its policy stance tomorrow. A large number of market participants are waiting to hear the Fed chairman, with bated breath. I expect a large number of traders in India to stay awake till midnight to hear Mr. Powell, even though they cannot initiate any trade until 9:15AM on Thursday, when the Indian markets open for trading. Therefore, literally speaking, losing sleep to hear the Fed statement is of little consequence. The market consensus is for a 75bps hike in the policy bank rate and an unambiguous hawkish stance unlike the previous statement in July, when the Fed sounded little ambivalent about the future hikes. Some experts are expecting even a steeper 100bps hike and raise in the terminal bank rate target to 4.5% (from previously estimated 3.75-4%) by April 2023. This implies a total of 200bps expected hike between September 2022 and April 20...

  Self-reliance in the defence sector has been one of the major investment themes in the past one year in particular. Besides dedicated public sector defence manufacturers, the stocks of a large number of equipment and service providers to the Indian defence establishments have seen a sharp up move. In the melee to own “defence stocks” many investors have ignored the basic principles of investment and buying stocks of these companies at any price. It seems a little has been learned from the recent unwinding in pharma API manufacturers and internet stocks which witnessed similar traders’ interest in 2019-2021. An informal discussion with some randomly selected market participants indicated that many individual investors and traders may not have a clear idea about the opportunity in the Indian defence sector. The way people tried to associate companies with the defence sector opportunity, it appeared that almost every company listed in India may be a potential beneficiary of the gr...

  In a recent research report, Goldman Sachs estimated that “energy bills will peak early next year at c.€500/month for a typical European family, implying a c.200% increase vs. 2021. For Europe as a whole, this implies a c.€2 tn surge in bills, or c.15% of GDP.” The bank believes that repercussions of this “will be even deeper than the 1970s oil crisis.” Obviously, a problem of the magnitude would require an impactful policy intervention that could have wider and deeper implications for decades to come. The policy interventions could involve partial suspension of free market mechanism; rationing of energy consumption; fiscal subsidies; deferment of climate goals and increased use of coal and/or accelerated shift to renewable sources of energy etc. Besides, there could be serious geopolitical implications also. In another interesting paper, McKinsey & Co, outlines how inflation may be flipping the global economic script. In the paper McKinsey’s experts have examined many of...

 In the current year 2022, inflation in India has consistently remained above the RBI tolerance band of 2-6%. For the month of August Consumer Price Inflation (CPI) was 7%, led primarily by the food inflation of 7.6%. Both rural and urban inflation recorded a MoM rise in August. Unfavourable weather conditions apparently led to sharp rise in the prices of vegetables, fruits, spices etc. However, the core inflation (CPI ex food and fuel) has also persisted over 6% since the past many months; emphasizing the persistent pricing pressures. The IIP growth in July also moderated to 2.4% led primarily by consumer non-durables – indicating pressure on household finances. The sharp rise in household debt, especially the expensive credit card rolling credits, also corroborates the rising stress on household finances. In view of the elevated price pressures, the Monetary Policy Committee (MPC) of RBI is expected to keep raising rates in line with the global peers. The market consensus is ex...

  One of the most famous dialogues delivered by legendary Shahrukh Khan goes like this – “Agar kisi cheez ko dil se chaaho to puri kayanat usey tumse milane ki koshish mein lag jaati hai” (If you desire something from the depth of your heart, the entire universe would conspire to fulfil your desire.) Recently, the Global CEO of McKinsey & Co, Bob Sternfels forecasted that. The factors like a large working population, multinational companies reimagining global supply chains, and a country leapfrogging at digital scale-to achieve something special not just for the Indian economy, but potentially for the world, are aligning well to to make 21 st century – the Century of India . ( Read here ) It appears that the universe is conspiring to make 21 st century - the century of India; but the question is whether we Indians are indeed aiming for this goal with full honesty and intensity. Historically, the Indian entrepreneurs were constricted by the culturally strong agricultur...

 1.   Bengaluru inundation In the first seven days of September 2022, Bangalore Urban District of Karnataka received 171mm of rain, which is 388% more than the long term average (35mm) of the rains it receives during this period. Obviously, the city infrastructure is not prepared to manage so much water; hence some areas of the city have been inundated with rain water. The spectacle of houses, vehicles and roads under deluge has been enthusiastically celebrated in the media – mainstream, social, local, national and global. The residents also marked the occasion by riding on tractors, excavators, and boats etc. Prima facie, there is nothing unusual in this. Almost every city in the country gets inundated at every instance of excess rain. From large metropolises like Mumbai, Delhi, Chennai, Kolkata, Hyderabad, to major cities like Lucknow, Bhopal, Ahmedabad, Jodhpur, Gurgaon, Patna, Varanasi, Ranchi, Bhubaneswar etc. have all experienced similar situations in the past f...

  As per the news agency Bloomberg’s calculations using IMF database and historical exchange rates, the size of the Indian economy in ‘nominal’ cash terms at the end of March 2022 quarter was US$854.7bn vs US$816bn for the UK economy. By this standard, India was the 5 th largest economy of the world as on 31 March 2022, behind the USA, China, Japan and Germany. This apparently innocuous, and mostly inconsequential, statistical data point has been subject of an intense discussion in India media – both mainstream and social. The pro establishment groups have celebrated this data point as an important milestone in the resurrection of the Indian economy, especially under the stewardship of Prime Minister Narendra Modi. They have forcefully argued that the Indian economy surpassing the UK’s economy highlights the rising status of India in the global economy; and symbolizes the undoing of 200years of British slavery. The groups opposing the establishment claims highlighted that th...