Do it yourself

  In the past fifteen years, the pre-budget narratives in India have always included discussions on the reimposition of Estate Duty (inheritance tax). The finance ministers, policy-makers, bureaucrats, economic thinkers, and members of the party think tanks, have all spoken about it and emphasized the need for such a tax in a country like India that has massive socioeconomic inequalities; poor GDP-to-Tax ratio; and significant fiscal, monetary, & social/sustainability concessions for entrepreneurs who ought to repay to the society after attaining a certain scale. In the past few years, I have seen numerous wealthy families worrying about Estate Duty and making plans to preempt it. Some of the richest families in the country have relocated their wealth offshore to more convenient tax jurisdictions like Singapore, UAE, Luxemburg, etc., in anticipation of the imposition of Estate Duty or Inheritance Tax in some form. Estate Duty has however not been an election issue ever sinc...

The recent RBI bulletin ( April 2024 ) contains an interesting article on the current state of the economy. The article is written by officers of RBI and does not represent the official views of RBI. The authors find most macroeconomic parameters positive and growth-supportive. The two areas of concern are climate and geopolitics. Overall, the global economy, and particularly the Indian economy, is stable and oriented towards resilient growth in 2024. Some of the noteworthy points in the article could be listed as follows: Global economy Growth: Global growth remains resilient despite geopolitical challenges and extreme weather event risks. In its latest world economic outlook (WEO April 2024), the International Monetary Fund (IMF) raised the global growth forecast for 2024 to 3.2%, 10 bps higher than its January 2024 Update, and expected the global economy to grow at the same pace in 2025 in also. Advance Economies (AEs) are now expected to grow by 1.7% in 2024 against the f...

In the past couple of weeks, I have heard more market participants talking about alternative assets like precious metals, cryptocurrencies, and bonds as compared to equities and equity derivatives. The trend has been more conspicuous, particularly after the first phase of voting for the 18 th Lok Sabha. The participants who were confident about an overwhelming majority for the incumbent government and strong equity rally post declaration of final results on 4 th June are now finding a need to hedge their exposure to equities. Surprisingly, none of the non-institutional investors/traders mentioned using equity derivatives to hedge their investment portfolios or trading positions. I would like to share some of my impressions gathered from my numerous interactions with a variety of investors and traders - from very small ones to ultra-high networth; from frequent and short-term traders to long-only investors; from highly educated to less educated; professionals, businessmen to salarie...

Early this year BRICS, a bloc of leading emerging economies, announced the induction of five new members, viz., Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates, to its fold. The ten-member bloc has a significant presence in global trade. More specifically, it exercises significant control over the global energy markets, controlling 42% of global oil production and 35% of total oil consumption. In July 2023, the then President of BRICS, South Africa claimed that over 50 emerging nations have expressed their desire to join the group. Recently, Russia’s Federation Council Committee on International Affairs, stated that BRICS would be expanded further as more than 40 countries are desirous of joining the group. The cooperation between BRICS members is free, and flexible and extends to a variety of subjects of common interest amongst members. The members and other countries desirous of joining the group, view BRICS as an alternative to global bodies viewed as dominated...

In the pre-finfluencer era, we used to have gods in the financial markets. Those gods would make an occasional public appearance and talk about their views on markets and investment strategies. The market participant would listen to these gods with rapt attention and follow them religiously. All those Buffets, Mungers, Rogers, Finks, Woods, Jhunjhunwalas, Damanis, et. al. were revered names. Then TikTok, Instagram, and X (formerly Twitter) happened. Financial experts, economists, monetary theorists, and technical gurus mushroomed at the rate of 100 per hour. Everyone who has traded stocks or crypto for three months is now an expert. They not only try to influence other investors/traders by giving unsolicited advice and recommendations; but also get influenced by the advice/recommendations of others who may not be any better than them. Sometimes it appears that there are more experts in the market than the actual number of investors and traders. Unfortunately, this is the situation wo...

  The issue of high and rising US public debt is a subject matter of public discussion in Indian streets. Using a common Dalal Street phrase I can say that every paanwalla, taxi driver, and barber is now discussing how unsustainable US public debt is. For example, listen to this boy . From top economists, analysts, and global strategists to a common man on the street, all are worried about an imminent US default and its impact on the global financial system, especially the developing and underdeveloped countries. Currently, the US public debt is close to US$35trn (Appx 125% of annual GDP) and is projected to double in the next eight years. The current US government's annual interest payments are more than US$1trn (Appx 20% of annual federal revenue; 14% of annual federal spending and 4% of GDP). The average interest rate on the entire debt is less than 3% p.a. As of June 2023, 43% of this debt was owned by the Federal Reserve System and State and Local Governments. 32% of the debt...

India’s real GDP is expected to grow ~7.8% in the current year FY24. At this rate, India’s growth would be the fastest among all major world economies. Indubitably, it is a matter of comfort for all Indians. Investors are celebrating as markets are buoyant and asset prices are rising. However, if we juxtapose the statistics of GDP growth and infrastructure development with the following, we get a different picture. ·          India carries the highest number of people suffering from tuberculosis (TB). In the year 2022 alone, about 2.8 million new cases of TB were registered in India. Out of these 342000 reportedly died due to the disease. India is popularly termed as the TB capital of the world. ( Read here ) ·          India has over 100 million confirmed diabetes patients and 136 million pre-diabetics. the number of diabetic cases has increased by 44 percent during 2019-2023, from 70 million affected...

For many weeks, global markets have been behaving in a very desynchronized manner. Non-congruence is conspicuous even in the behavior of the same investor/trader operating in different market segments, e.g., equities, bonds, commodities, currencies, cryptocurrencies, etc. For example, until a month ago an investor with a balanced 50:50 debt-equity asset allocation invested in bonds as if a soft landing was imminent leading to a series of policy rate cuts over the 12-15 months. The same investor invested in equities believing that earnings growth would surpass the estimates and stocks of top technology companies would continue with their dream run. The investor was content investing in USD assets assuming green greenback would strengthen and at the same time he was buying bitcoins expecting the demise of the extant monetary system by independent crypto or digital currencies. Last week in the US, equities reached their all-time high levels as if all is well in political, geopolitical, cl...

The strict stand of the Supreme Court of India in the case of misleading advertisements and false claims by the Patanjali Ayurveda is important. A clear verdict in this case and guidance to the State for framing & enforcing stricter norms for alternative treatment methods, especially for mental and sexual health problems, is long overdue. Any person who has traveled long distances in Indian trains and roadways buses must be aware of how misleading advertisements and claims are used by unqualified, and often fraudulent, medical and spiritual (for lack of better word) practitioners to swindle the gullible common people. There are millions of cases of these practitioners causing irreparable, and often fatal, harm to unsuspecting patients. The Supreme Court’s verdict, in this case, would be a timely reminder to the State and the people about fundamental duties prescribed under the Constitution (Article 51-A, inserted through the 42 nd Amendment), especially the duty to “Develop scie...

In my view, the stock market outlook in India, in the short term of one year, is a function of the following seven factors: (1)   Macroeconomic environment (2)   Global markets and flows (3)   Technical positioning (4)   Corporate earnings and valuations (5)   Return profile and prospects for alternative assets like gold, real estate, fixed income, and cryptocurrencies, etc. (6)   Greed and fear equilibrium (7)   Perception of the political establishment The outlook for these seven factors for the next twelve months is as follows, in my view— Macroeconomic environment – Neutral My outlook for the likely macroeconomic environment in FY25 is as follows: (a)   Inflation: Consumer inflation may average well within the RBI tolerance band of 4% to 6%. However, food inflation may continue to be erratic and cause occasional violations of the upper range. (b)   Fiscal Deficit: The fi...