Do it yourself

In a keenly watched two-day meeting, the first after the inauguration of the new US President, the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed) decided to pause its kept federal fund rates in 4.25%-4.5% range, after cutting it overall by 1% over its three previous meetings. The decision to pause is governed by a strong and resilient labor market and persisting inflation. In a post meeting press interaction, Fed Chairman Jerome Powell noted that “The unemployment rate has stabilized at a low level in recent months, labor market conditions remain solid, and Inflation remains somewhat elevated.” He further added that the Fed needs to see “real progress on inflation or some weakness in the labor market before we consider making adjustments.” Most notably, he emphasized that we're meaningfully above the ‘neutral rate’. He said, “I have no illusion that anyone knows precisely how much that is and but having cut 100 basis points means that it's appropriate th...

One sector that is inflicting extreme pain to the investors in Indian equity is ‘power'. The stock prices of almost all companies present in the power sector value chain have corrected 25-50% from their 2024 high levels. The correction in stock prices has been particularly pronounced after the declaration of ‘energy emergency’ by the president of the United States. In my view there are three factors responsible for this correction, viz., technical, fundamental and sentimental. Technical: The stocks of companies in the power sector value chain had seen a sharp runup in the past three years. Reasons for enhanced investor’s interest in the sector was underperformance of a few years showing bottom formation on charts; exciting announcements by the government relating to the sector; state electricity board reforms to reduce transmission & distribution losses; power demand growth picking up; and electric mobility and climate control commitment of several governments etc. The enh...

Presently, the total market capitalization of the NSE is close to Rs415 trillion, almost the same as it was during the last week of May 2024. The benchmark indices like Nifty 50, Small Cap 100, Nifty 500, Bank Nifty etc. are also trading almost at the same levels as prevailed during the last week of May 2024. Decent returns for the last one-year The benchmark indices may be down 12-16% lower from their September 2024 highs; but they are still yielding a return of 6-9% for the one-year period. Average asset under management (AUM) of Equity/Growth mutual fund schemes at the end of May 2024 was appx Rs25 trillion. The six-month period from June to December 2024 saw a net inflow of Rs2.7 trillion in these schemes. For the month of December, the average AUM of these schemes was Rs 31 trillion. This implies over 11% net value gain in these schemes during the June-December 2024 period. For the full year 2024, the value gain in equity MFs is close to 22%. Most equity-oriented funds hav...

Mr. Donald Trump has chosen to take some time before speaking with his Indian counterpart Mr. Narendra Modi. Trump has chosen to call the Chinese premier Xi Jinping, even before his inauguration. Prime Minister Modi has apparently sent a written congratulatory message to Trump, instead of calling him. This small pause in the top-level communication has triggered a debate about the shape of Indo-US relations in the near future. In my view, before drawing any conclusion from Trump’s pause, and writing obituaries of the Indo-US strategic partnership, we must study the evolution of Indo-US relationships. This relationship has evolved over the past 75 years. It is primarily based on mutual need and shared democratic values, and goes much beyond the personal equation of individual leaders. Prologue The foundation of Indo-US was laid during the 1949 visit of Prime Minister Nehru’s visit to the US and meeting with President Henry Truman. Nehru was welcomed by everyone he met during his multi w...

In the past couple of months, since the completion of the US presidential elections, most of the global analysis (financial, geopolitical, economic, international relations, etc.) has been revolving around the likely policy stance of the Trump 2.0 administration. Various scenarios have been built based on extrapolating his election speeches and other utterances made during Trump’s election campaign. Most of these analyses could be speculative, since (i) these is not based on the policy actions pursued during the first presidential term of Trump, assuming this time it is entirely different; (ii) these assume a significant delivery on the election promises, with no substantive evidence to support such assumptions; and (iii) these not only ignore the relatively recent experiences of India (Achee Din-2014), the UK (New Deal – Brexit), but also overlook the notable failed promises of the past US presidents. To name a few, Woodrow Wilson (1916) - “He kept us out of war”; Jimmy Carter (1977...

The 45 th   President of the United States of America (POTUS), Mr. Donald John Trump (Trump) has assumed office with an onerous promise to “Make America Great Again” (MAGA). In the past two months, POTUS and some of his team members have expressed their intention to implement radical policy changes in a variety of spheres. A close study of the entire election campaign of Trump, his actions during his previous presidential tenure (2016-2020), his selection of team members for his latest presidential term, and his various utterances since the election results in November 2024, would reveal that as of this morning MAGA is mostly an aspirational slogan lacking a credible conceptual framework. For example— ·           Trump has spoken about strict border controls, tougher immigration rules, and restrictions on the skilled worker visa (H1B) program. Presently, many US corporations which would play a pivotal role in MAGA, have first generation ...

The market action in the past three days has been quite exciting. It reminded me of the market action witnessed during March-April 2020, in the wake of the outbreak of Covid-19 pandemic. Drawing from the experience of 2020, like many, at first, I was also tempted to increase my risk exposure to Indian equities. However, on second thought, I have decided to reign my temptation and avoid any deviation from the “plan”. I note that the 2025-2026 market trajectory may not be similar to 2020-2021, for some very simple reasons. ·          Ignoring the panic fall in February-March 2020 and subsequent recovery, Nifty 50 gained 12% in 2020 and another 16% in 2021. These gains occurred because corporate earnings were coming out of a 10yr growth drought. Nifty EPS has grown over 225% in the past five years (FY21-FY25), against just 50% growth witnessed in the preceding decade (FY11-FY20). The growth trajectory is now moderating and is more likely to stabi...

As I mentioned in the preceding post , a narrative of “tax terrorism” is being built strongly on social media, against the incumbent regime. Many popular influencers are repeatedly alleging that the government is squeezing the middle classes too hard through “exorbitant” direct and indirect taxes. Numerous experts have opined that the high taxes are the primary reason for the decline in growth trajectory, especially the private consumption. The followers of these experts are quick to lament that poor infrastructure and civic amenities are totally incongruent with the current structures of direct and indirect taxation. There is absolutely no denying that regardless of the official claims, the civic infrastructure in most parts of the country remains of poor quality and inadequate. The civic authorities are mostly inefficient, and wastage of resources rampant. Nonetheless, accusing the current regime of coercive taxation policies may not be appropriate, in my view. The taxation structure...

Addressing the Student’s Union of London School of Economics and Political Science in 1923, Bertrand Russell said, “One of the peculiarities of the English-speaking world is its immense interest and belief in political parties. A very large percentage of English-speaking people really believe that the ills from which they suffer would be cured if a certain political party were in power. That is a reason for the swing of the pendulum. A man votes for one party and remains miserable; he concludes that it is the other party that was to bring the millennium. By the time he is disenchanted with all parties, he is an old man on the verge of death; his sons retain the belief of his youth, and the see-saw goes on.” After more than 100 years, his words not only remain true, but also equally applicable to the democracies which are not English speaking; Indian subcontinent being a classical case in point. In the past 75 years, the citizens of India, Pakistan, Bangladesh, Sri Lanka, and Nepal ha...