Do it yourself

The global macro landscape remains in flux. A strange mix of structural deflationary forces is colliding with equally powerful inflationary pressures. Technology, demographics, geopolitics, and policy responses are all pulling in different directions — making this one of the most complex investing environments in decades. I am not competent enough to decode where the current conditions are driving us. Nonetheless, I would like to share some random thoughts with the readers and seek their views on these. Inflation vs Deflation: The great tug of war At the structural level, Artificial Intelligence, aging demographics, and the rapid adoption of renewable energy are profoundly deflationary for the global economy. ·           AI is driving efficiency, collapsing cost structures, and displacing traditional labor models. ·           Demographics in most major economies — from China to Europe to Japan — ar...

In recent times, one of the most extrapolated data by the market participants in India has been the household participation in the capital markets. Several research papers/reports have highlighted the relatively low deployment of the Indian household savings into the capital market, especially listed equity shares, to argue for a high growth potential in this area. In fact, capital market related stocks like brokerages, AMCs, depositories, exchanges and transfer agents & registrars, have been outperforming the broader markets for the past few years. Impressed by the trend, NSE has even launched an index (Nifty Capital Market index) to capture the performance of this sector. Indubitably, the Indian capital markets are at the threshold of a major transition. Acceleration in institutionalization of household participation has been a major trend in the past five years. Access to banking and financial markets has improved materially with the advancement of technology and digitalizatio...

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...

In my past couple of strategy reviews, I had noted that given the present circumstances, the market outlook is pretty simple and straightforward – Moderate return expectations and focus on capital preservation. In fact, in the past three months the investment environment has become much more uncertain and complex. The geopolitical uncertainties, fiscal policy fatigue and monetary policy dilemma make short term forecasts very complex. These factors further support the idea of keeping the investment strategy simple and continue giving preference to capital preservation over higher returns. I continue to believe that the economic and market cycles are now becoming much more shallow as compared to the 80s and 90s. The recessions nowadays last for a couple of quarters, not many years. Inflation peaks at 7-8%. Despite all the brouhaha over unprecedented QE and uncontrolled inflation, US rates are expected to peak at 3%. In fact the bond market in the US may already be pricing in a reversal o...

Lately, I have received a lot of queries from readers about Gold. Everyone seems to have woken up to the idea of investing in yellow metal. Many readers have read a lot about the latest trends in the global financial markets, and appear to be in full concurrence with the idea of structural decline in the relevance of USD as global reserve currency; however the views about the rise of EUR or CNY as alternative reserve currencies do not seem to be sanguine. This uncertainty about the future of the global financial system is probably driving the interest of investors towards gold, which has traditionally been a popular reserve currency and preferred store of value during crisis period particularly. Many readers have highlighted that it was perhaps a mistake on my part to cut allocation to gold in my portfolio. I would like to answer the queries and concerns of the readers herein below. First of all, I would like to remind the inquisitors that it has been my consistent sta...