Do it yourself

We are currently in a market phase where most asset prices are rising. Equity indices (Nifty over 22200) are close to an all-time high. Gold prices (over US$2125/oz) are at an all-time high. Bond prices (benchmark 10-year yields 7.05% from 7.50% a year ago) have recovered from their recent lows. Bitcoins (US$66000) are trading at an all-time high. Real Estate prices in India are also close to their highest levels in most metros. Prima facie, all investors should be celebrating FY24 as one of the best years in their investment journey. However, a recent interaction with many small (retail) and high-networth investors indicates that for a significant proportion of investors, it may be a “glass half empty” kind of situation. The common regrets of over 100 investors I spoke to at three different gatherings could be listed as follows: ·          They stayed invested with the top-performing fund managers of 2018-2020. However, these fund managers ...

  In the past few days, I have picked up many red flags that have further strengthened my conviction that the markets may be running far ahead of fundamentals. In my recent posts, I have pointed out how the market participants have been extrapolating events like ISRO Moon mission ( see here ). For example, the following three occurrences underline greed's dominance and gradually permeating irrationality in investment decision-making. 1.     Recently, one popular finfluencer tweeted a list of some small and micro-cap stocks highlighting that their market cap is less than their current order book. Many of these stocks witnessed heightened buying interest, apparently from small household investors, following the tweet. The message was fervently circulated on other social media, like WhatsApp. I received the message through at least nine forwards from different sources. All forwards appeared to endorse this seemingly manipulative message. No one on social media que...

My numerous interactions with the small traders and manufacturers in past couple of years have highlighted "working capital stress" as one of the key challenge being faced by this key segment of the Indian economy. Traditionally, this segment had managed their working capital through informal sources. Private pools (popularly known as kitty or committee in local parlance) functioned as economical, stable and sustainable mechanism to fund working capital and small capex needs. Besides, it also helped in providing a large pool of "free" working capital to large corporate buyers. The process of demonetization in 2016 disrupted this traditional financing mechanism, without offering any alternative solution. This disruption not only impacted the MSME segment, but did also hurt the larger businesses which replied on these MSME as a major source of working capital financing and inventory parking. In recent past, many government officials and minister...

The government of India has been the greatest value destroyer for the investors in Indian Equities. The Nifty PSE index, comprising most listed PSU stocks, now trades at the same level as it was in 2006, implying no return for 13yrs, if we consider point to point investment period. The CPSE ETF comprising top 22 Central government undertaking stocks, launched in 2014 is giving negative return to its investors. Many large Public Sector companies are now trading at multi year low prices, adjusted for all dividends and other corporate actions. The government of India therefore has legal and moral duty to explain to the investors, why it should continue to manage these businesses. They have obviously not managed these great businesses like MTNL BEL, Coal India, etc well and destroyed huge wealth for the nation as a whole and individual investors as well. The Supreme Court may like to examine, whether the government should be permitted in the first place t...

As per media reports the government is seeking huge dividends (Rs190bn) from oil PSUs to meet its fiscal shortfall ( see here ). It is also reported that some companies might have to borrow money to pay the required amount of dividend as the cash balance with them may not be sufficient to meet the demand. Obviously the payout will at the expense of cutting capex and impairing the future growth potential. In summer of 2016 also, the "Finance Ministry" had directed all profit making PSUs to use their surplus cash to buy back shares and pay handsome dividend, besides considering issuing bonus shares or going for stock split. ( see here ) Since then the benchmark Nifty50 has gained over 42%, while the Nifty CPSE has lost over 9%, underperforming the benchmark by massive 51%. I have said it many time before, and I would like to reiterate this again - for a common investors, finding any reason for investing in a public sector enterprise (PSE) is extremely cha...