Do it yourself

I returned to my desk after a 10-day Diwali break. As I opened my overflowing mailbox, I realized a lot might have changed in the meantime. Nifty50 is flirting with its all-time level. INR has regained some of its lost ground. Precious metal prices have cooled after a sharp upmove. There is a conspicuous thaw in the Indo-US and Sino-US relations. Prime Minister Modi, who hardly missed an opportunity to represent India at various global forums, has missed the ASEAN summit after missing the UNGA annual session, arguably to avoid a one-on-one meeting with President Trump. However, what caught my attention was a large number of notes, reports, messages alluding to the unsustainable $38trn US government debt, and how the US government and the US Federal Reserve are conspiring to dissipate this mountain of debt by manipulating the prices of gold and cryptocurrencies (especially Bitcoins). Most messages are arguing that 2026 could be a 1933 and/or 1971 redux, when USD was devalued 69% (1933...

Since the beginning of the year 2025, the exchange rate of India Rupee (INR) has fallen against the currencies of most of our major partners. Though, USDINR (INR vs USD) is the most keenly watched exchange rate (since a majority of our forex reserves, external debt and external trades are USD denominated), INR has depreciated most against EURO (EUR). The extent of depreciation against Japanese Yen (JPY), Chinese Yuan and British Pound (GBP) is mostly similar.  ​ ​ Notwithstanding the views of the finance minister that “INR is not weakening, but the other currencies are appreciating”, the INR depreciation is a matter of concern to a large majority of Indian investors. Since we are traditionally a current account negative economy, on the net basis, INR depreciation adversely affects the economic fundamentals. Besides, eroding the confidence in the economy, — ·          INR depreciation makes many things expensive for the Indian households...

The behavior of Global markets has always been perplexing for the participants. The past 8-9 months have been no different in that sense. Stock prices, commodities, cryptos, bonds, and precious metals have all moved higher; in many cases without a fundamental case for such an upmove. Investors who typically manage their risk through diversification, hedging and alignment of their portfolios with economic fundamentals and corporate earnings, usually underperform in this kind of market and have reasons to be disappointed. Some of them, who usually invest on borrowed conviction, surrender to the fear of missing out (FOMO) and indulge in unnecessary churning of their portfolios resulting in violation of their standard asset allocation, and accumulation of momentum assets at high prices, only to regret later. Traders, on the other hand, ought to love this kind of markets, when most asset classes are moving in one direction, with low implied volatility. Theoretically, in the current stat...

Continuing from yesterday ( View from the Mars – 3 ) In my view, the following issues may,  inter alia , play an important role in shaping the contours of the new world order that may evolve in the next decade or so. ·           China presently is finding it hard to gain acceptance as a major global leader. One of the reasons is lack of democracy, which is still a major consideration for the western developed world. Besides, it is also regarded as an irresponsible power by the extant major global powers. Recently, the spread of Covid-19 virus from Wuhan laboratory, causing a global pandemic, has materially tarnished the image of China. In particular, the mistrust between the US and China have increased manifolds after the outbreak of pandemic, resulting in a Sino-US cold war. This cold war that may last for many years, or may be decades, may be a key determinant of the new world order. Important to note that Russia, which was a key WWII ...

Reportedly, Israel and Hezbollah (Lebanon) have successfully negotiated a 60 days ceasefire to the latest round of hostilities which started with Israeli forces invading Lebanon on the 1 st   October 2024. The deal involves withdrawal of Israeli troops from Lebanon and deployment of a UN peacekeeping mission and establishment of a US led international monitoring group. This is an important development in global geopolitics. The Hezbollah group was overtly supported by the Iranian government. Israeli invasion into Lebanon had evoked a direct military response from Iran; threatening a much wider escalation of a hitherto localized Israel-Palestine conflict. The ceasefire deal, which has been welcomed by Iran, diminishes the probability of an immediate wider escalation of the Israel-Palestine conflict. However, since the deal does not cover the ongoing Israeli attacks in Gaza Strip, it does not offer any durable mitigation of the threat. If the outgoing president Biden could pursue Ukr...

President elect of the US, Donald Trump has already designated key members of his team. Based on his election agenda, speeches and rhetoric and personal views of his designated team members, market participants are speculating about the likely policy framework of Trump 2.0 administration, and its implications for the global trade and markets. My personal view is that the actual agenda of governance might have some shades of the election rhetoric but its actual path may not materially deviate from the trend seen in the post GFC (2009) period. At this point in time, I do not expect to sight any black swan in global economics and/or markets. With this caveat, let me summarize the current market speculations and its likely impact on India. Trade tariffs Trump has been speaking about imposing high tariffs on the US merchandise imports to promote local manufacturing, cut US trade deficit and strengthen USD. He has been suggesting 20% universal tariff on all imports, 60% tariff on impor...

The year 2024 is proving to be one of the worst years for political soothsayers. After a debacle in the Indian general elections last summer, psephologists have failed in the US presidential elections. The challenger Donald Trump emerged a winner, gaining popular votes to occupy the White House for four years with a clear majority in the US Congress and Senate. This kind of decisive mandate has been a rarity in US politics in the past four decades. Most of the media, political commentators, psephologists, and other experts completely failed to read the peoples’ mind and anticipated a victory for Kamala Harris. Post the election results, thousands of experts – research analysts, economists, strategists, geopolitical experts, money managers, etc. – have written reports running into millions of terabytes, forecasting the likely impact of Trump's victory on financial markets, currencies, commodities, geopolitics, and trade etc. Most of this analysis is based on Trump's election p...

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...

I have been tracking the news flow and experts’ opinions regarding the developments in global commodities markets for the past couple of years. Of course, I am a novice in matters of global economics, trade, and finance; but the commodities markets are particularly something I could never understand. From my elementary understanding of economics and human behavior, I understand that aging demography, deeper & wider penetration of dematerialization & digitalization in human lives, rising awareness about climate change, and deteriorating growth potential of the developed economies, and perhaps China also, definitely do not augur well for the commodities’ demand in the long term (10-15yrs). However, the opinion of experts is overwhelmingly in favor of a bull market in commodities in the short term (2-5yrs). The key arguments presented by experts in favor of a bull market in commodities could be summarized as follows: (a)    Energy prices have corrected back to the p...

  One of the major trends in the post global financial crisis (GFC) world is the weakening of the United States of America’s (USA) clout as an undisputed global economic and strategic leader. In the past 15 years, the US administration has consistently failed in achieving its economic, financial, technological, and strategic objectives. The economic performance of the US has been below par in the past decade. The handling of the pandemic has been highly questionable. Both monetary and fiscal policies have not yielded the stated objectives of price stability (inflation has been persistently high and rates have become growth restrictive) and financial stability (many regional banks have failed, delinquencies are rising and capital adequacy & reserves of banks have deteriorated, particularly in the past couple of years). Fiscal profligacy has benefited the rich much more than the poor. The efforts to restrict the benefits of advanced technological innovations flowing to China thr...

  Last year, while discussing this subject, I mentioned , “it is a debate that will continue for many more years and no one will remain unaffected by it. Almost everyone who transacts in money or is part of the global economic system will need to deal with it at some point in time.” I note that the debate is intensifying, widening, and deepening. Moreover, it is becoming more balanced with many conventional money managers, regulators, bankers, and administrators coming in support of digital currencies as an alternative to fiat currencies. A few days ago, Larry Fink, the Chief Executive Officer of BlackRock, one of the most influential financial firms globally, commented in a TV interview that under the current circumstances “Crypto will play a role as flight to quality”. He was reported to have said, “Bitcoin is a hedge against the devaluation of your currency”. This comment is in total contrast to his comments in 2017 when he had emphatically condemned the idea of cryptocurre...