Do it yourself

  A random walk through the settlement statistic of NSE for past two decade and half decades provided some interesting insights into the market evolution over past two decades. It is interesting to note the things that have changed and the things that have not. Regardless, it is comforting to note that Indian markets are maturing well and the systemic risk appears to have subsided materially. The best part was to observe that our markets have become more democratic with deeper and wider participation. (All data is sourced from www.nseindia.com) Indian market maturing well The latest bull market has shown that the Indian investors and traders are maturing very well. The tendency to recklessly over trade that was witnessed during dotcom bubble, and to some lesser extent during credit bubble of 2007-08, seems to have been reigned well now. To give it some perspective, at the peak of the dotcom bubble, the average daily turnover of NSE was close to 0.8% of the total market capi...

The new margining norms proposed to be implemented from 1 August 2020, in respect of the equity market trades done on stock exchanges are a cause for worry for one simple reason, i.e., this highlights for the n th time that the securities market regulation in India lacks a robust conceptual framework. It is important to understand that regulation of securities market is like salt in a dish - any excess or less magnitude of regulation could make the dish unpalatable. Any market participant would vouch for the fact that the regulators understanding of the risk management needs in the securities market is inadequate, as it relies more on adhoc methods rather than a strong conceptual framework. In the event of a crisis, comes out like a brave fire fighter and douses the fire with whatever tools it has. Unfortunately, there is little empirical evidence to highlight that SEBI has taken enough preventive measures to stop frequent occurrences of crisis in the market. We frequently witness...

In past few days there has been heightened activity in stocks of the companies which are perceived to be beneficiaries of the "war" (trade or military) with China. My fellow small investors are lapping stocks making defence equipments, telecom equipments and missiles, as if there is going to be an attack on China tonight. The stock prices of many such stocks have risen by 10-25% this week. The stock price of a public sector power equipment manufacturer gained on the assumption that the government might ban Chinese competitors and the order book of this company may swell. Some pharma, chemical and agro chemical companies also witnessed action based on assumption of trade restrictions with China. The businesses dependent on imports from China witnessed selling pressure, while the businesses considered to be the alternative to the Chinese impost saw extra buying interest. I would like to request my fellow investors to exercise some extra caution and restraint while ju...

The public sector capital goods bellwether company Bharat Heavy Electricals Limited (BHEL), reported its earnings for the fourth quarter and financial year ended on 31 March 2020. The numbers were poor and quite off the mark from what the equity research analysts had forecasted. For the quarter 4QFY20, the company reported total revenue of Rs50.5bn (vs Rs103.7 yoy); and for the full year FY20 the company reported revenue of Rs210.9bn (vs Rs304.41bn yoy). The revenue for the quarter was down ~51% yoy; and for the full year it was down ~29% yoy. The research updates on BHEL by various brokerages raised three points in mind, which I find are critical for investors (especially the smaller one like me) to assimilate. I would like to share these points with the readers as follows: (a)    In the notes to account, BHEL reported that in 9 days of lockdown (23rd March to 31 March) Rs40bn of revenue was lost. This is appx 39% of the 4QFY19 revenue and 13% of the full year FY19 rev...

The benchmark Nifty has gained more than 22% during the one month of lock down. The broader market indicator Nifty500 has also gained by similar margin. This counterintuitive trend may be perplexing many market observer. I am however not surprised by this sharp rally of past this month. In fact I believe that this rally may even extend little further in May. In my view, this is a classical bear market rally in which the stocks are distributed to a large number of non institutional participants, popularly referred to as retail investors. A significant distribution takes place in the poor quality stocks, which are usually difficult to sell if the markets are falling. As you would observe from the following table, on 14 out of 21 trading session between 23 March and 24 April, the institutional investors and insiders have been net sellers. They have sold a net amount of Rs12676cr of equity on NSE itself. The domestic institutional buy of Rs8420cr is roughly equal to the am...