Do it yourself

After initial round of denial and complacency, the global markets seems to be waking up to the grave threat that the spread of coronavirus poses to the global economy and therefore global markets. As more foreigners emerge out of China mainland, the information opaqueness is diminishing insofar as the official Chinese claims and the popular perception of the spread of virus is concerned. It appears that the impact of virus far more serious initially estimated by global community or communicated by Chinese officials. In past two weeks the reports have suggested that the coronavirus has invaded many more territories across Asia and Europe. Japan and South East Asia Countries appear to be worst impacted. Japan and South Korea have raised the threat alert level to the highest that allows the government to lock down cities and businesses. Italy has also reportedly shut down schools and crowded market places and stadiums till further notice. WHO has feared that the vir...

In my discussions with the various market participants in last one year, I have realized that "drivers" and "domestic workers" are perhaps the most influential reference points in their analysis and forecasts of the economy. I have heard many of them proudly alluding to stories how the life in villages has improved in recent years. All the villages have connected to highways through all weather roads. Everyone is getting free money to build pucca houses. Houses in remote villages have got electricity and LPG connections. Children are going to English medium schools. Everyone has a smart phone and internet access. All have a basic bank account. Farmers are selling their crops through nationwide electronic trading platforms. Millions have people got their Ayushman (Health Insurance) cards and can avail free medical treatment in empanelled hospitals, etc. Many popular analysts, investment advisors and fund managers, have famously narrated on social med...

The growth vs. value debate is intensifying globally with each passing trading session. As a style, value investing has suffered a severe setback in past couple of years. The growth stocks have massively outperformed, transcending to a different stratosphere altogether. In the process the conventional valuation methods like price to earning ration (PER) and price to book ratio (P/BV) are suffering ignominious isolation. Many famous investors who stood firm to the principles of value investing appear to have changed their investment philosophy.   Mr. Ramdeo Agrawal of Motilal Oswal Financial Services, considered one of the legendary value investors in India famously said in a recent interview, "Value is out of fashion right now, deeply out of fashion. Even Warren Buffett is having a tough time.“Earlier you used to buy cheap. If you end up buying cheap, you were guaranteed to make money. That's not the scene now.” ( see here ) Prashant Jain, CIO of HDFC AMC, ano...

Yes Bank is a peculiar case study expanding across spheres of corporate governance; financial sector regulation; securities market regulation; investor behavior; crisis management; audit failure; risk management; decision making; and much more. The consequences are (i) investors' wealth has eroded materially and (ii) the interest of the entire financial system, including depositors, has been imperiled. By dithering on taking a prompt and appropriate action, the regulators are perhaps indicating that no lessons have been learned from the debacle of IL&FS and PMC. The worst, the bank continues to be a part of the benchmark Nifty50 and NiftyBank, forcing the passive investors to buy this poor quality stock. Besides, the equity shares of the bank continue to trade in the derivative segment encouraging speculative trades, especially by small investors in search of windfalls. Apparently, the bank has been violating the prudential lending norms with impunity. Bo...

The global rating agency Moody's Investors Service has again slashed India’s 2020 GDP growth forecast. The latest projections by Moody's peg 2020 GDP growth to 5.4% (earlier 6.6%); and 2021 GDP growth to 5.8% (earlier 6.7%). The rating agency has highlighted the disruptions in global trade arising due to spread of coronavirus as one of the reasons for slower growth. In other concerns, lower than potential GST collections is one of the prominent concerns expressed by the agency. If the history is any indicator of the trade trends, we can reasonably conclude that any major shift in the trade from one jurisdiction to the other, even if it is due to temporary disruptions, is not easily reversed after the disrupting condition cease to exist. Shift of automobile and electronics manufacturing from Japan to USA and then from USA to China is one example. India lost some of its textile exports to Bangladesh due to child labor issues. We also lost currency and derivativ...

Two data points released on Wednesday has again brought the specter of stagflation in India to the fore. The rise in food prices and telecom tariffs pushed the retail inflation in January 2020 to 7.59%, the highest level seen since May 2014. At the same time the industrial production recorded a decline of 0.3% in December 2019. I agree with the viewpoint that at macro level we may not be facing any threat of stagflation in near term. I also believe that (a) the headline CPI number may be close to peaking and may ease considerably post summer, as estimated by the monetary policy committee (MPC) of RBI; and (b) the headline growth number may be close to bottom and we may see a gradual recovery from 2HFY21 onwards. Notwithstanding the macro viewpoint, it is pertinent to keep in mind that a large segment of the population may already be experiencing stagflationary conditions. There is no denying that the employment conditions have worsened in past one decade a...