Do it yourself

While the shutdown of socio-economic activity prompted by spread of coronavirus (COVID-19) is dominating the headlines, there are few more important things that may be impacted larger volatility in markets and decline in asset values. 1.     Foreign investors have been net sellers in Indian equities in 5 out 6 years during 2015-2020. In the current year 2020, they have sold net Rs484bn in Indian equities. The FPI selling is certainly not COVID-19 driven. They seem worried about failure in growth acceleration, earnings drought, policy unpredictability, INR depreciation (or USD appreciation), and shrinking yield differential, amongst other things.   2.     The corporate earnings growth has been anemic for past one decade. In past 6years, the Nifty earnings have growth at less than 5% CAGR. The visibility of earnings growth for next year has also d...

An old market proverb is that "markets stop panicking when the government begins to panic". However, the current market conditions appear defying this conventional wisdom. Instead, the panic shown by the government authorities in dealing with the threat posed by the novel coronavirus (COVID-19) has caused deeper panic in the financial markets. From the statements made and actions taken by various state authorities across the world (including India) to check the spread of the coronavirus, I decipher the following: (a)    The coronavirus has spread to a large number of countries. Even though the mortality rate of patients suffering from the virus may not be high, the transmission is much faster, and it threatens large scale immobility or people and disruption of business. In that sense it is perhaps one of the most disruptive pandemic for the modern generation. The spread of bubonic plague in 19th century (though that had massively higher mortality rate) could ...

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...