Do it yourself

Last month, the National Sample Survey Office (NSSO) released the results of its annual survey of unincorporated sector enterprises (ASUSE). The survey was conducted during October 2022 to September 2023. ASUSE is conducted to measure various economic and operational characteristics of unincorporated non-agriculture establishments in manufacturing, trade and other service sectors (excluding construction). The key highlights of the survey are as follows: Demographics ·          There are 65 million establishments belonging to unincorporated ‘manufacturing’, ‘trade’ and ‘other services sector’ in India. Out of these estimated 65mn establishments, about 55% (35.6mn) are in rural areas and about 45% (29.4mn) in urban areas. 85% (5.53cr) of these units are Own Account Establishments (OAE means no hired worker) and the remaining 15% are Hired Worker Establishments (HWE). ·          Uttar Pradesh (13.82%...

The latest Periodic Labor Force Survey (PLFS), released on 16 August 2024 by the National Statistical office (NSO), provides some useful insights into the current employment conditions in the country. The following are some of the key observations from the Survey report. The Good ·          The employment conditions have improved during 1QFY25. The WPR-U improved for all ages and both genders. The Youth WPR-U improved from 39.3% (1QFY24) to 40.8% (1QFY25). For all workers, WPR-U improved 38.4% to 39.3% during this period. ·          The LFPR-U male workers improved from 57.2% in (1QFY24) to 58.9% in (1QFY25) for youth (15-29yrs) and from 73.5% to 74.7% for all workers above 15yrs of age. ·          Self-employed female workers increased in urban areas from 39.2% to 40% while the number of self-employed male workers in urban areas increased from 39.5% to 40%. ...

The US Federal Reserve (Fed) Chairman Jerome Powell has provided the much-anticipated fuel to the US markets, which appeared running out of fuel after a shocking job revision. Speaking at the annual Jackson Hole symposium, he unambiguously hinted that “The time has come for policy to adjust” as “inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic”. Though he qualified his remarks by adding, “the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks”. These comments read with the minutes of the last meeting of the Federal Open Market Committee (FOMC) provide adequate ground to believe that— (i)       The current rate cycle has peaked out; and the next policy move will be a rate cut. (ii)      The policymakers are confident the spike in inflation that occurred in the aftermath of Co...

The latest earnings season (1QFY25) is almost over. the ~4% yoy growth in NSE500 profit after tax (PAT) has marginally exceeded the modest expectations of a 3% yoy growth. NSE500 revenue grew ~6% yoy. This is the slowest pace of growth since the covid affected 1QFY21. The refiners and oil marketing companies materially dragged the overall performance. Sequentially, the earnings growth slipped sharply from 4QFY24. Negative surprises outweigh, smallcap earnings failed the optimism As per the brokerage Emkay’s report, “the ratio of negative surprises jumped sharply, from 46% to 62% for Emkay coverage and 56% to 66% for the Nifty.” The brokerage however added that “The aggregate numbers were skewed owing to the Energy sector’s 30% YoY PAT drop on a high base. EBITDA margins fell by 20bps YoY to 15.1%, mostly due to a 388bp contraction for the Energy sector – most other sectors delivered strong margins.” Post the earnings, the consensus Nifty50 EPS witnessed a cut of 1.7% FY25 and 1% ...

I have received several responses to my post regarding investment in the public sector enterprises ( see here ). A majority of respondents do not agree with my hypothesis.  Their argument is that any business venture cannot be sustainable if it is not run for profit. For decades, PSEs have incurred losses and have been supported with public money. In the past one decade the policy towards PSEs has witnessed a paradigm shift. The focus has shifted to make PSEs profitable rather than privatize them. It is in the public interest that PSEs make good money and pay dividends and capital gains (on sale of minority interests) to the government, which can be used to finance public services. A majority therefore believes that strong profitability of PSEs is in the interest of the economy in particular, and the broader nation interest in general. Some agree with my hypothesis  that presently the government does not have the constitutional mandate to indulge in “for profit” businesses. Th...

  The preamble to the Constitution of India declares India to be a sovereign socialist (emphasis added) secular democratic republic. The Supreme Court of India has held in Kesavananda Bharati vs State of Kerala Case (1973) and S R Bommai vs Union of India (1994 ), that the Preamble is an integral part of the Constitution. The Court held that the Preamble is not the supreme power or source of any restriction or prohibition but it plays an important role in the interpretation of statutes and provisions of the Constitution. The question is “whether, in the normal course, every legislation, policy, programs and practices framed and pursued by the Parliament and Executive ought to be congruent with the Preamble, to be constitutionally legitimate? Is it unreasonable to expect that the legislature and policymakers put all legislation, policies, programs and practices framed by them through the test of this declaration, before these are implemented? To clarify, these questions need to ...

The Consumer Price Index (CPI) inflation for the month of July came at 3.54%, the lowest in five years and below the RBI tolerance band of 4-6%. This has excited some market participants as their hopes of an earlier rate cut by RBI have been rekindled. I am however not sensing any imminent rate cut, for the following simple reasons. (i)       The headline inflation number is significantly impacted by a strong base effect, as the CPI inflation in the base period (July 2023) was 7.4%. Sequentially, the inflation has risen 1.42% MoM in July 2024 against 1.33% MoM rise in June 2024. As of now, there is no indication of a sustainable decline in inflation trajectory. (ii)      Core CPI inflation in July 2024 was 3.3% against 3.1% in the preceding two months. This is the first rise in core CPI after twelve months of consistent decline. (iii)    Food inflation remained sticky, rising 2.47% in July 2024 after a 2.69% rise in June 202...

In the past few months, the RBI governor has repeatedly spoken about “diversion” of household money from the bank deposits to stock markets. He has in particular mentioned rising household (retail) participation in the derivative trading, as a cause of concern for the financial stability. The securities market regulator (SEBI) has also cited high retail participation in the derivative segment as a systemic risk to the financial markets. For a common man like me, it is difficult to understand how option buying by retail investors possess any challenge or risk to the financial system and markets. My understanding of the securities markets is very elementary. Whatever little I understand, it works like this. Registered and/or authorized market intermediaries are not allowed to receive from or give cash to their respective clients. This implies that all legal transactions in the stock markets are settled through the banking system. When someone buys a security, there is necessarily a count...

“Bear market” is perhaps one of the most prominent phrases being used on social media, in the context of global stock markets. Several of the major global indices are down over 10% from their recent high levels. Japan (Nikkei 225 -17%), US Tech (NASDAQ -12%), France (CAC40 -14%), China/Hong Kong (Hang Seng -14%), and South Korea (KOSPI -11%) are some of the most talked about markets on social media. The Indian indices have not fallen materially from their recent highs. The benchmark Nifty is barely down three odd percent from the highs it recorded last week. Obviously, in India, the household investors are not yet worrying about the possibilities of a bear market, as for them the sky is still bright blue with few scattered cumulus clouds. Nonetheless, this phrase is gaining frequency in the personal discussions. From my various interactions with the market participants, I gather that many of them may have a different, and often misplaced, understanding of the concept of bear market...

The legendary Warren Buffet has been on an equity portfolio selling spree in recent weeks. His fund, Berkshire Hathaway, has reportedly raised over US$275bn in cash; which is over 20% of total assets under management. His selling in the stocks of Apple Inc and Bank of America have been reported the most. Apparently, either his team is not comfortable with the present market conditions (valuation, growth, macro, geopolitics etc.) or believes that they can get much better buying opportunities in near to short term, or both. They may be looking for better buying opportunities in terms of better stocks or better price points in the same stocks. It may be pertinent to note that it is not Berkshire Hathaway alone. A number of reputable investors have taken note of the conspicuous warning signs flashing on billboards for the past few months in particular. Yen carry-trade Hike in the policy rates by the Bank of Japan (BoJ) and strengthening of Japan is perhaps the most talked about event...