Do it yourself

While the equity markets have generally welcomed the Union Budget for FY23, the bond market seems to be majorly disappointed. It may be pertinent to note that the government bond yields had started rising in December 2021 itself, even though the April-October 2021 deficit numbers were very encouraging; and the RBI had categorically assured that the policy stance will continue to be “growth supportive” irrespective of the rising price pressures. YTD 2022, the benchmark 10yr yield has seen a sharp surge, rising over 55bps. With this the benchmark yields are higher by 100bps from 2020 lows. The higher yields have however not transmitted to the lending rates. Perfect storm in the bond street A perfect storm seems to be developing in the Indian bond market. ·          The net government market borrowings are most likely to stay elevated in the midterm as fiscal consolidation is expected to take longer than previously estimated. ·   ...

After struggling to understand the economic survey and budget documents for more than 36hours, I have concluded that at least in matters of government, ignorance is actually bliss. In my view, a presentation that makes overwhelming use of technical jargon, complicated arguments, and statistical manipulation, usually implies lack of conviction in the presenter. Moreover, a presentation which does not take into consideration the comprehension level and linguistic abilities of its audience is a futile exercise. Usually such presentations are the outcome of either poor communication skills of the presenter; or mala fide intent of the presenter. Presenters tactically overuse technical jargon and complicated arguments to overwhelm the audience so that they could be distracted from noticing the shortcomings. In my view, the latest budget and economic survey are clear cases of poor communication. They follow the principle of “Form over Substance”, as these conceal more than what they reve...

The finance minister presented the union budget for FY23 this morning. The 90minutes speech was apparently the shortest budget speech delivered by the incumbent finance minister. There is little doubt that the presentation of both the budget and economic survey are smartly aimed at markets and investors. The two fundamental ideas underlying the budget speech appear to be – (i) the government is now in a hurry to catch the digital train it has been missing for past more than a decade; and (ii) the government is earnestly keen to plug the leakages and loopholes in the taxation system. Though the budget speech and economic surveys have made overwhelming use of digital and management jargon, signifying that professional managers are now running the policy defining exercise at North Block, I would try to derive the key message from the budget in common man language. Positive take away The three best features of the Union Budget for FY23 are perhaps The general status quo on tax ra...

 Let’s consider India as a company; annual budget as the annual account for the current year and forecast for the next year and the budget presentation in the Parliament and subsequent press conference as the conference call with various stakeholders. An investor who wants to invest in this company would want to objectively analyze: (i)     The past performance of the company in terms of growth; (ii)    The credibility of the management in terms of professionalism, integrity, execution and delivery on promises; (iii)   The future prospects in terms of growth, competitiveness, financial stability, cost of capital, price stability, etc.; and (iv)    The relative positioning in terms of expected returns, access to markets, regulatory flexibility, costs (taxation etc.). The past performance of the Indian economy in terms of growth has not been particularly outstanding, especially in the past one decade. The growth trend appears to hav...

  Expectation is a strange animal. More you beat it, the stronger it rises. Consistent underachievement is perhaps the only way to kill it. This is that time of the year when everyone gets an opportunity to express their wishes to the finance minister. Even though there is no empirical evidence to suggest that the finance minister would oblige even a significant minority of aspirants – not because she does not want to; but simply because she cannot. Contours of the annual union budget It is important to note that the finance minister of India is like the CFO of a business corporation. Her job is to keep account of the receipts and expenditure of the government; manage resources necessary for executing the plans approved by the Cabinet; ensure optimum utilization of available resources; and keep adequate provision for meeting the contingencies. She is accountable to all the stakeholders, insofar as the transparency of accounts is concerned. Her discretion is however limited ...

The weather in the market has changed rather dramatically over the past two weeks. As we changed the calendars about four weeks ago, it was a partially clouded sky, but no one was forecasting a hailstorm, the markets are witnessing for the past 6 trading sessions. Seven odd percent fall in the benchmark Nifty is certainly not indicative of the damage that has been caused to equity investment portfolios, as the theater has been mostly outside the Nifty. The sharp correction in equity prices is nothing unusual. In fact it has been a regular feature of the markets ever since the advent of public trading of corporate. However, in modern times this volatility assumes a wider socio-economic significance because the markets have become increasingly democratic. The access to the market is no longer confined to an elite section of the society. Investors in listed equities now come from all walks of life – young college students to old pensioners and top metros to the poorest districts of the ...

  The latest edition of the World Economic Forum’s global risk report ( The Global Risk Report 2022 ) offers some valuable and interesting insights into the current global risk perceptions and areas of concern. The key message is that “A divergent economic recovery from the crisis created by the pandemic risks deepening global divisions at a time when societies and the international community urgently need to collaborate to check COVID-19, heal its scars and address compounding global risks.” The clear and present global challenges include “Supply chain disruptions, inflation, debt, labour market gaps, protectionism and educational disparities are moving the world economy into choppy waters that both rapidly and slowly recovering countries alike will need to navigate to restore social cohesion, boost employment and thrive. These difficulties are impeding the visibility of emerging challenges, which include climate transition disorder, increased cyber vulnerabilities, greater barr...

  ·          In a recently published paper International Renewable Energy Agency (IRENA) said that hydrogen could disrupt global trade and bilateral energy relations, reshaping the positioning of states with new hydrogen exporters and users emerging. IRENA sees hydrogen changing the geography of energy trade and regionalising energy relations, hinting at the emergence of new centres of geopolitical influence built on the production and use of hydrogen, as traditional oil and gas trade declines. IRENA estimates hydrogen to cover up to 12 per cent of global energy use by 2050. “Hydrogen could prove to be a missing link to a climate-safe energy future”, Francesco La Camera, Director-General of IRENA said. “Hydrogen is clearly riding on the renewable energy revolution with green hydrogen emerging as a game changer for achieving climate neutrality without compromising industrial growth and social development. But hydrogen is not a new oil. And ...