Do it yourself

In the current week, the Delhi NCR region has recorded the highest-ever summer temperatures. The mercury kissed 50 Degrees Celsius. The residents are facing acute water and electricity shortages. The polling for the ongoing general elections in Delhi and Gurgaon was held on Saturday, the 25 th of May. Both cities recorded less than 60% polling. A lot of people cited scorching heat as the primary reason for not stepping out to vote. In that sense, extreme weather has now started to directly impact the health of our democracy. Surprisingly, the entire two-month-long election campaign; thousands of election speeches; 24X7 media debates; opinion pieces in newspapers; and zillions of social media posts and memes, appear to have mostly ignored this critical issue. Both national parties have incorporated their strategy to fight climate change and protect the environment in their respective manifesto. The Congress manifesto on environmental issues is much broader and seeks to deal with th...

Ravi Bhatt, a brilliant student, completed his senior school education in 2018; went to a prestigious college in the US; completed his post-graduation in 2023. Worked some odd jobs in the interim and also interned with a top consulting firm. After finishing college, Ravi searched for a suitable job, but could not find any for more than six months. Finally, he returned to India in the autumn of 2023 and unsuccessfully tried for a decent job in India for a few months. Earlier this year he borrowed five million rupees from his father, a successful surgeon, and started trading in stocks and derivatives. Being a brilliant student, good in mathematics and data analytics, he soon developed a trading model of his own. He is now a full-time stock trader; making decent money; perhaps more than what he could have earned, working long hours for a consulting firm. Mitesh Gupta, an average student, passed senior school in 2021. He failed to pass the admission test for graduate school. He joined a ...

The minutes of the last meeting (30 April 2024 – 1 May 2024) of the Federal Open Market Committee (FOMC) of the US were released last week. The discussion provides a decent insight into the policymakers’ thought process about the near-term economic outlook and the likely policy direction. In my view, the most notable part of the FOMC discussion was the mention of a scenario that may warrant further tightening of policy. Though the participants may not have specifically mentioned the term “Rate Hike” it was very close. The minutes read, “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.” This is perhaps the first time in the past six months that FOMC participants have explicitly mentioned the likelihood of policy tightening. The FOMC participants noted that data indicated continued strong economic growth. They, therefore, sounded circumspect about the restrictiveness of the cu...

The ongoing celebrations of the Festival of Democracy shall end on 4 th June 2024, with the announcement of election results for the 18 th Lok Sabha. In the past two months, the market narrative in India has pivoted around the election outcome. Even though 4QFY24 earnings did impact the performance of specific stocks materially; speculation about the election results has mostly dominated the sentiments. Once the elections are over and the contours of the new government are clear in the first fortnight of June, the focus will shift to the presentation of a full budget for the current financial year. To keep the tradition, only an interim budget (vote on account) for FY25 was presented in February 2024 to run the government till a new government is formed for the next five years. A final budget is expected to be presented by the new government in the last week of July 2024. Some media commentators and market experts have attempted to sketch the final budget based on the election sp...

Some famous finfluencers of social media have recently commented that some large-cap stocks have underperformed the benchmark Nifty50 in the past couple of years, while the earnings and balance sheets of these companies have improved decently. These stocks are trading well below their peak valuations. Many of these stocks are trading well below their 5-year median valuations. The finfluencers are arguing that valuations of these stocks shall witness a “mean reversion” soon and these could give 30 to 40% return without any further improvement in earnings or balance sheet matrices. The most popular example cited by these finfluencers is the share price behavior of ITC Limited in 2022-2023. I have no issues with these social media stars. I will be happy if large-cap stocks like HDFC Bank, Kotak Bank, Hindustan Lever, etc., outperform the benchmark indices and yield a 35-40% return. I am happy to ignore the fact that ITC has yielded a negative return in the past year. My small inquisitio...

Verdict 2024: Market Implications An analysis of the past 30 years of market trends provides no evidence to suggest that elections, the form of government, or the strength of a particular party in the parliament impacts the market performance significantly. However, it is common to see higher volatility during or around elections. Insofar as the fear of a multi-party coalition or a fractured mandate is concerned, I believe, the investors should be relieved by the prospects of a true coalition coming to power. Because, in the post-independence era, the best periods for the Indian economy have been those when a “coalition” government was in power. It is however important to note that by “coalition” I do not mean just a multi-party government. In my view, coalition government means where people with diverging socio-economic policies jointly participate in a government. Empirical evidence suggests that such coalition governments in India have agreed on a common minimum agenda and foc...

“Did you notice that no politician takes moral responsibility for any wrong these days!” In the past two months, many readers have asked about my expectations of the outcome of the ongoing general elections and the likely impact of it on the Indian economy and financial markets. I am glad to offer my opinion, with the rider that I am an independent observer of Indian politics and have no affiliation or inclination towards any particular political party or group thereof. Economic impact I believe that in India economic policies, and therefore financial markets, are politics agnostic. I do not see the outcome of general elections impacting the Indian economy in any significant manner. A study of the history of Indian politics would suggest that, unlike the Western democracies, only an abysmal minority of Indian voters are strongly committed to a political or socio-economic ideology. Contemporary issues, personalities, and election promises usually dominate the political discourse...

Polling for the fourth phase of the 18 th general elections ended yesterday. Electorate from 380 Lok Sabha constituencies have exercised franchise to elect their national representatives. Over the next three weeks, eight states (full or partial), NCT of Delhi, and four union territories will vote in three phases. With 70% voting already over, a fair estimate of the national trends could be made by the experts. Since the Election Commission of India (ECI) does not permit the publication or communication of the results in any other form of Exit Polls conducted by various agencies until the completion of voting for all seats, we do not have any expert opinion available about the likely outcome of the ongoing elections. However, a variety of guesstimates are available on social media and other platforms. Most of these guesstimates are speculative. These are either based on a small and localized sample; or gambling trends. Many stock market experts have also presented their scenario an...

Economists, monetary policy experts and market commentators have been talking about the dilemma the Bank of Japan (BoJ) is facing for the past few months. As the BoJ simultaneously fights both the inflationary and deflationary pressures in the Japanese, it finds striking a balance between JPY exchange rate and Japan Government treasury bonds (JGT) yields a big challenge. The Japanese economy has been facing a deflationary trend for more than three decades. After the global financial crisis, the trend accentuated further. In 2016, the Japanese authorities decided to trigger inflation by keeping policy rates below zero. Massive “free money” was pumped in the economy to boost economic activity by achieving a sustained inflation rate of 2%. Consequent to the ultraloose monetary policy, the debt in Japan has swelled to 250% of GDP. It was not a major problem till the major trading partners like the US were also keeping the interest rates close to zero and following an expansionary monetary...