Do it yourself

इशरत - ए - क़तरा है दरिया में फ़ना हो जाना   दर्द का हद से गुज़रना है दवा हो जाना — मिर्ज़ा ग़ालिब (Aspiration of every drop of water is to get extinguished by immersing itself into the ocean. For a person who is hurt in love, extreme pain is the only relief.) I interacted with a small but reasonably representative sample of investors in the past few days. The interactions were in person meetings, discussions over telephone and WhatsApp chats. We discussed a wide range of topics that are current in investors’ memory. The idea was to understand their current outlook on markets. From my discussions I have concluded that currently a majority of investors are ambivalent about their investment outlook and strategy. They are perplexed, greedy, fearful and relieved all at the same time. The following are some random thoughts based on my latest interaction with a sample of investors. Some random thoughts It is customary to read and quote investment classics duri...

 A barrage of bad news has made the market mood rather despondent in the past one month. The enthusiasm created by the “path breaking” budget did not last even for a whole week. Issues like macroeconomics (growth, inflation, current account, yields, INR), geopolitics (Russia-Ukraine), politics (state elections) and persistent selling by foreign portfolio investors (FPIs) have dominated the market narrative in the past one month. The trends in corporate earnings also did not help the cause of market participants. While from their respective all time high levels recorded between October 2021 and January 2022, the benchmark Nifty is down ~11%; the second most popular benchmark Nifty Bank is down ~16%, the Nifty Midcap 100 is down ~14% and the Nifty Smallcap 100 is down ~17%. In strict technical terms, Indian markets are still some distance away from a bear market. However, if I may use the Weatherman’s phrase “Indices are in correction mode, but feels like bear market”. The tend...

The National Statistical Office (NSO) recently released national income estimates for 3QFY22 and advance estimates for the entire year FY22. The key highlights of the GDP data are as follows: 3QFY22 – Overall deceleration in growth ·          GDP grew 5.4% yoy, despite a favorable base (3QFY21 growth was 1%). ·          Private consumption witnessed decent growth of 7% in 3QFY22. But the public consumption expenditure growth was poor at 3.4% (3QFY21 at 9.3%). ·          Capital expenditure growth was weak at 2% (2QFY22 was 15%). ·          Industrial growth weakened to 0.2% vs. 7% in 3QFY21, mainly due to weak growth in manufacturing and electricity generation. ·          Agriculture and allied sectors growth was also weak at 2.6% ·        ...

  As I indicated last week ( see here ) to me markets are not looking good, at least for now. And it is definitely not only due to the latest episode of Russia-Ukraine conflict. This conflict has only added to the caution. My primary problem is the lack of adequate growth drivers for the Indian economy. There is a virtual stagflation in the domestic economy, constraining private consumption. The exports have helped in the past couple of years to some extent. However, the higher probability of slowing growth in the western countries due to tightening monetary policies and the spectre of a prolonged geopolitical conflict in Europe and probable reorganization of the global order (political realignment, trade blocks, currency preferences, energy mix etc.) clouds the exports’ growth in FY23. Another key driver of growth in the past few years has been public expenditure. The government made decent cash payments to the poor and farmers to support private consumption. It also accelerat...

  “Kaya lag raha hai?” (How is it looking?) I am sure most of the financial market participants must be overwhelmed by this question in the past week. Obviously there is no accurate answer to this question in the present uncertain and volatile times. Regardless, every market participant is trying to answer this inquisition to the best of their ability and understanding of the situation. As the situation is still evolving and new complexities are getting added with each passing day, it is natural that the answers to this question will keep changing every day, and sometimes even within the same day. If I have to answer this question as someone who is an independent observer of the markets, I would prefer to take a myopic view of the market rather than getting influenced by the hourly news flow. Also, I would mostly remain focused on the Indian markets, as my lenses do not show me the long distance view. For example, I am incapable of commenting on the likely effect of the Russia-Uk...

The stock market participants, who invested or traded in stocks in the 1980s and 1990s would remember how tedious it was to buy stocks and get the ownership transferred in their own name. “Bad delivery” and “lost dividends” were such a big nuisance. Then dematerialization of securities was implemented and things changed forever. Research has shown that investors of that era still consider “dematerialization” as the single most important reform in financial markets. Many of the market participants who started to participate in markets after 2000 even might not be aware that people holding securities in dematerialized form are technically not the legal owners of such securities. They are only beneficial owners of securities– implying that they have the legal right to receive all benefits accruing in respect of those securities. This beneficial ownership is freely transferable, subject to regulatory lock-in and other legal restrictions. The legal ownership of the dematerialized securiti...

The Union Cabinet of the UPA government headed by Dr. Manmohan Singh had approved the draft of “The Land Titling Bill, 2010”. This was supposed to be a model law to be adopted by all states and union territories. The objective of the proposed legislation was, inter alia , to provide for a uniform law across the country “for the establishment, administration and management of a system of conclusive property titles with title guarantee and indemnification against losses due to inaccuracies in property titles, through registration of immovable properties”. The Bill was prepared by the Rural Development Ministry’s ‘Department of Land Resources’  to bring uniformity across the country and replace the existing deeds system fraught with excessive litigation due to inaccuracies in property records. It is a well-known fact that the present system for keeping records of property titles and transactions has numerous inadequacies. There are multiple, usually unconnected, agencies involved ...

  The latest result season (3QFY22) has ended on a mixed note. While aggregate numbers look on expected lines, the internals however show a different picture. There is significant divergence in performance of various sectors. In fact, the number of companies that did not meet market expectations is higher than the number of companies beating the expectations. Raw material inflation hurt most of the manufacturing sectors. Lack of pricing power in view of poor demand thus resulted in margin compression for most of the manufacturing sector. Financial sector was the brightest spot with credit demand accelerating, and asset quality, recoveries & profit margins improving. IT Services and Real Estate were other sectors that witnessed better performance on better demand environment. Metals and mining had another great quarter as prices remained elevated, with non-ferrous performing better than the ferrous metals. Oil & Gas sector performance however was below expectation. Though th...

This world is like a prism. You see different pictures, colours and hues depending upon from which angle and under what light you are viewing the world. Therefore, while all views and colours are equally valid, your "truth" is always what you see from the point you are standing at a given point in time and under the current light. In the past few months, inflation has become one of the driving narratives of monetary policy world over. From Brazil to Britain, and Australia to the Eurozone, the central bankers have expressed concerns over rising prices. Over 30 central banks have actually raised policy rates in the past 12months to control inflation. The US Fed is also widely expected to embark on a path to accelerated rate hike from next month onward. Insofar as the monetary policy impact on inflation is concerned, in my view, in the latest episode, inflation (rate of increase in the prices) is not the only problem. It is the current price level that is hurting people seve...

I firmly believe that faith is a better decision making tool than logic. Faith lets you unconditionally accept or reject things. It makes it easier to believe or doubt the things you are thinking about - making the decision making easier and faster. Logic, on the other hand, agitates the minds as it questions the beliefs and raises doubts. It often leads to protraction (and often prevention) of the decision making. It is of course subjective opinion and could be challenged by logical thinkers. Regardless, my experience in life is that whether the decisions are right or wrong is only known in hindsight. There is little empirical evidence available to me, to prove beyond doubt that the impulsive decisions are less or more effective than the decisions taken after applying deep logical thinking. So, I usually take the easier route to the decision making that saves me from thinking and The context for mentioning this is a little complex. It is widely expected and accepted that the Federal...