Do it yourself

 In the past one week, I discussed the current situation in the Indian financial markets with some seasoned investors and experienced market participants. It was after almost three months that I got an opportunity to discuss the markets with such an enlightened group of people. Mood of markets definitely appears to have changed remarkably since June 2022. After my interaction with some senior market participants (bankers and investors) I had noted that the mood was rather despondent. The consensus in June appeared strongly in favor of a slow grind over the next 6-9months. The reference point of discussion was mostly the 2008 market crash. The market participants sounded cautious about rising cost of funds and drying liquidity; and feared major defaults that could trigger a global contagion. ( see here ). Reactions of the market participants this time were diametrically opposite. Most of them were in fact trying more to convince themselves about “all is well” rather than discuss...

  Chasing multibaggers Identifying and investing in “multibagger” stocks has always been a popular topic of discussion in the context of equity investments. The annals of stock markets are replete with folklore about how famous investors successfully identified and invested in “multibagger” stocks and made extraordinary returns. The marketing pitches made by several financial service providers often include the claims of identifying multiple “multibagger” stocks at the “right time” and riding on these till the end. Drawing inspiration from these folklores and claims, many investors strive to find “multibagger” stocks for investing. However, as the anecdotal evidence would suggest, very few of them are actually able to identify and invest in such stocks. It is also common to find investors lamenting that they did actually identify a potential “multibagger” at the right time, but either did not invest in it; or invested an insignificant amount in it ; or the worst, exited the...

The National Statistical Office (NSO) released the estimates of National Income for the first quarter (April-June) of the current fiscal year (2022-2023) on Wednesday evening. A lot has already been written, said and debated about the reported GDP/GVA numbers. Apparently, the reported yoy GDP growth of 13.5% for 1QFY23 is slightly short of what the market consensus was expecting. In my view, the economic growth of India has been grossly inadequate and unbalanced, especially in the past 5yrs. The worst part is that the manufacturing and construction sectors that are traditionally considered having material employment generation potential are growing the least. It is primarily the exports that have helped the Indian economy to grow at the rate of 1.4% CAGR in the past 3years. Given that the global economy has perhaps entered a phase of protracted slowdown or sub-optimal growth, the exports may not sustain the Indian economy for too long. The markets must take cognizance of this. Especial...

  ·           The European continent is facing its worst drought in 500yrs, leading to crop devastation, loss of livestock, wildfire, water shortages and accelerated glacier melting. The situation in about half of the continent is alarming – soil is losing moisture and vegetation is under stress. ( read more ) ·           Western states of the United States have witnessed persistent drought conditions in the past couple of decades. It is the longest and driest stretch in the past 1400yrs. A study published earlier this year suggested that “there’s a very strong chance the drought will continue through 2030.” The soil moisture in the affected states is at historic low. Studies have indicated that a couple of good years of rain are highly unlikely to change the drought situation materially. ( read more ) ·           Many provinces of China are witness...

It is a basic human tendency to long for what they do not possess. It is common to find people who have struggled very hard to achieve certain goals; but almost instantly feel dissatisfied with (or indifferent to) the outcome. They either realize that it was not something they actually wanted in the first place; or they immediately shift the goal post and begin to struggle/strive for a different/higher goal. This basic human tendency, that often manifests in a constant need to move, evolve and grow, is at the core of all economic growth and development. And perhaps this is the key factor that undermines the issue of sustainability. Metaverse is nothing but a realization that humans never wanted to globalize in the first place. They like to remain confined to their caves and tribes. It was perhaps the starvation and disease that would have forced the first tranche of immigration. Of course since the end of the stone age, this realization has taken more than 5000 years; many rounds of po...

In the past one month the benchmark Nifty50 index has gained over 7%. With these gains Nifty returns are now positive YTD2022 as well on a one year basis. In fact, the August 2022 Nifty Future expiry was the highest since October 2021 Future expiry of 17857. Even for Bank Nifty, the August 2022 Future Expiry was highest ever; since October Future expiry of 39508. Indian equities are now outperforming most major global markets on a one year basis. On one year bsis Nifty is now higher by ~6%.In this period, IT (-15%), Pharma (-8%) and Small Cap (-4%) are notable underperformers; while Energy (+39%), Media (+33%), Auto (+33%), PSU Banks (+30%), Realty (+21%) and Midcap (+14%) are notable outperformers. The ~7% gain in the past one month has been led by Metals (+13.5%), Private Banks (+9.9%) and Energy (+9.8%). Pharma (+2.3%) and FMCG (3.3%) have been notable underperformers. This strong market performance has occurred in spite of  – (i) below par 1QFY23 corporate performance; (i...

  Some of the most popular video clips shared on social media in India in the recent past were of India’s External Affair Minister, Mr. S. Jaishankar, giving stern replies to the global media about India’s stand on Russia-Ukraine war. In these clips, the minister is seen ‘exposing’, the hypocrisy of European media and politicians in raising questions over India’s purchase of energy from Russia, despite sanctions imposed by US and EU, while the European countries continue to buy natural gas from Russia. Most social media constituents who shared these clips cited the confident and unabashed counteroffensive by the Indian minister as a harbinger of ‘rising India’ and ‘declining west’. I personally have no disputes with the social media warriors on this issue. It does feel good to see a representative of the Indian government taking a firm stand against the developed nations on global platforms. However, the point I am presently more concerned about is ‘declining west’. Worsening d...

Some notes on the current state of the Indian economy. Monsoon ‘abnormal’ so far The monsoon season this year has been quite erratic so far. Statistically, during the period from 1 st June to 22 nd August the country has received 9% more than the normal rainfall. However, the temporal and spatial distribution of rainfall has been quite abnormal so far. ·          252 (36%) of the 703 districts in the country have witnessed ‘excess’ (20% to 59% above normal) to ‘large excess’ (60% or more above normal) of rains. ·          236 (34%) districts have received ‘normal’ (upto 19% above or below normal) rains. ·          215 (30%) districts have received ‘deficient’ (60% to 59% below normal) to ‘large deficient’ (more than 60% below normal) rains. ·          More importantly, the granaries of India – UP, Bihar, Jharkhand, ...

From various recurring events that generate significant anticipation and anxiety amongst market participants, the speech of the US Federal Reserve chairman at Jackson Hole annual symposium is the most popular one. This year the speech is scheduled to be delivered on 26 th August. Since, the markets are again filled with anticipation and anxiety. I find it pertinent to highlight a few things about the event and its likely consequences. Jackson Hole is Davos in Wyoming Later this week the Fed Chairman Jerome Powell is scheduled to make a speech in a symposium held in Jackson Hole valley (Wyoming, USA). This annual symposium, sponsored by the Federal Reserve of Kansas City, has been held since 1978; and in Jackson Hole since 1981. The symposium is usually held in the month of August, just ahead of the pre scheduled US Federal Reserve Open Market Committee (FOMC) meeting in September. Many prominent central bankers, finance ministers, reputable academicians and market participants ta...

Notwithstanding the official position about the state of economy in the US, the market is building an elevated probability of a recession (or a recession like, if I may say so) situation in 2023. The short term (1-2yr) bond yields are now higher than the benchmark 10yr yields in a number of developed economies, including US, UK, Canada, Sweden, and emerging economies like Brazil, Mexico, Hong Kong, Turkey, Pakistan etc. Historically, the yield curve inversion has been a harbinger of recession in the majority of instances. For example, in the case of the US, the yield curve inversion has been followed by a recession in all of the past seven instances. In this context, it is important to note that the US Federal Reserve (Fed) and European Central Bank (ECB) have unambiguously stated that they are willing to accept a measured slowdown in the economy to achieve the goal of price control. The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) also stated categorically that f...