Do it yourself

A multitude of data highlights that the participation of non institutional investors (and/or traders) in the Indian equity market has increased significantly in past few months. Many market observers have commented that it may in fact be a global phenomenon. Since, I do not have access to adequate authentic information about the global equity markets; I would restrict myself to Indian markets here. As per the data available till last week, the share of non institutional volume on NSE has increased from 44.75% in February to 74.56% in July. In this period, the average daily market volume has increased from Rs51227cr to Rs59844; whereas the non institutional daily average volumes has almost doubled from Rs229bn to Rs446bn. This is unprecedented and surpasses both bubble markets (1999-2000 and 2007-2008).   Unlike the previous two episodes of bubble formation in markets, this rise in non institutional participation has coincided with sharp fall in the flows to mut...

Continuing from last week ( see How will this tiger ride end? ) As per various reports, central banks and governments worldwide have unleashed more than $15 trillion of stimulus to counter the economic slowdown caused by the outbreak of COVID-19 virus. Considering that the global economy had still not recovered fully from the global financial crisis (2008-09), this slowdown appears much more serious. It is like a cancer patient relapsing after responding to the treatment and showing some signs of recovery. As per the estimates made by the Institute of International Finance estimates (IIF), total global debt has risen $87 trillion since 2007. Out of this government debt accounts for about $70 trillion, while the rest is private debt. The IIF estimates show that the total global debt may rise year to over 340% of the global GDP, assuming moderate recession of 3% in Global GDP. A more severe decline in economic activity will of course make the situation worse. The questio...

Mukesh Dhirubhai Ambani becoming the sixth richest person on the planet earth has been adequately highlighted in Indian media, much more than his younger sibling Anil Dhirubhai Ambani pleading state of total penury in a UK court few weeks ago. Twenty years ago, Wipro Chairman Azim Hasham Premji was rated as the fifth richest person on Earth and the Richest in India. At that time, he could have exchanged his 75% holding in Wipro worth US$47bn, for 100% ownership each in Reliance Industry, Hindustan lever and Infosys Technologies, and still keep enough change to survive for two generations. Having committed most of his wealth to charity, today Prem Ji is known for his generosity and philanthropic pursuits and not for his wealth. This is however not the point of discussion here. Many readers have asked for my views on Reliance Industries, especially in light of the impressive growth agenda presented in a grand digital show, watched by millions. I would like to share my th...

Recently the SEBI chief was quoted saying that exempting companies from declaring 1QFY21 results by allowing them to combine 1QFY21 and 2QFY21 will be detrimental to the interest of investors. He reportedly said that "Without companies declaring their results for a quarter, investors, financial analysts and media might make their own estimates about companies' earnings, which could be less reliable and speculative". If this is really the thought process of regulator than it must be a cause of worry for all, especially investors. A regulator laying so much emphasis on quarterly earnings of companies highlights the adhoc nature of our regulatory framework for the market. It is pertinent to note that financial analysts and media do make their own estimates much before companies declare their results. The companies' performance is widely reported and evaluated by analysts and media in comparison to these estimates. The tone of the reporting is always th...

A large part of global economic and financial research these days is focused on the burgeoning debt at all levels - government, business and household. The global government debt is now estimated to be 105% of global GDP and is still rising briskly. In the year 2020 itself the global government and private debt burden may increase by US$200trn, approximately 35% of global GDP. According to Bank of International Settlements, the percentage of companies with less than one interest coverage ratio has exploded since the global financial crisis (GFC). This number is witnessing sharp rise in the wake of COVID-19 led economic crisis. In Indian context also, we have seen sharp rise in fiscal deficit (rise in government debt); corporate debt and household debt. Also, the quality of debt has deteriorated materially at all levels. The ratio of India’s public debt to GDP is expected to scale a new high at the end of FY21 due to record borrowing by the central and state governments and...