Do it yourself

The Reserve Bank of India, in its latest policy review, refrained from making any projection for the economic growth for the current fiscal year. It however admitted that the economy may see some contraction in the current fiscal year FY21. Post announcement of economic performance data for 1QFY21 a number of agencies and brokerage firms have reduced the full year FY21e GDP contraction number to ranging from -5% to -11%. Similarly, the fiscal deficit number for FY21 now range from 6.5% to 8.5%. Recently, the former governor of RBI, Dr. C. Rangrajan surprised the markets by stating that FY21 GDP may actually post a small growth instead of contraction. This was a clear departure from his views expressed a couple of months back. A paper titled ‘India’s Growth Prospects and Policy Options: Emerging from the Pandemic’s Shadow’, jointly written by Rangarajan and India EY India chief policy advisor D K Srivastava noted that notwithstanding the forecasts of GDP contraction made by many n...

One of the most popular concept of invetsing is the "power of compounding". Almost every prominent investor and financial author has emphasized on this concept. The principal of compounding, insofar as financial investments are concerned, works on the basis of three key factors (a) regular investment; (b) staying invested for long period; and (c) rate of compunding. To take full advantage of the power of compounding, it is therefore essential to: (i)     Invest regularly; (ii)    Reinvest the return on investment; and (iii)   Try investing at the maximum possible rate of return, without of course compromising the safety requirements. Does this imply that the concept of compunding is relevant only for investors who could "buy and hold" an investment for sufficiently long period of time? This question is more pertinent to answer is whether the concept of compounding is relevant for stock traders also; especially when currently the markets are be...

Two inquisitions from readers in past one week have kept my mind occupied for most of the week. The questions are not new; rather these are the most routine questions I get from readers (usually small individual investors). I have answered it many times. But still I keep getting it repeatedly, even from the same people. This makes me wonder why do we investors refuse to learn the art of investing, despite an abundance of wisdom easily available for free on the internet and our own experiences! The inquisitions were: (a)    Yes Bank is down more than 95% from its 2018 peak. How much more it can fall? Can I buy this? (b)    ITC is up more than 40% from its recent lows. Should I buy it or wait for correction? Well, I cannot comment on stock specific queries. But let me answer it the following way. Please note that this is only for illustration purposes and not an investment advice. (a)    15yrs ago, Suzlon Energy Limited, a renewable energy major, ...

In past few months, the rally in stocks markets, bonds, precious metals and resilience of energy prices despite diminishing demand due to lockdown have been subject matter of intense debate and extensive analysis. It has been strongly argued that prices of financial assets may not be in sync with the economic realities. Given that the corporate earnings are likely to remain suppressed for an extended period of time; and the government's fiscal discipline has been violated, ideally the stocks and bond prices should have fallen. The data also indicates that the Indian consumers' demand for gold has fallen sharply in past few years. India, one of the largest importers of gold has been importing less gold since 2017. The world gold council expects the Indian gold demand to hit 26yr low in 2020 (see here). Theoretically, this should have checked the prices of bullion too. The demand of petroleum products has also contracted in past 5 months. Nonetheless, prices have risen for stocks...

The economic growth in first quarter of current fiscal year (FY21) contracted ~24% as compared to 1QFY20. The data released on Monday evening was not shocking as this quarter was impacted by the total lockdown of economy to mitigate the impact of COVID-19 pandemic. However, it was surprising to the extent that it surpassed all the worst case estimates and is the worst economic performance amongst all major global economies. The sharp economic contraction has come after a sustained economic slowdown over past four years. The investment activity and new employment creation has virtually collapsed in post demonetization (November 2016) period. The household savings, which traditionally cushioned the fiscal profligacy of governments, have declined sharply and rate of incremental rise in per capita income has also declined. The wealth and income inequalities have seen sharp rise causing widespread civic disquiet in the country. The stress on financial sector is not easing materially des...

Many years ago Mr. Kishore Biyani started the business of organized retail of readymade garments. Few years later he expanded his offering to groceries, electronics, furniture, ethnic crafts etc. He grew fast through organic and inorganic methods. He brilliantly assessed the markets and conceived the business formats to suit those markets. Established good quality stores across the country and gave organized retail a strong foothold in the country, before the likes of Tata, Birla, Goenka, Damani and Ambani entered in the fray. However, business of Mr. Biyani always remained in stress. Lot of hopes were raised when he reorganized his business post global financial crisis by selling his flagship Pantaloon format to Birla and rechristened his business group as Future Group. However, as I understand, inventory and financial mismanagement always kept the group under stress. For some years it was very clear that Mr. Biyani will have to materially dilute his stake in the group to mitigate...