Do it yourself

  The statistics for economic growth during 2QFY21; consumption, investment, exports and financial indicators etc. for the month of October were announced last week. The data has been received very enthusiastically. The general commentary is that the growth is “surprising”, and the recovery is much quicker and superior that previously estimated. The “buoyant” data and further encouraging news on vaccine development & launch kept the momentum in the stock market busy yesterday. Since, most of the “surprised” reports are basing their arguments on the “Pre-Covid” and “Consensus Estimate” benchmarks; I find it pertinent to note the data with the usual year on year comparison. 1.    The production in eight core industries has contracted for eight consecutive months. In October 2020, the index of core industries fell by 2.5% compared to October 2020. It is important to note that in the base month October 2019, index had also contracted 5.5%. While coal, fertiliser, cem...

“Generation gap” has perhaps been a subject of study, discussion and debate ever since beginning of civilization. The new generations have been adopting new ways and methods of living, and the older generations have been rejecting these ways and methods as degeneration. The human civilization has evolved, regardless of this persistent conflict between experience and experiment. It could be matter of debate whether experience is good as a guide or driver. But in my view, there is no doubt that the innovation (experiment) of new ways and methods of living and doing things has been the primary driver of the human civilization so far. With the advancement in science and technology, the life span of people has increased materially in post WWII era especially. This expansion in life span has material impact on the dimensions of “generation gap”. The gap which was historically visible mostly between grandfather and grandsons is now sometime visible even in siblings born 5-6yrs apart. In...

 The classical Bollywood blockbuster Mother India (Mehboob Khan, 1957), was one of many Indian movies of that era that exposed the ugly realties of Indian society, especially feudal dominance, repression of destitute, and exploitation of women. But made Mother India a classic was the courage and grit of a destitute woman, who stood not only against the oppressor but also against her own son who decided to rebel and take the path of crime and violence. One particular instance from the movie that has stuck to millions of minds is about the pledge of gold bangles by the protagonist Radha (played by Nargis) to the unscrupulous money lender Sukhi Lala (played by Kanhaiya Lal) to repay an old debt. In the end, the rebel son of Radha, Birju (played by Sunil Dutt), attacks Sukhi Lala’s household and forcibly takes the bangles and kills Lala to avenge the atrocities done by him to his family, especially his mother. The pair gold bangles thus became the symbol of feudal repression, women exp...

In past few days the weather in India has changed rather swiftly. The winter has set in couple of weeks of early. The higher mountains are already covered with snow. North of Vindhyachal, the air has distinct chill; in South the weather is pleasant. The atmosphere is generally hazy, with heavy cool air not letting the pollution fly away. In political troposphere also, the heat has subsided with conclusion of intensely contested elections for Bihar assembly. However, the political stratosphere continues to remain hot and dusty, as the political leaders move further east towards West Bengal with their retinue. In financial markets also the season has changed. Past couple of months has not seen any noticeable disaster in corporate debt sphere. Hopes of recovery have been rekindled with many beleaguered borrowers (DHFL, IL&FS, Jet etc.) showing some encouraging signs. The suspended debt schemes of Franklin Templeton have also given hopes to investors that a significant part of thei...

It is a tradition amongst local brokerage houses, which primarily cater to the domestic household clients, to present a list of their top stock ideas to their clients on every Diwali. The ideas are presented usually with one year investment period, i.e. till next Diwali. Reading through the presentations of various brokerages this year, I found the following key messages: Kotak Securities As we advance towards getting the vaccine (by middle of next year) and economy gets back to normalcy, we can expect the economy driven sectors to outperform the defensives in Samvat 2077. Banks, NBFCs, automobiles, oil & gas, telecom, utilities, capital goods, cement and metals could come into focus in Samvat 2077. The potential upside in most of these sectors based on our one year price targets ranges between 20 & 39% (Vs single digit potential upside in Nifty50). Since most of the economy driven sectors are prone to market correction one should have an accumulation strategy in them rat...

 For past many years, it has become a tradition for popular market participants (brokers, fund managers, large investors, analysts etc.) to don finest attires and appear on special Diwali shows hosted by various TV channels to announce their prophecies for the traditional Indian New Year. In the spirit of the festivals of light, they enthusiastically speak about their outlook about the economy, financial markets, and investment opportunities. In earlier years, these prophecies were taken seriously by the audience, mostly household investors. However, based on my interaction with several people from the targeted audience, I feel, now days most people listen to the experts for validating their own positioning rather than for guidance. Whether in consonance of their positioning or otherwise, these prophecies are drowned in the noise of firecrackers on Diwali night itself. However given the mobility restrictions and popularization of digital media due to Covid-19 this year, most ex...

  The benchmark Nifty retraced to it all time high level recorded on 14 January 2020. It erased all the losses incurred due to a disappointing budget (from market expectations perspective) and outbreak of Covid-19 pandemic leading to a nationwide shutdown. In a year full of disappointments and despondency, this small and seemingly irrelevant event brought cheers and ignited hope for a better new year. Not to undermine the enthusiasm and positivity around the event, I would just like to highlight three small points: 1. On a longer horizon, after spending a decade in a flat channel, equity markets had been broadly moving higher in a widening channel since 2003. There could be multiple reasons for this strong up move, punctuated with multiple deep corrections. However, if we have to narrow our search, I would list the following three reasons as the primary drivers of markets: (a)   Mostly easy monetary policies of the global central bankers. (b)   Change in valuati...

 I have always believed that “equity investment” is a serious business but mostly done in a casual manner. In past three decades I have observed that most investors take equity investment decisions based on factors that are not related to the underlying business of the company they are investing in. While this may be more true for the small household investors (Retail) and High Networth Individuals (HNI); the professional fund managers (Institutions) and large traders are also seen taking decisions based purely on factors like politics, geopolitics, and monthly or weekly data (trade, jobs, production), etc. No wonder the “breaking news” on TV channels causes more volatility in stock prices than the management guidance about the business of the company. I have seen many Retail and HNI investors spending less effort and time in taking equity investment decisions than they would normally spend on buying a shirt. And worst, they spend much less effort and time in taking a decision to...

 My dilemma this morning is whether I should be concerned about the internal politics of the United States of America, as most of my colleagues and financial market participants appear to be! In past 20yrs, we have seen George Bush Jr. (Republican, 8yrs), Barak Obama (Democrat, 8yrs) and Donald Trump (Republican, 4yrs) as presidents of United States. In these 20years, India witnessed Atal Bihari Vajpayee (NDA, 3.5yrs), Manmohan Singh (UPA, 10yrs) and Narendra Modi (BJP, 6.5yrs) as India’s prime minister. Evidently, a Socialist India (UPA) has lived well with Republican US (Bush); and a free economy supporter India (BJP) has lived well with Democrat (Obama) US. In past two decades, we have achieved progress in our civil nuclear program and we have been able to materially enhance our relationship with key US allies like Japan, Australia, UAE, Saudi Arab, and France; while maintain our strong relationship with Russia and Iran. The relationship with China has been volatile all throug...

 The work on developing as crypto currency started in early 1980s. The idea was to create a medium of exchange that is independent of any central authority, is based on trust and is accepted by distributed consensus. The process was formally commercialized in 2009 with release of Bitcoin, the first decentralized crypto currency. May be uncertainty over future of fiat currencies post global financial crisis (which led to printing of unprecedented amount of new money) prompted adoption of an independent currency as medium of exchange. Since then, the crypto currencies based on block chain technology have been gaining popularity. Presently, besides Bitcoin, over 6000 variants of crypto currencies are in vogue. The present value of all bitcoin in circulation is over US$250bn and the average daily trading value of bitcoins id over US$23bn. It is clear that Bitcoin is emerging as a serious challenger to Gold as an alternative currency or medium for exchange of value. In India, RBI issu...

 There was this very famous soccer player. He was one of the main strikers for his country as well as club team. He won many matches for his teams. He was very popular amongst sports enthusiast, and as such attracted many corporates to become brand ambassador for their respective products. Unfortunately, one day he met with a serious accident in which many of his limbs were fractured. He remained in intensive care for many months. Doctors had to perform several surgeries to keep him alive and make him walk again. After spending two years in bed, the striker took his first step with the assistance of his wife and walking stick. The hospital management immediately broke the news to the media. The fans were ecstatic and celebrated the news by popping up champagne and ringing church bells. The doctors informed the team management and sponsors (who were keeping a close watch on the health conditions of their star striker), in confidence that their star would never be able to play agai...