Do it yourself

  Self-reliance in the defence sector has been one of the major investment themes in the past one year in particular. Besides dedicated public sector defence manufacturers, the stocks of a large number of equipment and service providers to the Indian defence establishments have seen a sharp up move. In the melee to own “defence stocks” many investors have ignored the basic principles of investment and buying stocks of these companies at any price. It seems a little has been learned from the recent unwinding in pharma API manufacturers and internet stocks which witnessed similar traders’ interest in 2019-2021. An informal discussion with some randomly selected market participants indicated that many individual investors and traders may not have a clear idea about the opportunity in the Indian defence sector. The way people tried to associate companies with the defence sector opportunity, it appeared that almost every company listed in India may be a potential beneficiary of the gr...

  In a recent research report, Goldman Sachs estimated that “energy bills will peak early next year at c.€500/month for a typical European family, implying a c.200% increase vs. 2021. For Europe as a whole, this implies a c.€2 tn surge in bills, or c.15% of GDP.” The bank believes that repercussions of this “will be even deeper than the 1970s oil crisis.” Obviously, a problem of the magnitude would require an impactful policy intervention that could have wider and deeper implications for decades to come. The policy interventions could involve partial suspension of free market mechanism; rationing of energy consumption; fiscal subsidies; deferment of climate goals and increased use of coal and/or accelerated shift to renewable sources of energy etc. Besides, there could be serious geopolitical implications also. In another interesting paper, McKinsey & Co, outlines how inflation may be flipping the global economic script. In the paper McKinsey’s experts have examined many of...

 In the current year 2022, inflation in India has consistently remained above the RBI tolerance band of 2-6%. For the month of August Consumer Price Inflation (CPI) was 7%, led primarily by the food inflation of 7.6%. Both rural and urban inflation recorded a MoM rise in August. Unfavourable weather conditions apparently led to sharp rise in the prices of vegetables, fruits, spices etc. However, the core inflation (CPI ex food and fuel) has also persisted over 6% since the past many months; emphasizing the persistent pricing pressures. The IIP growth in July also moderated to 2.4% led primarily by consumer non-durables – indicating pressure on household finances. The sharp rise in household debt, especially the expensive credit card rolling credits, also corroborates the rising stress on household finances. In view of the elevated price pressures, the Monetary Policy Committee (MPC) of RBI is expected to keep raising rates in line with the global peers. The market consensus is ex...

  One of the most famous dialogues delivered by legendary Shahrukh Khan goes like this – “Agar kisi cheez ko dil se chaaho to puri kayanat usey tumse milane ki koshish mein lag jaati hai” (If you desire something from the depth of your heart, the entire universe would conspire to fulfil your desire.) Recently, the Global CEO of McKinsey & Co, Bob Sternfels forecasted that. The factors like a large working population, multinational companies reimagining global supply chains, and a country leapfrogging at digital scale-to achieve something special not just for the Indian economy, but potentially for the world, are aligning well to to make 21 st century – the Century of India . ( Read here ) It appears that the universe is conspiring to make 21 st century - the century of India; but the question is whether we Indians are indeed aiming for this goal with full honesty and intensity. Historically, the Indian entrepreneurs were constricted by the culturally strong agricultur...

 1.   Bengaluru inundation In the first seven days of September 2022, Bangalore Urban District of Karnataka received 171mm of rain, which is 388% more than the long term average (35mm) of the rains it receives during this period. Obviously, the city infrastructure is not prepared to manage so much water; hence some areas of the city have been inundated with rain water. The spectacle of houses, vehicles and roads under deluge has been enthusiastically celebrated in the media – mainstream, social, local, national and global. The residents also marked the occasion by riding on tractors, excavators, and boats etc. Prima facie, there is nothing unusual in this. Almost every city in the country gets inundated at every instance of excess rain. From large metropolises like Mumbai, Delhi, Chennai, Kolkata, Hyderabad, to major cities like Lucknow, Bhopal, Ahmedabad, Jodhpur, Gurgaon, Patna, Varanasi, Ranchi, Bhubaneswar etc. have all experienced similar situations in the past f...

  As per the news agency Bloomberg’s calculations using IMF database and historical exchange rates, the size of the Indian economy in ‘nominal’ cash terms at the end of March 2022 quarter was US$854.7bn vs US$816bn for the UK economy. By this standard, India was the 5 th largest economy of the world as on 31 March 2022, behind the USA, China, Japan and Germany. This apparently innocuous, and mostly inconsequential, statistical data point has been subject of an intense discussion in India media – both mainstream and social. The pro establishment groups have celebrated this data point as an important milestone in the resurrection of the Indian economy, especially under the stewardship of Prime Minister Narendra Modi. They have forcefully argued that the Indian economy surpassing the UK’s economy highlights the rising status of India in the global economy; and symbolizes the undoing of 200years of British slavery. The groups opposing the establishment claims highlighted that th...

 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, ...