Do it yourself

  Continuing from yesterday. If the job crisis is so severe, why is the incumbent government so popular, especially among the youth? The incumbent prime minister , reportedly , enjoys the highest rating amongst the popular leaders of the world. In particular, he is very popular amongst the youth and women in India. India faces one of the worst youth unemployment rates globally. Indian homemakers are facing serious challenges in managing their household budgets due to inflation. According to the World Bank, the youth unemployment rate in India could be comparable to war-torn economies like Syria, Yemen, Lebanon etc. The unemployment rate and household inflation have worsened or failed to improve in the past 10 years. The question thus arises, why is the incumbent government still popular amongst youth and women? I have discussed this aspect with numerous common people, like myself, nationwide over the ...

Continuing from yesterday’s post , let me share my thoughts on the issues raised therein.  If the condition of the economy is so bad, why are the equity markets booming? In my view, there is nothing unusual or unprecedented in the current equity market behavior. We have witnessed markets scaling new highs during 1989-1994 (Sensex up 482%) when the global economy was struggling in the aftermath of the severe global economic slowdown; NATO forces attacking Iraq and a sharp rise in energy prices; India facing a severe balance of payment crisis, needing an IMF bailout; fall of National Front government in two and a half years and subsequently Chandrashekhar government within six months, and a minority government led by P. V Narasimha Rao at the helm in Delhi; first major financial market (Harshad Mehta) scam in India; belligerent BJP taking out Rath Yatra from Somnath to Ayodhya, Mosque demolition in Ayodhya and subsequent acts of terrorism that killed thousands; a slew of economic ref...

Last week an appeal purportedly issued by Birla Institute of Technology & Science (BITS), Pilani, to its alumni, seeking their help in the placement of its current students went viral on social media. The appeal mentioned that the global economy may be experiencing its worst slump in decades, with around 4 lac employees being laid off since January 2022. The cost-cutting measures taken by the small and large businesses have resulted in hiring restrictions (including at the campus level) and a funding winter. It added, that the hiring slowdown has deepened in recent months. Some other top-level higher education institutions have also reported challenges in campus placements. As per a Mint report, the total headcount of the top five IT services firms in India has fallen by ~65000 during the year 2023. About five million aspirants applied for 60000 police constable posts in UP. The applicants' ordeal in tr...

  My recent interactions with many market participants indicated that selling deep Out of Money (OTM) options (mostly Call Options) on the last day of the weekly option expiry days (e.g., Wednesday for Nifty Bank and Thursday for Nifty50) has become a very popular trading strategy for many high networth individuals (HNIs). By pledging stocks, mutual funds, and bank deposits as margin money, HNIs claim to be enhancing their overall returns by 6% to 8% p.a. using this trading strategy. Surprisingly, most brokers and money managers, who run this strategy for their clients, are selling this as a risk-free strategy arguing that a move of 5% of more in Nifty50 or Bank Nifty on the expiry day is unlikely. An option of strike price 5% away from the current index value will hence expire worthless. There are three points to be considered in this regard, in my view. 1.     In recent years we have not witnessed large (5% or more) daily moves in benchmark indices. In fact, ...

The benchmark Nifty50 scaled a new all-time high-level yesterday. Analyzing the current market trends, I get some signals that suggest that a significant correction (8% to 10%) in the benchmark Nifty50, though not imminent, is certainly on its way. I feel not imminent, because (i) the top stocks that could have caused an immediate slump are notably underperforming the Index, and (ii) a much deeper correction ought to occur first in the broader market indices that materially outperformed Nifty50 in the past one year. YTD2024, the benchmark Nifty50 has been supported mostly by the energy, healthcare, and auto sectors; while the heavyweight financials and consumers have massively underperformed. Though there are no significant triggers for a strong recovery in the financial and consumer sectors, a technical upmove cannot be ruled. This might result in a Nifty50 spurt before a correction sets in. It is pertinent to note that a correction in the outperforming energy (ex-Reliance), auto, and...

Last week, the National Statistical Office (NSO) released the outcome of the latest Annual Survey of Industries (2021-2022) . The survey results provide important insights into the current state of the Indian industry. Some key highlights of the survey results are as follows: ·          Growth : The year 2021-22 witnessed a sharp rise in level as well as in the growth of the majority of the important economic parameters like invested capital, input, output, GVA, net income, and net profit registered by the sector and even surpassed the pre-pandemic level in absolute value terms. ·          The main drivers of this growth in 2021-22 were industries like the Manufacture of Basic metal, Coke & Refined Petroleum Products, Pharmaceutical Products, Motor vehicles, Food Products and Chemical and Chemical products. These industries, taken together, contributed about 56% of the total GVA of the sector and s...

  Not so defensive Self-reliance in the defense sector has been one of the major investment themes in the past three years. Besides dedicated public sector defense manufacturers, the stocks of many equipment and service providers to the Indian defense establishments have seen a sharp upmove. In the melee to own “defense stocks,” many investors have ignored the basic principles of investment and buying stocks of these companies at any price. I had written a cautionary post about this many months ago ( see here ). The trend has only strengthened in the past six months. Stocks, even remotely associated with the defense sector, have seen hyperbolic moves. I feel the interest in the sector that was driven initially by optimism, may have crossed over the realm of exuberance.    

Recently, an interview ( watch here or read here ) with Russian President Vladimir Putin has been trending in the media worldwide. In this two-hour seventeen minute long interview, President Putin touched upon many important issues concerning global economics and geopolitics. Experts from the world over are analyzing the interview from multiple angles, e.g., strategic, political, geopolitics, economics, etc. Most analysis I have come across is deeply biased. The starting point of most comments is the trustworthiness of President Putin. Most Western analysts seem to be rejecting Putin’s assertions as mere propaganda; while the analysts from Eastern and Southern analysts are using the contents of the interview to justify their opinions about the US agencies (deep state) and NATO. In India, pro-establishment media and experts have mostly refrained from commenting on the interview; whereas the critics of the establishment have used this opportunity to emphasize that President Putin has ...

Earlier this week, Prime Minister Narendra Modi claimed that the incumbent ruling dispensation (NDA) shall return to power in 100 days with a much larger majority. The popular political debate is now getting narrowed to the question “whether NDA will return to power with 300/545 seats or 400/545 seats”. On the other side of the globe, the political debate in the US is also fast reaching the point where the most relevant question would be “Who will Donald trump defeat in the November presidential elections?” The ever-forward-looking financial markets are not oblivious to these more likely political outcomes. It is therefore safe to assume that the current prices have factored in the election victories of Modi and Trump. Thus, from a political viewpoint, one should not anticipate a significant upside to the financial markets. An unexpected election outcome may though result in a material downside. In the latest episode of Greed & Fear, Christopher Wood (of Jefferies), said ...

As the market participants look forward to hearing Governor Das later this morning, it is pertinent to take note of a recent report by Moody’s Investors Service, cautioning about strengthening headwinds, tight funding conditions, and rising geopolitical threats for Asia Pacific region. The report emphasizes that “A downshift in China's economic growth rate and a cyclical slowdown in the US will weigh on Asia-Pacific (APAC)'s credit conditions in 2024. Peaking inflation globally will provide space for monetary tightening cycles to slow, but financial conditions will remain difficult for the weakest rated issuers. Meanwhile, geopolitical risks will continue to shape business decisions.” Interest rates:  Moody’s does not expect central banks in the region to hike rates further. However, it believes that interest rates will remain elevated and decline only gradually. The possibility of occasional rate increases to guard against unexpected inflationary pressures is also not ruled ou...

Shri Ram Janmabhoomi Teerth Kshetra (SRJBTKshetra), a public trust, is building a grand temple dedicated to Lord Rama at his birthplace in Ayodhya of Uttar Pradesh. Recently, the consecration ceremony of Lord Rama’s idol at the temple was performed with great fervor. To facilitate the devotees visiting the temple, the Government of Uttar Pradesh and the Central Government are investing in developing civil infrastructure in and around the Ayodhya town. Reportedly, the Master Plan 2031 envisages the redevelopment of Ayodhya to be completed over 10 years with an investment of over Rs 85,000 crore. This is expected to establish Ayodhya town prominently on the world tourist map. It is pertinent to note that just three years ago, Ayodhya was a small municipal town with a population of approximately 70000 with poor civil infrastructure. Impressed by the government’s investment in Ayodhya’s civil infrastructure, Global brokerage firm Jefferies commented in a report, “The grand opening of the R...

ले दे के अपने पास फ़क़त इक नज़र तो है , क्यूँ देखें ज़िंदगी को किसी की नज़र से हम — साहिर लुधियानवी Last Thursday, the finance minister presented an interim budget for the fiscal year 2024-25. The budget presentation had two part – (i) rhetorical and (ii) substantive. The first part included a speech about the performance of the governments led by Prime Minister Narendra Modi for the past 10 years and promises for the next 23 years. The finance minister spoke about how in 2014 their government inherited an economy that was in shambles; and how they have pulled it out from a total mess and put it on the fast track to achieve the status of a developed nation by the year 2047; when we would celebrate 100 years of our independence from the colonial British rule. The finance minister also promised to implement a slew of development schemes over the next five years. She however refrained from listing any specifics or financial details. The second part included (i) the...

  Sitharaman, Powell toss the ball in Das’s court Wednesday night, the Federal Open Market Committee (FOMC) decided to maintain the status quo on policy rates for the fourth successive review. The Committee reiterated that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward two percent.” The Committee however made it quite clear that any rate hike from the present level is no longer on the table. In the post-meeting press meeting, Fed Chairman Jerome Powell indicated that FOMC may not consider rate cuts in its next meeting in March 2024. The market is thus expecting a rate cut in May 2024. In another development, the Union Finance Minister, Ms. Nirmala Sitharaman, presented an interim budget for the fiscal year 2024-25. Two notable features of the interim budget were (i) Nominal GDP growth projection for FY25 at 10.5%, implying a well-controlled inflation environment; and (ii) F...

It is an annual ritual to seek tax relief, exemptions and incentives from the finance minister before presentation of the annual budget. The expectations of tax favors are particularly stronger in election years, as taxpayers and market participants are led by the belief that the government may be gratuitous to allure voters. There is however no empirical evidence of any correlation between the direct tax regime and government populism. The fact is that the population that is materially affected by direct tax laws is not significant to the election outcome. The recently released Direct Tax Statistics by the Central Board of Direct Taxes (CBDT) shows that income taxpayers in India may not be a group of interest from a general election view point. For example, consider the following points evident from the said statistics: No. of taxpayers: In AY23 only 8.91crore individuals paid some income tax (including TDS) in India. This is less than 10% of the total eligible voters in India. T...