Do it yourself

Recently the Ministry of Statistics and Program Implementation, Government of India, released the results of the latest Annual Survey of Industries (ASI) for the reference period FY23. The Annual Survey of Industries is conducted with the primary objective to provide a meaningful insight into the dynamics of change in the composition, growth and structure of various manufacturing industries in terms of output, value added, employment, capital formation and a host of other parameters. I note the following key points from the survey results. Key statistics (five-year period from FY19 to FY23) ·           Number of total factories in the country has grown at a CAGR of 1.2%, despite the government’s strong emphasis on manufacturing and multiple incentives. ·           Total fixed capital (investment) employed in manufacturing has recorded a growth of 4.4% CAGR . Total invested capital has grown at a CA...

Last weekend, I happened to meet a senior IT professional, aged 48yr. This gentleman has worked with many global IT services companies like IBM, Google, etc. He has his wife and two teenage daughters in his family. Four years ago, he quit his job and took to equity and derivative trading as his full-time occupation. He even developed an algorithm of his own for trading in options. He did very well till March 2024, earning an IRR of over 54% on his capital deployed in the trading business. With a material growth in his earnings, his lifestyle changed dramatically. He bought a bigger house, bought a luxury sedan for himself and a car for his daughters' use. They travelled business class on their Europe and America trips. In April 2024, he grew in confidence and increased his exposure materially, deploying all his savings in the market. In the past 6 months, he has lost 70% of his enhanced capital in option trading; and is close to defaulting on his house EMI. The losses in the market...

I shared some of my random thoughts with the readers last week ( see here ). Many readers have commented on my post. Some readers have raised some pertinent questions and also provided very useful feedback. Based on the readers’ comments, questions and feedback, I would like to share some more random thoughts. It is however important to note that I am a tiny insect living in a cocoon of my own. I cannot comment intelligently on the international markets, policy matters and geopolitics. Nonetheless, I reserve my rights to form strong views on global and domestic developments concerning markets, policies and geopolitics, for my personal strategy purposes. The US debt end game The current state of the Fed balance sheet and the US public debt is certainly not sustainable by any parameter. It is a matter of debate how the US government and the Federal Reserve would make fiscal and monetary corrections and eventually return to an acceptable level of public debt without pushing the economy in...

Last week we celebrated Dussehra – a festival that for centuries has marked the victory of good (Ram) over evil (Raavan). Burning of effigies of Raavan, his brother and son has been an integral part of this celebration (particularly in North India) for over a century. This year was not the same though. There were scattered instances of people worshipping Raavan and protesting against burning of his effigies. Some elements of the Indian society discovered a caste angle in this and termed Dussehra festivities as a conspiracy against the upper caste brahmins, to which Raavan is believed to belong. This may be a small beginning, but my discussion with many educated people indicates that it may not be long before Raavan worshipping emerges as a popular cult in India. For context, I have not heard or read any leader or wise man critical or concerned about this; though some social media commentators did appear amused.                   ...

Myth of free market A fundamental principle of economics is that “in a ‘free market’ current price of anything having an economic value is a function of demand and supply of such things at that particular point in time.” Of course, there could be multiple factors that may impact the demand and supply of a thing; but usually nothing impacts the “price” directly other than the forces of demand and supply. In a ‘controlled and/or manipulated market’ the prices of things are fixed by the controlling authorities (or forces); regardless of the demand and supply for such things. In such markets, usually demand and supply of things are controlled and/or manipulated; or demand and supply duly get adjusted to the fixed/manipulated prices. In the modern world, money is arguably the largest factor of production in the world. The price of money (interest rate) should ideally be a function of demand and supply of money. In case of excess supply, the interest rates should be lower and vice vers...

The current market condition reminds me of one of my favorite bedtime stories. I love to narrate this time and again. Once upon a time a sparrow couple made their nest in a wheat farm. In a few days, the lady sparrow laid four eggs. In two weeks, eggs were fully hatched and four chicks were born. In the meantime, the wheat stems had started growing tall. In another two weeks, the chicks started to fledge and the wheat kernels began to turn golden. This was the day when parent sparrows first discussed leaving their nest and moving somewhere else. “The crop will soon be ready for the harvest. Our nest shall be exposed and trampled by the harvesters”, the lady sparrow feared. Her companion however was not worried as yet. “Nothing to worry as yet”, he assured her. In another three weeks, the farm turned completely golden with wheat completely ripe to harvest. The lady sparrow was terribly worried now. “We must fly out now. The chicks have also grown up now and can easily fly to the w...

Yesterday, the Reserve Bank of India announced the outcome of the meeting of its Monetary Policy Committee (MPC) held on 7-9 October 2024. The MPC decided to: (i)     Leave the key policy rates unchanged with a majority 5:1 vote. Dr. Nagesh Kumar (the recently inducted MPC member) voted in favor of a 25bps cut. (ii)    Change its policy stance from change from withdrawal of accommodation to neutral with unambiguous focus on a durable alignment of inflation with the target, while supporting growth. The MPC decision did not come as a surprise, given the resilient growth environment and inflationary risks emanating from geopolitical escalations and erratic weather conditions. The MPC noted that— (a)    The global economy has remained resilient and is expected to maintain stable momentum over the rest of the year, amidst downside risks from intensifying geopolitical conflicts. (b)    The domestic growth outlook remains resilient ...

  2HFY25 - Market strategy and outlook (Note: I had last shared my investment outlook and strategy for the second half of the year 2024, July 2024. Since then, there have been some changes in circumstances. Global central bankers have embarked on a policy easing path after more than a year. Geopolitical conditions have worsened. Stock markets have done very well and are close to the upper bound of fair value territory. Global economy is slowing down as the post Covid stimulated demand is waning. Accordingly, the corporate earnings growth trajectory is also flattening. I had accounted for most of these occurrences in my investment strategy in July 2024. Therefore, there is no notable change in my outlook and strategy for 2HFY25.) In my view, the stock market outlook in India, in the short term, is a function of the following seven factors: (1)        Macroeconomic environment (2)        Global markets and ...

The first half of the financial year FY25 has been good for financial and commodity markets. Despite elevated geopolitical concerns, inflation, and political changes in many countries, stocks, precious metals, industrial commodities and crypto made a steady move up, though not without higher volatility. In 1HFY25, the global central bankers embarked on a path of monetary easing, with several of them cutting rates. Most notably, the People’s Bank of China (PBoC) and the Federal Reserve of the US, did rather aggressive easing. The Chinese (and Hong Kong) equities rose sharply in the last week of the 1HFY25 to erase months of underperformance. Indian equities were amongst the top performing global assets for 1HFY25. Japan, South Korea and European equities were notable underperformers. Another notable feature of global markets was the sharp rally in precious metal. The central bankers across emerging markets accelerated their gold accumulation, in view of the geopolitical developments and...