Friday, December 31, 2010


The Euro currency faced a turbulent 2010.
As concerns continue to mount over the finances of the '''PIIGS''', 2011 could mean even more volatility.

Will the easy money/quantitative easing policy of the USA or the austerity measures of the Eurozone be successful?
Here is a chart and an article by Graham Summers of Gains Pains & Capital on the EURO crisis.

Sunday, December 19, 2010

INDIAN EQUITIES : FII & Domestic Institutional Fundflows

2010 has been a good year for Indian Equities. The FMCG (Consumer staples ) sector, Auto sector & Banking sector have performed well this year. Valuations are no longer cheap, and the margin of safety for investors has narrowed substantially.

Link - Domestic institutions turn cautious, go on selling spree ...
As usual, FII fundflows continue to dictate market direction, but as the above article points out, Domestic Institutional investors - Mutual Funds are booking profits.

Saturday, December 18, 2010


The recent sell off in US Treasuries comes at a time when the FED continues onward with its QE2 programme.

The USD too has weakened somewhat over the last few months, even against the troubled EURO.

Could this Bond market sell off further complicate the attempts of the FED to revive the ''global'' economy? Falling Bond prices means that yields will rise, a fact that will not go down well in a market where credit growth is actually contracting. If mortgage rates start to rise, the US housing market will face further headwinds.


Friday, December 17, 2010


The Economist magazine recently published an article regarding India on 25.11.2010 titled

Graft in India - Rotten to the Core? Coping with the aftermath of a massive scam !!!
And who's to say that they are off the mark as far as the story goes.

We have been on a never ending roller coaster of scams.

  • IPL - Cricket scam -issues regarding benami -ownership structures of teams
  • Commonwealth games scam.
  • Adarsh Building scam in Mumbai - Illegal Building on Army land
  • Telecom 2G scam - That's a mega one!
  • Public Sector bank officials involved in a loans for bribes scam.
  • Stock price rigging scam being investigated by SEBI.
  • Nira Radia tapes - involving journalists, industrialists etc!

So we have massive wealth disparity, income inequality, corruption, rural poverty, poor infrastructure and then we have on the other hand an ecomnomy that's doing fantastically well, while the world economy is still reeling under the strain of slowing consumer consumption and record debt levels.




While its going to be a never ending discussion about the politicians, industrialists and other individuals involved in these scams, there are some facts and lessons that an investor in Indian markets can take away from this mess.

  • While the Indian Economy does present a fantastic investment opportunity to both Indian and overseas investors, it can be bumpy ride at times.

  • While the Indian government continues to move slowly on / ignore vital issues like wealth disparity, rural poverty, overburdened infrastructure and the poor state of primary education and healthcare facilities across India, they must realise that this economic boom cannot continue unless they start to tackle the above mentioned critical problems and target "inclusive growth".

  • Remember to curtail investments to firms where the management has a credible track record and takes care of the interests of all stakeholders concerned - & not just themselves! You may come acoss an interesting investment opportunity, but if the management has a dodgy track record, just stay out!

  • If SEBI fails to rein in the Equity market scamsters, it will result in a massive blow to SME (Small and medium enterprises) businesses in India. The SMEs are the ones most affected by these stock rigging scams because a tightening of bank credit across the SME sector will deny working capital loans to many deserving and good quality small cap companies in India

  • The incredible progress that has been made by Corporate India has been made inspite of our politicians and not because of them!

  • While I'm not condoning the massive, almost blatant and shameless corruption here in India; we live in a world where politicians in most countries are no better than the ones we have here. It may be less blatant but sadly,corruption goes on!

  • There is incredible corruption,short termism and lack of leadership in global politics today.As someone rightly said, " The people who want to be in politics are not the people whom you want to be in politics". No politician is willing to fix a problem that he can kick further down the road, an example being the *crazy debt crisis* facing the western world today! Imagine asking consumers who have no savings to start overspending and re- leveraging again - Thats both WRONG & insane!

  • Lastly, remember that the prudent investor does not chase an over extended stock market rally. Remember to wait for pull backs and always look to invest in good quality stocks, with managements that have an established track record!


Below is an article from the Economic Times - 4 December 2010.
All new telcos have less than 50% active users, finds Trai - The ...

The Pre-paid/ Pay as you go segment dominates the mobile phone telecom sector in India.

With record-low tariffs and cut throat competition, telecom companies are hoping to regain earnings traction via 3G services!

Furthermore, we may be headed for a 3G price war as well.
The percentage of active subscribers is far too low in the case of many of the new entrants. Some of the new players will gradually find the current tariffs unviable for their business models, and a consolidation is likely.

This is clearly an overcrowded market. In the meantime, expect the established incumbents to aggressively defend their market share. This will result in reduced profitability in the near term, until an inevitable consolidation occurs/ some players exit the market altogether.