Friday, 11 November 2022

This week in stock market

 During the week sensex rose by 1.73% 




The weekend surge happened mainly due to data released on 10th November by USA on consumer price index (CPI) which was lower than expected at 7.7% in October compared to 8.2% in September.  Indian market surge followed the surge in stocks in US.  Another favourable point for the sensex is that INR strengthened against USD and now is trading @ 80.73 compared to one day earlier close of 81.68.   With core inflation moving down in USA interest rate hikes in USA will be moderated, this will lead to more FII investments moving to India which in turn will make the stock market bullish.   On domestic front all industries are expected to do will this quarter and results are expected to be good.  This is good news for the markets.

My take : Market will be bullish for the reminder of 2022.  It is good to invest in the markets in small volumes over a period of time in quality stocks & mutual funds.  There will be fluctuations in the market on certain days but overall market will provide good returns in the short to medium term.

Saturday, 25 June 2022

This week in stock market

 Stock Market index moved up 2% this week indicating some turnaround for stocks,


This was primarily due to softening of oil prices to $ 106 levels.  Concerns still remain on inflation and increase in US Interest rates.

Coming week in stock markets will be quite volatile and we can expect a lower finish of sensex in next week

Friday, 24 June 2022

Flight of Foreign Portfolio Investors (FPI)

Till todate, Foreign Portfolio Investors (FPI) have pulled out Rs.212,966 crores from stock markets in 2022

                                                                                         Source : SEBI / NSDL

This pull off by FPI is one of the major reason for fall in stock market by 14% in 2022

                                                   

                                                                                         Movement of stock market in 2022


What has triggered this pull off by FPI from Indian stock markets?  

  • Inflation in USA and subsequent interest rate hikes (total 1.5% in 2022), triggered flight of capital from emerging markets to USA.  This resulted in FPIs pulling out funds from India to USA
  • Anticipation of further rate increases by USA also made FPI pull out money from India.  
  • Depreciation of Rupee by 5% in 2022 is triggering FPI outflow as they find it more attractive to invest in USD than in INR

Will stock market continue to decrease?

Markets will be volatile in the short term considering the economic situation currently.  It is best to stay invested and continue with Systematic Investments to reap long term benefits as markets will re-bound once economy recovers (time frame 1 to 2 years).

Thursday, 23 June 2022

5% drop in Rupee in 2022

Rupee has dropped 5% in 2022 in comparison to US Dollar.  USD vs INR was trading at 74.57 on 1st January and now it is at all time record high of 78.19.  

                        

Major factors responsible for this significant depreciation of Indian Rupee are as below

  • High Inflation in USA (8.6% as on May 2022) and consequent three times interest rate increases (0.25% in March, 0.50% in May & 0.75% in June) by US Federal Reserve has moved funds from emerging economies like India to US thereby depreciating the Rupee.  The high point here is further rate increase is anticipated from US Federal Reserve so Rupee will continue to be under pressure in the near future.
  • Oil the largest item to be imported into India is having a bull run due to multiple factors including Ukraine war.  Oil is up by 26% in 2022 currently trading at levels of $ 106 compared to $ 77 at the beginning of 2022.  As per data from Petroleum Planning & Analysis Cell (PPAC) India imported oil worth of $ 120.4 Billion in 2021-22 which was 25% of all imports by India.  With increased costs in 2022 it is estimated that imports for the month of April 2022 will be a whopping $ 16.2 Billion.  The key point to note here is cost per MMT of oil was $ 316 in 2020-21, $ 568 in 2021-22 & $ 775 in 2022-23.  This effectively means price increase between 2021-22 & 2022-23 is around 36%. This increase in import costs of oil is exerting pressure on Rupee as there is high demand for USD and USD is strengthening 
 
  • Foreign exchange reserves are currently at $ 596 Billion compared to  $ 635 Billion in September 2021 signalling a drop of 10% in 8 months.  This depreciation in reserves is mainly attributed to Reserve Bank of India intervening in the Rupee market and selling Dollars to curtail depreciation in Rupee.  This though to a certain extend holds Rupee depreciation brings in uncertainty in minds of investors and impacting the Rupee  

Impact of this Rupee Deprecation

Depreciation of the Rupee is good for export oriented sectors especially Information Technology, Pharmaceuticals & Organic Chemicals.  However it impacts in a significant way imports and thereby cost of products in India.  With India already facing a high inflation of 7% Rupee depreciation will fuel it further and make it move upwards which will be a big challenge, already RBI has increased interest rates by 0.9% in 2022 to 4.9% to combat inflation.  Rupee depreciation will also bring more strain to the balance of trade position which already is in negative (imports more than exports) territory for long time now.  Forex reserves will continue to be under pressure.  

Overall it will be a challenging situation for India to keep Rupee under wraps and not allowing it to depreciate significantly.  With the current situation prevailing my estimate for the rupee will be 79 to 81 by end of this year.


Wednesday, 22 June 2022

Oil Economics

Oil is dropping fast and WTI crude is currently trading at $103 per barrel levels.  What caused this change?  Is India buying more oil from Russia?  The answer will be on the affirmative, India is buying more oil from Russia in 2022 as there are deep discounts offered by Russia.  Commodity data from Kpler states that India imported more than 60 million barrels from Russia till now in 2022 compared to 12 million barrels in 2021.  

To facilitate this purchase Indian banks will likely be joining hands with Russian banks who are not hit by sanctions to facilitate payment for purchases of oil from Russia in Indian Rupees.  Setting up of payment mechanism is underway.

With China also buying higher volumes of oil from Russia global oil prices will be under stress and will drop further.

Friday, 4 March 2022

Book Review - En Sarithiram (My History) By U V Swaminatha Iyer

En Sarithiram (My History) is an autobiography written by the Tamil Scholar Dr.U V Swaminatha Iyer (1855 to 1942) who published about 100 books in ancient Tamil literature, poem, puranas, & devotional songs.  It all started with him publishing the Jain kapiyam (Epic) "Seevaga Sinthamani" which was written around 10th Century by Thiruthaka Thevar.  He went around collecting the old palm leaf manuscripts from various people who were holding it, complied it wrote commentary and published this epic.  In similar manner with a career spanning more than 70 years he published many long lost books in Tamil and made it available to the world by going around village by village meeting people collecting palm leaf manuscripts (which were almost lost).  His main publications which received great adoration are "Cilappathigaram, Manimekalai, Purananuru, Seevaga Sinthamani, Pattupattu, Ettuthokai".

In his book "En Sarithiram" he gives a beautiful view of village life near Kumbakonam in mid nineteenth century.  Written in simple Tamil which can be well understood by everyone he gives a gripping account of his journey through education & professional life.  The sequence of events are so well narrated that even though this book is somewhat long there is not even a dull moment.  

Some interesting topics in the book.

Marriage - he describes how a traditional Tamil marriage happens in the 19th century, the simplicity, the elegance the gathering of relatives.   He even comments about the extravaganza carried out in weddings in mid 20th century compared to his wedding (Ps : If he is to see weddings today I wonder what will be his comments!)  

Respect for teacher - This is the ultimate lesson in this book.  His respect for all his teachers especially Mahavidvan Meenakshi Sundaram Pillai is simply adorable.  He gives lot of accolades to all his teachers right from his childhood.   

Efforts for publication -  His effort for his first publication Seevaga SInthamni is well narrated in the book.  His efforts, obstacles faced, financial challenges, logistical challenges etc.  He also narrates how it felt when all the hard work turned into a beautiful book.

A great man whose life was an illustrious one and needs to be studied and followed.

A must read book for all.

Balancing Act

Russian invasion of Ukraine has sent stock markets on a spin across the world and Sensex is no exception to it.  Compared to 23rd of February, Sensex is down by 5%.


There are indications that stock markets across the world will continue to be under strain as invasion of Ukraine does not seem to end soon.  Also as a consequence of this oil price is spinning out of control and currently trading at around $ 113 per barrel (29% increase since 23rd of February) which in turns puts in a big pressure on margin of corporate's which in turn affects the stock markets significantly.


Drop in stock markets and with oil prices not helping it either there is severe under current for all investors who are losing quite a lot of money on the markets.   This is where the balancing act has to come into play. 

Considered as one of the safe investments during crises gold has always traditionally played a pivotal role for investors.  Gold since 23rd February has increased by 4%.


Investors in gold have gained during the period when Sensex & Oil are wrecking havoc.

This trend helps us to understand the basic principle of balancing portfolio of investment.  It is not wise as an investor to have one type of investment it is advisable to spread portfolio.  It is always recommended to have gold around 20% to 30% in one's portfolio to have a balanced return.