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Commentary

Capital Mind Quoted in the NSEL fiasco

It feels good when mainstream media quotes you, and even better if it’s twice in the same day! Here’s Sundaresha Subramanian at Business Standard on how NSEL contracts were sold as risk free:

These trades were put through in the form of an execution advisory, says Deepak Shenoy, founder of Capitalmind.in, who has been tracking the NSEL crisis for the past few days. “They were pitching to the HNIs. They offer it to the client. If he agrees, they executed the trade. The broker made about Rs 877 on each leg of the transaction. These trades continued for 15-16 months. And, in a year, a broker made a cool Rs 20,000.”

And then, my money quote:

“Everything that seems 100 per cent risk-free will work beautifully until that one day when there is 100 per cent risk,” Shenoy said in his post on capitalmind.in

(Read the post they refer to: The 100% risk free product)

And then, “The Men Who Saw it Coming”:

But, with the spurt of social media, analysis and critical comments are no longer monopoly of the journalists and columnists. A few people online have been giving the mainstream a run for their money in tracking the NSEL payment crisis. These include www.capitalmind.in by Bangalore-based Deepak Shenoy and Sanjay Bakshi’s fundooprofessor.wordpress.com. Take time to read these for some clinical analysis and commentary.

Thanks for all the fish!

  • Arjun says:

    Hi. Cgrats on being featured. You are doing a good job in getting the news/views out to people who cant track it on their own. Not sure if this is the right forum to ask but,
    1) how do you see this playing out on MCX? is there a chance of a similar crisis in MCX?
    2) what about ncdex or even NSE?
    Regards
    arjun

    • MCX wise – I haven’t seen volumes or OI myself,but have received some data saying volumes have dropped since earlier. But other than that, no impact.
      NCDEX or NSE won’t be affected. Foreigners might be spooked but will wait for the drama to unfold first…

  • kizuki says:

    Congratulations and well done!!
    In my opinion, your posts are superior in insight and analysis compared to any other publication (dailies or non-dailies) with the added spice of humor.
    I am afraid that it is giving a high, and readers will face some serious withdrawal symptoms if you reduce the posting rate!!

  • Niftytrader says:

    Many congrats. I was pleasantly surprised too while reading BS in the morning. Kudos.

  • ARP says:

    Deepak,
    Last week, I read your article of real estate on Michael Shedlock’s Global Economic Analysis blog – which I have been following since 2004 (Before the GEA blog he used to post on http://www.fool.com)
    So double congrats, and keep up the good work !!.

  • Amit M says:

    Congrats man! Though, I do agree with the previous comments that your analysis on specific topics is often far superior and more in-depth than most English-language national dailies in the country. So it’s actually you doing them a favour by giving them something sensible to quote in their ‘Google-journalism’ generated articles!

  • Atul Mittal says:

    Congrats Deepak..
    Keep it up…

  • px says:

    Very Well deserved , Your write ups are generally top notch, thorough and unbiased ….way better than what one mostly sees in most English dailies.
    Yes, NSEL may be finished but this episode redoubles peoples perceptions about the govt and regulators sleeping at the wheel.
    I couldn’t quite figure out why MCX is still getting hammered …
    though i agree that the trust deficit will hurt it quite badly but peoples memory is short and a yr down the line i think things will be back to normal. When do u think it will be a buy ?

  • Inder says:

    Congrats !! you deserve even more 🙂
    Now captialmind is the first choice before ET or BS.
    How should one get out of MCX ( I still have IPO allocated 8 shares) which is hitting lower circuit each day ?

  • Yusuf says:

    Great Job Deepak !!

  • XYZ says:

    I was happy to find your name mentioned in the rediff.com article. I found your site while searching for sceptical takes on Indian online shopping businesses. I find your blog to be one of the very few blogs that cover current economic and business issues related to India.
    Congrats to you.

  • Reghulal says:

    Good job Deepak…I missed your thoughts all these time….though you were slightly harsh on NSEL issue. Wanted MCX to come back in full swing…

  • Guruprasad V says:

    I believe you are the pioneer in India. In US people relay on blogs than MSM and now it looks like most of the guys (includes me) trust Deepak than a opinion from Business Standard or ET. This is just the beginning. Keep up the good work and you have more hurdles to past. Good old hard work pays.

  • Sandeep says:

    Great Job Deepak !
    If time permits you should do a piece on MF industry also ! How they have been taking retail investors for a ride and basically catering to institutional invetors (defeating the basic objective) having big chunk of their AUMs primarily in liquid and other debt schemes (read short term money from corportates and even banks-there was an article about round tripping of money from bank to the bank). Here are my comments on some article on a website –
    Financial Journals always miss out an important point in their articles – the complacency in the Indian Mutual Fund Managers because of the benchmarking concept. Lest see the following situation – if they have to build a portfolio of a diversified or a sectoral fund – Would they ever put 45% of your funds in a single stock, however good that stock may be ???? – not even by a long shot from whatever they have been writing over last many years.
    Lets consider an example – In India we have two FMCG funds from ICICI and SBI. If you look at their portfolio you will find that both of them have about 45% investment in ITC….. isn’t it totally against whatever you have learnt and the journals and websites have been telling readers for years? Doesn’t it throw all the principles of Portfolio Management for a toss ? Then why do these funds have 45% exposure to ITC.
    As Jeremy Grantham said “the primary directive, first and last, is to keep your job. To do this, he explained, you must never, ever be wrong on your own.”
    So how do fund managers do it -the fund manager very conveniently has a benchmark against whom he can compare himself. To retain his job he must not underperform the benchmark even in the worst case scenario by a huge margin. In the best case scenario he hopes to outperform the benchmark little bit by slight tinkering in the portfolio to earn his bonus.
    So if SBI’s FMCG fund’s benchmark – BSE FMCG index has appx 50% weightage in ITC, SBI FMCG fund has about 45% of its investment in ITC, even though its totally against what every fund manager/analyst/investment guru learnt and preached throughout his life.
    The idea at the back of any fund managers mind is NEVER about giving good absolute returns to their investors – as a retail investor naively assumes, reading all the good articles about -long term benefits of investing and investing thru mutual funds – where one of the biggest benefit is always proclaimed to be DIVERSIFICATION (as a retial investor can not diversify in to many stocks with limited funds). The primary goal of the fund manager is saving his job and for that he has to clone the index.
    Simillar thing is carried out in a Diversified Mutual Fund, like a Large cap or Flexi cap fund, but on a more sophisticated level which a retail investor can’t figure out (based on the Beta of the the benchmark index etc etc, more on that some other time).
    Do you think fund managers are doing a great job, if over five years they beat a benchmark, in which Stock are included at four digit prices and excluded at two digit prices, by a couple of percentage points???
    The dark reality is that Financial websites and Journals avoid writing about it because they are part of the system, they are dependent on Mutual Funds for Ad Revenue hence they will write about everything from SEBI’s inefficiency to misselling by distributors to financial illiteracy of investors but not about the rot in the fund management.