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On Slack: Duty hike, MSCI India, Kattupalli Port, Chai pe Charcha, Swachh pinch and more….

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The Slack Discussions

The Slack group at Capital Mind Premium has been extremely active and if you haven’t been there, pop us a note by replying to this email. (If you’re a trial member this probably sound like Greek to you; it will be available when you sign up!)

A brief summary of some of the interesting things discussed there in the last few days:

#stocks: Mutual fund stripping: creating book losses of Rs. 8,500 crore

Some argue that till the time no rules are broken, stripping is a fair tax planning strategy that is available. That is really not the case. (Link)

#general: Piramal Enterprises Acquires the Baby Care Brand – Little’s for the Consumer Products Business

Piramal Enterprises’ Consumer Products Division announces the acquisition of the baby-care brand “Little’s”, which includes the entire product range across six categories.

Launched in India in 1980, Little’s is present across a wide range of products including – baby feeding bottles, baby skin-care, baby grooming accessories, baby apparels and baby toys. The brand is currently available across 25,000 outlets in India and has been growing at a CAGR of 30% over the past few years. (Link)

#general: In Kerala’s backwaters, a private firm wades into politics

Kitex Group, a textile firm with around 8,000 employees and an annual turnover of Rs 1,000 crore, is planning an unusual ‘takeover’. Where most corporate organizations in Kerala crawl on being asked to bend when confronted by vindictive politicians and dogma-driven trade unions, Kitex Group has dared to take the battle to them. (Link1) (Link2)

#general: Swachh pinch: Government levies 0.5% cess on service tax

Everything from your mobile bills to eating out in air-conditioned restaurants, a visit to a spa, dry cleaning charges and coaching classes fees are set to get more expensive with the government deciding to levy a 0.5% Swachh Bharat cess on all services that attract service tax. (Link)

#general: Foreign Investors Take Out Rs 4,300 Crore in 5 Days

Foreign investors have pulled out more than Rs 4,300 crore from Indian capital markets in the past five trading sessions due to muted quarterly earnings and fears of a possible rate hike by the Federal Reserve.

The move comes after foreign portfolio investors (FPIs) inflow had hit a 7-month high in October.

According to data compiled by the depositories, net outflow in equities stood at Rs 2,667 crore between November 2 and November 6, while it was Rs 1,689 crore for debt, translating into a total of Rs 4,356 crore ($666 million). (Link)

#general: Man behind Chai pe Charcha leaves BJP – BJP’s strategic error and Prashant Kishor’s political U-turn

As per a news piece that recently appeared in Economic Times, Prashant Kishor, the campaign manager of Modi’s professional support team Citizens for Accountable Governance (CAG) is switching sides to work for JD(U) and effectively support Janata Parivar this Bihar election. Although CAG, now rechristened Citizens Alliance, constitutes professionals, this looks like a leaf straight out of a politician’s book. But while Kishor makes a U-turn on his loyalty, his actions also leave the BJP with a lot to introspect about. (Link)

#general: Disaster foretold

The world’s biggest climatic weather phenomenon is easier to predict than many calamities. But it shows the importance of preparing for other disasters, too. (Link)

#stocks: Maruti, BoB may be among MSCI India index picks

Stocks such as Maruti Suzuki, Ashok Leyland, Yes Bank, Indiabulls Housing Finance, Bank of Baroda, Britannia and Cadila are emerging as key contenders for inclusion in the MSCI India index — an emerging market index widelytracked by global funds. (Link)

#stocks: Compliance worries hit shares in India’s top two drugmakers

Shares in India’s two largest drugmakers, Sun Pharmaceutical Industries Ltd (SUN.NS) and Dr Reddy’s Laboratories Ltd (REDY.NS), slid on Monday after both reported compliance troubles that could dent profits this business year. (Link)

#general: Duty hike effect: Taxes have now exceeded actual cost of production of petro

With excise duty being hiked five times in a year, taxes and duties have now exceeded the actual cost of production of petrol.

As much as Rs 31.20 in the retail price of Rs 60.70 a litre of petrol in Delhi is because of central and excise duties.

Based on average cost of gasoline and foreign exchange rate during the second half of October, it costs Rs 24.75 to produce a litre of petrol at refineries, industry officials said. (Link)

#general: Overuse of cess

Last week, the finance ministry said that, from November 15, the government would impose a cess of 0.5 per cent on all services on which service tax is paid. The proceeds from this cess would be meant exclusively for the government’s Swachh Bharat initiative. Being a cess, the entire proceeds would remain with the Centre and would not have to be compulsorily shared with the states. (Link)

#macronomics: Portuguese Alliance to Topple Coelho Sends Bond Yields Higher

A loose alliance of Portuguese opposition parties is poised to topple the government, sending the country’s bond yields higher on concerns about political instability and plans to roll back spending cuts tied to the country’s previous international bailout.

The 10-year bond fell, sending the yield to a four-month high on Monday after the Socialist party, led by Antonio Costa, approved a plan to join forces with three other parties to oust Prime Minister Pedro Passos Coelho’s administration in a Tuesday vote. (Link)

#stocks: Piramal, TPG, Baring in race to acquire ICICI Home Finance

Piramal Group, TPG Capital and Baring Private Equity Asia are in the race to acquire ICICI Home Finance Company, a subsidiary of India’s largest private bank, two people familiar with the development said.

Parent ICICI Bank had been expecting a valuation of about Rs 4,400 crore for the unit, which focuses on home loans in smaller cities. (Link)

#macronomics: Saudi Arabia’s national debt is about to surge

Saudi Arabia will tap up international creditors to plug gaps in its public finances left by low oil prices, according to a report in the Financial Times.

The country’s debt could rocket to as much as 50% of GDP by 2020, from 6.7% this year, the report said. (Link)

#stocks: L&T in pact to sell Kattupalli Port to Adani group

Larsen & Toubro has decided to sell the Kattupalli Port in Tamil Nadu and has entered into an in-principle agreement with the Adani group. L&T informed the stock exchanges that the sale is subject to approval from the Government of Tamil Nadu and the Central Government. (Link)

#backtobasics

Market-Neutral Pairs Trading – (Link)

Option Strategy Builder – (Link)

Protective Put – (Link)

Rotating Inversely Correlated Assets – NIFTY and USDINR – (Link)

Straddles and Strangles – (Link)

The 3 things to look for in a reversal trade – (Link)

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Disclaimer

Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion. 

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

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