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On Slack: $27 Trillion Locked in Bear Markets, Yield Illusion, Dalal Street to Halal Street, Nifty's history, Fall in markets 'market's problem', Fed's rate hike plans, China PBOC, Modi’s historic Startup Action Plan, China slump, Investment Checklist 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:

#general: Why are we looking on helplessly as markets crash all over the world? – Will Hutton

(China, Economic Crisis, World Economy)

#macronomics: China PBOC to inject $91 billion into market

China’s central bank said it would inject 600 billion yuan ($91 billion) of funds into the financial market to meet medium-term liquidity demand, according to a statement posted on the People’s Bank of China’s website Tuesday.

#macronomics: What Lifting Sanctions on Iran Means for India

(Iran, Sanctions, Oil, India)

#macronomics: Battle over oil, coal & forests

(Oil, Coal, Forests)

#general: All you need to know about PM Modi’s historic Startup Action Plan

Startup India is a great first step in the right direction and will probably help startups to some extent, it will probably not make a dent on the exodus of India’s Flipkarts or InMobis to Singapore in any meaningful way.

#macronomics: China requires some banks to tightens grip on capital outflows – sources

Chinese regulators are imposing limits on cross-border flows from yuan-denominated capital pools and requiring intensified checks on related transactions, people with direct knowledge told Reuters, as Beijing moves to restrict capital outflows fleeing a falling currency.

#general: Fabindia crosses Rs 1,000 crore in sales; becomes largest retail apparel brand in the country

During 2014-15, the ethnic wear firm posted a 12% rise in consolidated sales at Rs 1,148 crore with 36% increase profit before exceptional items at Rs 112 crore. Its domestic business grew 25% to touch Rs 767 crore ahead of largest fast-fashion brand Zara that clocked sales of Rs 720 crore during the same period.

#macronomics: Don’t treat earning below Rs 5 lakh from shares as biz income

In order to help attract more retail investors to the stock market, a high-level panel today suggested levying lower short-term capital gains tax on annual earning of less than Rs 5 lakh from share trading rather than treating it as business income.

The Justice (rtd) R V Easwar Committee on simplification of income tax laws, in its draft report, suggested doing away with the discretion given to tax assessing officer to classify equity trading income as business income or short/long term capital gains.

#general: Good opportunity to buy great businesses; boom not over: Damani

According to Damani, nothing in the economy suggests that the boom which started in 2013 is over. He says India is heading into a period of lower interest rates and that will add heft to economic growth and corporate earnings.

#macronomics: Is world ready for China slump?

So, will China’s problems cause a global crisis? The good news is that the numbers, as I read them, don’t seem big enough. The bad news is that I could be wrong, because global contagion often seems to end up being worse than hard numbers say it should. And the worse news is that if China does deliver a bad shock to the rest of the world, we are remarkably unready to deal with the consequences.

#general: The Tyranny of Data

(Tyranny of Data)

#macronomics: Global fears cast gloom on the Fed’s rate hike plans

Many on Wall Street believe there will only be two rate increases this year.

“We doubt that the Fed will be hiking the federal funds rate four times this year,” Ed Yardeni, chief investment strategist at Yardeni Research. Yardeni is calling for only one rate hike this year.

#stocks: Apple seeks Indian government approval to set up retail stores

Apple’s retail expansion plans in India comes at a time when concerns about slowing growth in the US and China, the world’s most important market for smartphones, have weighed on the company’s stock in the last few months.

#general: Slump season: 130 stocks below pre-Modi wave level

The S&P BSE Sensex cracked nearly 2 per cent to hit a fresh 52-week low of 23,998.65 inWednesday’s trade led by relentless slide in crude oil prices.

The low point so far was lower than the lowest point recorded on May 16, 2014 when Prime Minister Narendra Modi’s Bharatiya Janata Party won a landslide victory in the national elections.

#general: India can be a bright spot, says economist Nouriel Roubini

India, with an accelerated pace of reforms, has the potential to be one of the bright spots in a woe-stricken global economy, says “Dr Doom” Nouriel Roubini, the US-based economist famous for calling the 2008 global financial meltdown.

Roubini, who goes by various monikers including “permabear” for his usually circumspect views of things, told ET in an interview that while structural reforms in India were directionally right, the speed of policy changes could be faster.

#general: Forget Modi, Someone Else Is Running India’s Show

As India’s politicians bicker, its Supreme Court judges are taking the lead in shaping policy.

In the past six months, Indian courts doubled a tax on commercial vehicles entering Delhi, banned bullfighting and — most controversially — struck down a constitutional amendment that would give politicians a role in picking judges. Soon they will decide on the legality of 4G mobile-phone licenses and mining activities in the south.

#general: Here is the web of little known companies through which Ambani and Nahata have invested in media in India.

(Ambani, Nahata, Media)

#general: IDFC Bank negotiating to purchase RBS’ corporate banking portfolio in Rs 3,000 crore deal

IDFC Bank is in advanced negotiations to purchase Royal Bank of Scotland’s corporate banking portfolio in a deal pegged at up to Rs 3,000 crore, said two people with direct knowledge of the plan. A successful acquisition will allow IDFC, which recently started operations as a universal bank, to widen its branch network in India’s biggest cities, add more customers and acquire a stronger corporate loan book, they said.

#stocks: Sun in the shade

Sun Pharma has fallen some 40 per cent from its 52-week highs. What ails the country’s largest pharmaceutical company and what’s ahead?

#general: WEF 2016: Fall in markets ‘market’s problem’ not of economy, says Raghuram Rajan

With Indian and some other emerging markets witnessing a major plunge on global growth headwinds, RBI Governor Raghuram Rajan today said these falls are actually ‘markets’ problem’ and not of the economy.

However, the “problem in markets can hit the real economy also,” Rajan said here at World Economic Forum (WEF) Annual Meeting.

#general: Cola industry stumped by Narendra Modi’s juicy idea for aerated drinks

Prime Minister Narendra Modi’s suggestion that at least 2% natural fruit juice be added to aerated drinks is impossible to implement for the entire category of products, soft drink industry executives claimed.

Narendra Modi made the suggestion at Saturday’s Startup India programme. “Why can’t 2% natural juice be mixed in aerated drinks? This will provide farmers a market for their produce,” Modi said.

#general: Bank of America singles out the No. 1 black-swan event for the global oil market

(BofA, Crude Oil)

#general: Phone companies like Sony, Samsung lay off 300 employees as sales of smartphones slow on Chinese competition

Sony Corporation and Samsung Electronics have each laid off about 150 executives in India in the wake of slowing sales in the country in the past two months and increased competition from Chinese companies that’s eating away at their smartphone market shares.

#general: Europe on the verge of collapse: Soros

Billionaire financier George Soros has warned that the European Union is on the “verge of collapse” over the migrant crisis and is in “danger of kicking the ball further up the hill” in its management of the issue which has seen more than a million migrants and refugees arrive in the region in 2015.

In an interview with the New York Review of Books, Soros added that the German Chancellor Angela Merkel is key to solving the crisis.

#general: Commodities Crash Boosts China’s New Silk Road

While commodities producers grapple with the lowest prices in more than a decade, the slump could prove a blessing for President Xi Jinping’s signature initiative to build an intercontinental web of infrastructure and trade links with China at the center.

The New Silk Road program announced by Xi more than two years ago is finally gathering steam just as the prices of oil, steel, concrete and other building materials sink. That’s making it easier for China to sell its ambitious vision to build roads, railways, pipelines and ports from Xian to Athens, diversifying the country’s trade options and exporting the excess industrial capacity that’s dragging down its own economy.

#general: Steel prices, capacity utilization take a hit despite safeguard duty

After four months of safeguard duty, the domestic steel industry is grappling with the same problems and is, in fact, worse off, with prices having tumbled by around Rs 8,000 tonne.

According to producers, since September — when the safeguard duty was imposed by the government — prices of hot rolled coil (a primary flat product) have dropped by Rs 7,500-8,000 per tonne, ex-plant.

#general: Cess on petrol, diesel, telecom services proposed to fund Swachh Bharat initiatives

You could soon be paying more for the Narendra Modi government’s Swachh Bharat Abhiyan, with further levies being considered to fund the cleanliness programme. The mission that was launched on October 2, 2014, envisages an investment of nearly Rs 2.23 lakh crore by October 2019.

The measures under consideration include a 0.5% cess on petrol, diesel and telecom services, a 1% cess on accumulated waste produced by mineral generation plants and a 0.5 percentage point increase in service tax. The government imposed a 0.5% Swachh Bharat cess on taxable services from November 15. The government is also contemplating long-term, tax-free Swachh Bharat bonds to raise funds, a senior official told ET.

#stocks: This is the 8th time in Nifty’s history where it has corrected 20% from 52w Highs. This time is also the longest we’ve survived without a 20% correction.

Nifty20pCorrections

#mutual-funds: Many equity schemes outperform markets in 1 year

In the last one year, the Indian equity markets were down by around 16%, but many of the equity schemes managed to outperform the broader markets. Investing into quality companies and specific stock selection helped fund managers generate strong returns.

#macronomics: Oil Sold for -$0.50 per Barrel. A Negative Price!

In a bizarre turn of events, Bloomberg reported that Flint Hill Resources, a refining unit owned by the Koch brothers, said that they would purchase sour crude from North Dakota for $-0.50 per barrel.

#stocks-from the past: Force Motors faces investor ire over purchase of costly aircraft to ferry managers

Force Motors has bought an aircraft to ferry managers between Pune, where the company is based, and In
dore, where it has its main plant.

But some shareholders don’t seem too pleased at what they see as an extravagance, especially since the plane was bought for Rs 136.2 crore in FY13, nearly 10 times the year’s profit and a little over one-third of the company’s current market capitalization. It’s not clear what sort of plane the company has purchased.

#stocks: Every proposal for Cabinet approval should mention its job potential: Govt to Ministries

In a latest communication to all Government of India secretaries, Special Secretary (Cabinet) Jai P Prakash stated that all Cabinet notes will now have to “separately” and “clearly” reflect the “Employment Generation Potential” of each proposal.

#general: Gurus Struggle to Boost Sagging Morale Even As Savage Selling Turns Dalal Street into Halal Street

The savage crash in stock prices has sent shock waves across the investment community that a 2008-like crises is around the corner. Investors are panic-stricken and are likely to throw in the towel soon. The Gurus have their hands full in trying to soothe the nerves of their followers.

#general: Bumpy road ahead for Axis Bank

Shares of Axis Bank have slumped 40.2% after they touched an all-time high in March last year, under-performing the banking index.

Pasted image at 2016_01_21 10_04 AM

#general: Lessons for fund managers: You don’t know where the next cannonball is coming from

(Fund Managers)

#general-from the past: An Analysis of SIP Returns on the Sensex for 23 years

(SIP returns, Sensex)

#general-from the past: ULIPs

(ULIPs)

#general: Maruti YEN imports account nearly 21% (including royalty) of sales. Strong YEN leads to higher import bill, Lower margin

CZOh68eXEAAyTga

#forex: Indian Police Crack Down on XDirect in Mumbai for Illicit Trading

XDirect is registered in Mauritius though the company failed to procure a license to provide FX services following an investigation.

#general: When Russia’s money runs out, the ‘real trouble starts’

Stuck in a recession and with no sign of a reprieve in the oil price, Russia could quickly descend into chaos if the money runs out, William Browder, a well-known critic of the Kremlin and chief executive of Hermitage Capital, told CNBC.

“I don’t think you can underestimate how bad the situation in Russia is right now, you’ve got oil below any measure where the budget can survive and you’ve got sanctions from the West. Russia is in what I’d call a real serious economic crisis,” he said on Thursday.

#general: Why Raghuram Rajan feels market jitters are just jitters about jitters

Anxiety drifted thick and fast and there was pessimism all around as the high-profile gathering of business and political elite kicked off at Davos, Switzerland, on Wednesday.

The three-day annual meeting of the World Economic Forum is focused on “improving the state of the world”, but it clearly showed that the world’s most powerful capitalists are feeling as pessimistic about the economy as nearly everyone else.

#general: RBI ‘admits’ to circulating Rs 1,000 notes without ‘silver thread’ security feature

Reserve Bank of India (RBI) has admitted to having circulated currency notes of Rs 1,000 denomination without the ‘silver thread’ security feature.

Sources told CNN-IBN on Tuesday that the notes were printed in the 5AG and 3AP series, but did not disclose how many were in circulation.

#general: India changing tax laws for stability, predictability: Jaitley

India is gradually transforming most of its taxation laws for a greater degree of stability and predictability, Finance Minister Arun Jaitley on Thursday said, stressing that the proposed Goods and Services Tax (GST) is a major step in this direction.

“It has been our effort in India to gradually transform and change most of our taxation laws, put to rest various disputes and issues which have been pending and make sure that the scope of discretions is eliminated and there is a greater degree of stability and predictability as far as taxation laws are concerned,” Jaitley said.

#general: ’Hosa Belaku’ spreads to 52 places in five districts

The distribution of LED bulbs under Hosa Belaku, the Energy Department’s flagship programme, has been expanded with eco-friendly bulbs available at 52 places across five districts under the jurisdiction of Chamundeshwari Electricity Supply Corporation (CESC).

Over three lakh bulbs have been sold in a span of one month, after the programme was launched in Mysuru in December last. The authorities claim that the distribution of bulbs, each costing Rs. 100, was going smoothly, with no hiccups in distribution.

#general: The U.S. Is at the Center of the Global Economic Meltdown

While the economic implosion progresses this year, there will be considerable misdirection and disinformation as to the true nature of what is taking place. As I have outlined in the past, the masses were so ill informed by the mainstream media during the Great Depression that most people had no idea they were actually in the midst of an “official” depression until years after it began. The chorus of economic journalists of the day made sure to argue consistently that recovery was “right around the corner.” Our current depression has been no different, but something is about to change.

#general: India’s Export Crash: Handing Out Crutches To Lame-duck Exporters Is Not The Answer

India’s export story appears to be one of serious de-growth. In December 2015, exports fell 15 percent, the 13th consecutive decline in as many months, and the April-December export figure shows a fall of an even higher magnitude – 18.6 percent.

But should we worry? Yes and no. We should worry that our merchandise exports are not competitive enough to handle the current global shrinkage in demand; but we should not be wringing our hands in despair either because it takes two sides to make a trade ledger.

#macronomics: How balance of power in oil trade is shifting back to OPEC

(Oil Trade, OPEC)

#general-from the past: How high can Nifty go in 2015? Here’s the math

I’m sure we’ve all read this somewhere: past performance is no guarantee of future returns. Still, our financial media is hostage to price projections by brokerages and ‘gurus’ based on past price action. Is there a better way? Sure. The forward-looking India VIX index.

What’s that? Simply, it’s the one standard deviation expected move of the Nifty calculated using option premiums, expressed as an annualized percentage.

#general: Top Economist – Who Predicted the 2008 Crash – Confirms What Alternative Financial Sites Have Been Saying for a Decade

William White is one of the world’s top economists.

He was the head economist for the Bank for International Settlements (BIS) – the world’s most prestigious financial institution, called the “central banks’ central bank – comprised of the world’s central banks.  He is now the chief economist for OECD, made up of most of the world’s richest and most powerful countries.

As chief economist for BIS, White predicted the 2008 crash.

#general: Global Shareholders Have $27 Trillion Locked in Bear Markets

At least 40 stock markets around the world with a total value of $27 trillion are in bear territory, as investors witness the worst start to a year on record.

#general: PM Modi may bet on old faces and new to regain winning ways; Arun Jaitley may go to defence

Prime Minister Narendra Modi may look to press the reset button on his leadership this spring to reinvigorate stalled economic reforms and appease critics, eyeing a mix of tried and tested allies and fresh blood, senior government sources said.

The government has overseen rapid economic growth but failed on tax and land reforms, and the euphoria that met Modi’s 2014 election triumph has given way to investor disillusionment; stocks have erased all of their gains since he won power.

#general: The Yield Illusion – Many high-dividend paying companies will find it hard to sustain their payout

Many high-dividend paying companies will find it hard to sustain their payout

While many stocks at their current market price offer a mouth-watering dividend yield, in reality they are a trap as the financial health of many of these companies are deteriorating. Commodity stocks top the dividend yield table and companies like Cairn India, NMDC, Oil India, Vedanta and others now have a dividend yield in excess of 5%. However considering the recent correction in commodity prices, many of them will have lower operating cash flow and that will impact their ability to sustain last year’s dividend payout.

 

#stocks: Why IndiGo Shares Crashed Despite Record Quarterly Profit

(Indigo, Stock)

#general: Japan’s Nikkei surges more than 5% in late trade

Tokyo shares rallied more than five percent Friday, tracking gains in US and European markets on hopes for fresh European and Japanese central bank stimulus.

The benchmark Nikkei 225 index at the Tokyo Stock Exchange surged 5.38 percent, or 862.34 points, to 16,879.60 in mid-afternoon trade, while the broader Topix index of all first-section shares also gained 5.05 percent, or 65.71 points, to 1,367.20.

#market-gyan

@Karunakar – for fresh starter in market. (From my experience).

• Listen to everyone but buy only stock which your heart says. Everyone has its own lovable share.

• Follow gurus and expert but don’t copy their trade if you don’t understand it well and it is useful for your portfolio.

• Read AR of 10 company this year.

• Filter out companies with ROE of 30% and ROCE of 30%, read AR of these companies first.

• Understand yourself, are you trader / investor.

• Never leverage.

Making an Investment Checklist? Check these recommended by users.

Recommendations by Manoj Mathew and Ritesh

#recommended-readings

Books by Jack Schwager

Contrarian Investment Strategies by David Dreman

Making Up Losses Is Tougher

The Widowmaker Trade

The Investment Checklist: The Art of In-Depth Research

Using Implied Volatility to Determine the Expected Range of a Stock

Wally Olins. Brand New: The Shape of Brands to Come

#doityourself

Where can we check the bond prices?

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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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