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On Slack: Modi's Year of Possibility, IREDA Bonds, Patanjali Products Exclusivity, Risky Oil IPOs, China Forex Reserves, Sucker's rally, Your Tax Aide, When to Take Profits 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: Modi’s Year of Possibility

More than most world leaders, Indian Prime Minister Narendra Modi must’ve cheered the end of 2015. The year was an annus horribilis for him, marred by policy paralysis, embarrassing electoral defeats and mounting doubts about how transformative his term will turn out to be. He has a chance to regain momentum in 2016, but only if he’s smarter and bolder about pushing his reform agenda.

#general: Word of mouth sends demand soaring for Pulse candy

In just six months, Pulse has posted Rs50 crore in sales and DS Group expects to cross Rs100 crore by March.

#general: U.S. payrolls surge in December in boost to economic outlook

U.S. job growth surged in December and employment for the prior two months was revised sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary. 

Nonfarm payrolls increased by 292,000 last month, the Labor Department said on Friday. The unemployment rate held steady at a 7-1/2-year low of 5 percent even as more people entered the labor force, a sign of confidence in the labor market.

#general: Shekhar Gupta and Barkha Dutt launch theprintindia

Former editor-in-chief of The Indian Express newspaper and NDTV’s Barkha Dutt have joined hands to launch a new media startup called ‘theprintindia’.

#macronomics: Just the Beginning: Iran, India Dump Petrodollar, Settle Oil Payments in Rupees

(Iran, India, Petrodolla, Oil, Rupees)

#general: Reliance Jio to offer 10GB 4G data, MiFi device for Rs 700: Report

The report said that the telecom operator is increasingly appointing new distributors for its SIM cards across the country. It has also given them a working target of launching commercial 4G services early in March.

#general: IREDA bonds subscribed 5 times on day 1

With stock markets losing ground, investors are increasingly bonding with debt. The Rs 1,000-crore tax-free bond issue of Indian Renewable Energy Development Agency (IREDA) has been subscribed more than five times on the first day itself.

#general: India’s e-commerce industry likely to touch $38 billion mark in 2016 – Assocham

The e-commerce industry in the country is likely to be worth USD 38 billion by 2016, a 67 per cent jump over the USD 23 billion revenues for 2015, as per industry body Assocham. “India’s e-commerce market was worth about USD 3.8 billion in 2009, it went up to USD 17 billion in 2014 and to USD 23 billion in 2015 and is expected to touch whopping USD 38 billion mark by 2016,” Assocham said in a statement.

#general: Online med sellers protest ban on selling drugs online

Protesting the ban on sale of medicines through online platforms, pharmacists and drug retailers affected by the decision met with regulatory authorities.

#general: Patanjali products get exclusive space at stores as sales soar

Modern retailers are creating exclusive ‘Patanjali destinations’ at their outlets as Yoga guru Baba Ramdev’s products fly off the shelves. Big Bazaar, Reliance Retail, Spencer’s Retail and SRS report Patanjali products such as ghee, honey, chyawanprash, juices, instant noodles and shampoo among the top-selling brands in their respective categories. Retailers are putting up standalone racks, counters or bays depending on the size of the stores to stock Patanjali’s grocery products.

#general: The link between Capricorn eServe and former Foodpanda MD Rohit Chadda

Former Foodpanda MD Rohit Chadda may have channelled money to Capricorn eServe, promoted by his relatives.

#general: Russia and Saudi Arabia Bet on Risky Oil IPOs

Saudi Aramco, the government-owned oil company that claims to produce “roughly one in every eight barrels of the world’s oil supply,” has announced that it would seek to go public, either by listing its own shares on the stock exchange or by selling stock in a “bundle of its downstream subsidiaries.” Russia, for its part, is considering the privatization of 19.5 percent of Rosneft, the country’s biggest oil company that is now 69.5 percent state-owned.

#general: Gold In 2016: “Economic Power Is Shifting”

(Gold, Economic Power)

#general: Meet the Two Brothers Making Millions off the Refugee Crisis in Scandinavia

(Refugee, Scandinavia, Profit Brothers)

#general: Twitter slumps to all-time low as product changes loom

Since its 2013 initial public offering, the company has disappointed investors with slowing user growth and sales.

#general: Young prince in a hurry. Muhammad bin Salman gambles on intervention abroad and radical economic change at home. But forget about democracy

(Saudi Prince, Democracy)

#macronomics: The Big Headline that went unnoticed: China is losing Forex reserves at an Alarming pace

China’s foreign exchange is declining and it’s a clear indication that China is struggling not only with slowing economy but also with Capital flows. China has been struggling with forex reserves decline for mo
re than six months now. October month was the only exception when forex reserves rose by $11.39 bn.

China’s foreign-exchange reserves declined by $87.22 billion in November 2015. It then declined by another $107.9 bn in December 2015. Having said that – China’s foreign exchange reserves still stands at $3.33 trillion but in the world of financial markets – it is not the absolute number that matters. What matters is the trend. That picture does not look pretty.

#macronomics: What might happen in China in 2016?

Millions of people being relocated from cities, fewer jobs, greater centralization, and more movie blockbusters are just some of the author’s predictions for the year.

#macronomics-from the past: Chinese Cash Floods U.S. Real Estate Market

Chinese families are looking for a safe place to invest their Renminbi. From rural Texas to Silicon Valley, American real estate is an increasingly popular destination for their cash.

#macronomics-from the past: China Boosts Efforts to Keep Money at Home

China is imposing fresh controls to prevent too much money from leaving its shores, escalating its battle against a deepening slump in the world’s No. 2 economy.

The country’s central bank said Tuesday that it will make it more expensive for investors to pressure the yuan to weaken against the U.S. dollar. A weaker currency generally prompts investors to look elsewhere to put their cash and would complicate the government’s efforts to generate spending and bolster economic growth.

#macronomics-from the past: Lots of money is escaping China’s porous capital controls

(China, Capital Controls)

#macronomics: Ajay Shah (professor at National Institute of Public Finance and Policy): Mother of all currency defences

(Currency Defence, Ajay Shah)

#general: Anil Ambani-led Reliance Group to set up Rs 5,000-crore naval shipbuilding unit

The facility, to be set up at Rambilli along the East Coast near Vizag, would also lead to creation of a multi-tier array of defence ancillaries with further investments of Rs 5,000-10,000 crore and thousands of skilled jobs, he said.

Speaking here at the Andhra Partnership Summit after his group signed an MoU with Andhra Pradesh government for the facility, Ambani said it would complement Reliance Group’s existing facility at Pipavav in Gujarat and will have a clear focus on building strategic assets for the Indian Navy.

#general: AI raises bond amount to Rs 1 cr for new pilots to stem poaching

Air India has hiked the bond amount for new senior pilots joining the airline from Rs 50 lakh to Rs 1 crore. This comes after a series of resignations by new pilots who had undergone training but left the airline for greener pastures.

The airline had made new pilots sign a bond of Rs 12 to 14 lakh in the recent past, which is now being revised upwards to stem their migration to rivals after acquiring high-cost training at the expense of the national carrier.

#general: Beware! Sucker’s rally on in midcap, smallcap stocks

The BSE smallcap index has rallied 61.5 per cent over the past two years while BSE midcap index has risen 53.1 per cent compared with a 18.61 per cent gain in the BSE Sensex during the same period. Traditionally, a bull run leads to a surge in the largecaps first and then the broader market tails the benchmark indices.

But the BSE smallcap index has gone far ahead this time around, and is currently trading at a 65 per cent premium to the BSE Sensex.

#mutual-funds: Equity Mutual Fund redemptions highest, since September 2010!

Equity mutual fund schemes reported steady inflows over the past 20 months. But suddenly, in December 2015, net inflows dipped to its lowest since May 2014. In December 2015, equity schemes reported a net inflow of Rs3,464 crore. While sales remained steady compared to the past months at around Rs13,409 crore, redemptions peaked to Rs9,945 crore in December 2015. This was the highest redemption reported since September 2010, when as much as Rs13,250 crore flowed out of equity schemes.

#general: China’s Hunger for Commodities Wanes, and Pain Spreads among Producers

For years, China voraciously gobbled up all manner of metals, crops and fuels as its economy rapidly expanded. Countries and companies, fueled by cheap debt, aggressively broadened their operations, betting that China’s appetite would grow unabated.

Now everything has changed.

China’s economy is slumping. American companies, struggling to pay their debts as interest rates rise, must keep producing. All the excess is crushing prices, hurting commodity-dependent economies across emerging markets like Brazil and Venezuela and developed countries like Australia and Canada.

#general: As Facebook bats for Free Basics, four young engineers bring free Wi-Fi to Indian villages

Even as Facebook’s Free Basics platform claims to connect India’s villages by giving them free but limited Internet, a grassroots initiative aims to provide unrestricted Internet access for free. Four young IT engineers have started a free Wi-Fi service in a village in their home district Rajgarh in the state of Madhya Pradesh.

#general: Gurgaon Housing Prices Drop By 25 Per Cent In 2015 On Low Demand

Housing prices in Gurgaon fell by about 25 per cent during last year but it was not sufficient to boost demand, according to property consultant JLL.

“Gurgaon was not unaffected by the slump that hit the country’s realty sector. Sales dwindled, new launches decreased, prices came down and the overall sentiment nosedived in the year 2015,” JLL India CEO – Residential Services Ashwinder Raj Singh said in a report on the city.

#general: Markets rewarding stock-picking for first time in 30 years: Ramesh Damani

(Ramesh Damani, Market Talk)

#general: China Rou
t Threatens to Spawn India Crisis, Top Banker Says

A deepening slowdown in China threatens to derail India’s economic growth, triggering financial market upheaval and a falling currency, Vishal Kampani, the nation’s top investment banker, said.

“If China keeps getting hit like this, the yuan has to devalue, and we will see another crisis in India,” Kampani, managing director at JM Financial Ltd., the South Asian country’s top mergers and acquisitions adviser last year, said in a Jan. 8 interview. “I refuse to believe that India will stand out and will look very different.

#general: HUL, Colgate and Dabur could gain from implementation of DBT for food subsidies

Implementation of Direct Benefit Transfer (DBT) for food subsidies is expected to benefit a few of India’s top consumer companies, said Ambit Capital. DBT can result in Rs 45,500-crore rise in disposable incomes of targeted households annually, which in turn can boost rural FMCG demand by 14%. HUL, Colgate and Dabur are likely to be the biggest beneficiaries, according to the domestic brokerage.

#stocks: SEBI Tightens Investment Caps for Debt Funds

The Securities and Exchange Board of India (Sebi) on Monday lowered the amount of corporate debt that mutual funds can hold in individual companies and sectors to prevent investors from potentially damaging over-exposure.

The rules are in response to market turmoil last year when a unit of JP Morgan in India suffered significant mark-to-market losses after a big investment in the debt by Amtek Auto Ltd soured when the auto parts maker was downgraded by rating agencies.

#macronomics: Here Are 6 Reasons China Matters

(6 Reasons China Matters)

#general: The fault in our startups

Internet startups are cloning business models from the West, without much thought on how to Make in India.

#backtobasics:

A Bond and Macro Recap of 2015 and Themes for 2016

Covered Call vs. Short Put

Daniel Kahneman in Conversation with Michael Mauboussin on Intuition, Causality, Loss Aversion and More

Historical versus Implied Volatilities

Straddle Defense and Management

The Most Important Question Of Your Life

Zerodha – Your Tax Aide While You Trade

#doityourself:

How to download NSE listed companies by market cap:

  1. Download bhavcopy from – NSEIndia
  2. Unzip, open excel file and take the symbol column and copy it
  3. Open a new google spreadsheet (docs.google.com)
  4. Paste this column into one column
  5. Assuming that’s column A, in column B put the formula “=GOOGLEFINANCE(“NSE:”&A1,”marketcap”)/10000000 for Mcap in crores.

#quotes:

Reason for stocks being at their 52-week lows

When new companies are formed and capital is needed, the stock has to be sold to the public, and there is no difference in the method of selling stock and the method used by business men in selling their goods. A good business man advertises his goods and that is what the manipulators do. When they wish to distribute stocks and get them into the hands of the public, they use the newspapers in every way possible to advertise the stock. Their fluctuations are given wide publicity and everything possible is done to attract the public.

It requires wide fluctuations and activity to entice the public to take a hand. They may pay very little attention to a stock selling around 40 when it is only fluctuating 5 or 6 points in three or four months, but when this same stock reaches 150 and begins to fluctuate 5 and 10 points each day, everybody talks about it. They see great opportunities for making big profits and begin to trade in it. The result is that the wide publicity and advertising induces the public to buy all the stock at a high price. Then the decline starts. They hold on and hope, and nothing much is said about it until the stock gets near the bottom, when all the bad news comes out and everybody talks about it.

When to Take Profits

Never close a trade just because you have a profit. The time to hold on is when the tide is running in your favor. When tempted to close a trade just because you have a profit ask yourself the questions: “Do I need the money?” “Is the move over?” “Do I have to sell?” “Why should I take profits?”

Look at your charts; do what they tell you. If they do not show a change in trend, wait. Protect profits with stop loss order, but do not take a profit too soon. This is just as bad as taking a loss too late. Patience to hold on when you are right and nerve to get out quickly when you are wrong will make a success.

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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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