Tuesday, February 19, 2019

UP Equation & Modi Schemes

Wednesday, February 06, 2019

India Macro Charts

NO ease of doing business in India

List of issues Indian bureaucracy creates is amazing. Hope we are not creating too many barriers to drastically reduce the long term fund flows to India. This article highlights exactly the points which I am concerned about for India

Issues which irritate foreign players
  • ArcelorMittal on Essar Steel vs Indian steel players who doesn't want Mittal in India and playing all games that they can to keep him away
  • Vodafone and Cairn on tax disputes and these are not small change
  • E-Commerce rules impacting Amazon / Walmart-Flipkart
  • Phased Manufacturing Programme (PMP) for manufacturing - Actually this was long due

India keeps foreign firms on tenterhooks

Still, no-one should make the mistake of thinking India is the only investment destination left globally. Look at Japanese investment, for instance. Indian diplomats and others who've dealt with the Japanese testify to the fact executives there are more comfortable and feel greater cultural affinity with South-East Asia and the CMLV (Cambodia, Myanmar, Laos and Vietnam) countries than India. Also, there are estimated to be 30,000 Japanese companies operating in China compared to just 1,400 in India. With the glass still half-full or half-empty for foreign investors, depending on the way they look at India, there's a vital need for the government to tread sensitively and judiciously in implementing rules. This country not only faces competition from other Asian economies, and increasingly east Africa too. And in developed markets, India risks being squeezed in a race with automation. That's shaping up to be a whole other boondoggle for all labour-intensive economies.

Ambit on BFSI Sector

Ambit's BFSI Team is the best. Pankaj Agarwal understanding of the sector is unparalleled.

Tuesday, February 05, 2019

Investors Sector Positioning - Covers FPIs, DFI and DMFs (MS Report)

Whole world has bought Axis Bank and ICICI Bank.
Never seen such a common consensus buy call from research houses.

EV Charging Infra: Guidelines and Standards (MS Report)

As per MS report, the EV Charging Infra guidelines are comprehensive. Challenges include payback period for investments and possibly land acquisition

Tuesday, January 29, 2019

Interesting Article I read today

Green energy companies see red due to cancelled tenders, low tariffs (ET Article)
Stupid bureaucrats making a mess of the sector.

"But other countries are also competing hard to attract capital and we fear that the government is sending a negative signal to investors. International capital can be fickle and once turned away, it would be extremely hard to attract these investors back to India," Rustagi added.
Coal shipments at India's 12 major ports up 16 pc to 121 MT in Apr-Dec (ET Article)
Import growth could be higher if the power capacity addition does not keep up with power demand growth

Coal shipments, comprising thermal/steam and coking coal, were up 17 per cent and 15 per cent respectively in the April-December period of the ongoing fiscal. 

Your Davos Cheat Sheet (Source)
Good & brief cheat sheet on Davos...don't need to read any other article
The World Economic Forum has traditionally brought together the world's top political and business leaders. But this year, the political leaders were largely absent — remaining in their home countries to handle crises largely of their own making (President Trump with the shutdown and Prime Minister Theresa May with Brexit).
The surprise guest this year was Tim Cook, Apple's chief executive, making his first appearance; it may be an indication of Apple's increasing dependence on foreign markets for growth.
A Chinese chief executive described his country's economy as "ugly" — he used that world repeatedly — suggesting that the underlying foundation there was more fragile than most economists acknowledge. That could lead to weakness in China spreading to the rest of the world. And the general sense is that while the U.S. and China may reach a trade d├ętente, we might be headed for a decades-long economic cold war.


Thursday, January 24, 2019

HSBC on Real Estate Sector - Real estate has become a bad word for NBFCs - New NBFCs are not going ahead with RE financing..Wow


India Infrastructure: Doubts on Sanctity of SPVs Have Far-reaching Implications

I am sharing below a note from Citi Research. There will be a complication of disproportionate magnitude if there is any tinkering done in this order. I hope the courts don't do anything here.

Gems & Jewellery Sector - Titan Market Cap is almost 4x of all the other players combines

Public Sector Undertakings (PSUs) - Stock Price Damage (In order of most damage from 52w High price)

IPOs Price Performance (In order of most damage done from 52w High Price)

Charts from 2019 Crisil India Economy Outlook

24 Jan 2019: Some interesting articles I read today

Snowbalisation: The steam has gone out of globalisation: A new pattern of world commerce is becoming clearer—as are its costs (Article Link)
"Globalisation made the world a better place for almost everyone. But too little was done to mitigate its costs. The integrated world's neglected problems have now grown in the eyes of the public to the point where the benefits of the global order are easily forgotten. Yet the solution on offer is not really a fix at all. Slowbalisation will be meaner and less stable than its predecessor. In the end it will only feed the discontent"

Interesting Article on the current situation of Jet Airways (Article Link)
Mounting losses, increased debt has pushed the airline to the brink. In last three quarters Jet airways made losses to the tune of Rs 3,500 Crs. Rising fuel prices coupled with price warfare has bought left Jet Airways tottering. The playbook we are seeing today is similar to the one we saw in case of Kingfisher – Delays in payment of Salaries to staff followed by defaults on payment of Interest to Banks.
Last month Jet defaulted on payment of interest and principal to a consortium of banks. Jet defaulted on payments for December month to banks. Post the default. ICRA has downgraded Jet airways debt to D from C.
Jet Airways has a debt of Rs 8,000 Cr on its book. Currently Jet has a negative net worth of Rs 9,000 Crs. In next three months Jet airways needs to repay 1,700 Cr of debt and for FY20 its roughly RS 2,500 Crs. It has borrowed from a group of 26 banks. Jet has paid 480 Crs as finance cost for the first half of current financial year. For last financial year Jet has paid around 850 Crs as finance cost.

About 40 per cent of the gross credit exposure of Indian banks is in sectors where water risks are significant (BL Article)
Water problems could push the non-performing assets of banks higher as many lenders have loan exposure in sectors where there are risks to water resources, says a report. At a time when the banking sector is grappling with mounting NPAs, the World Wildlife Fund (WWF) report released on Wednesday said water risks could pose further "liquidity constraints" on the strained balance sheets of banks. Launched with the Indian Banks' Association (IBA), the WWF-India report 'Hidden Risks and Untapped Opportunities: Water and the Indian Banking Sector' provides evidence for why water presents a material risk for banks in India, particularly how water risks could lead to stranded assets in the power and agriculture sectors, two sectors that account for the highest gross credit exposure of Indian banks
According to the report, close to 40% of the gross credit exposure of Indian banks is in sectors where water risks are significant. "Reeling under a crisis of non-performing loans with close to 10% of gross-advances of the Indian banks facing a risk of non-payment from debtors, these risks can place further liquidity constraints on the already stressed balance sheets of banks in India," it said. Citing NITI Aayog's observation, it said, the current water crisis in the country is its worst ever. "With water being a shared resource, what the country requires is a comprehensive and sustainable water management plan by various stakeholders," the report said. While banks are exposed to the risks of water as lenders to businesses, it also places them in a unique position to influence businesses to proactively handle various water related risks, including using WWF's Water Risk Filter and enabling flow of capital towards solutions which address such risks, the report added.

Soumya Kanti Ghosh makes a relevant point on the topic of Central Bank communication (Via email)
I have been reading his reports (mostly 2-5 pages long). These reports makes for a good read on topic which is not covered otherwise. Compared to other macro reports, his writing is unbiased (as I see it)

Basics of Technical Analysis

Corporations are fleeing global chaos (Link)
This is not good news for the employment. UK is a far better place than many EU countries
"Companies around the world are changing their tunes and addresses — uprooting supply chains and moving their headquarters to get ahead of unsettled global chaos. More than half of the 48 financial services companies in EY's Brexit tracker said they are considering moving some of their operations and or staff out of the U.K., thanks to Brexit uncertainty. "I doubt these companies will go back," even if tensions ease, Gutierrez said"

The new U.S.-China Cold War (Article Link)
Indians are in a better place than Chinese. However, I have also read that many Indians are being pulled by Canadians to make a Silicon Valley copy called "Maple Valley" 
The new dynamic affects people as well as products. China is asking state firms to avoid travel to the U.S. and its allies. And if you were an American or Canadian tech company executive, would you travel to China right now, given that Canada has detained a leading Huawei executive (and daughter of the company's CEO) for extradition to the U.S.? Meanwhile, many American universities are kicking their local Confucius Institute off campus, most notably the University of Michigan, amid complaints that those institutes are spying on Chinese nationals who attend those schools. Whether or not that is true, this is another sign of the collapse of trust. This is the deeper issue with the U.S.-China relationship: the continuing erosion, in an era of rapid deglobalization, of previous ties built at least partly on a common sense of purpose. Looking back at 2018, it now seems obvious that this was the most important story of the year. It is easy enough to imagine how things might get worse. More and more accounts of Chinese espionage are likely to surface, and the U.S. is hacking Chinese systems, too. As deals are rejected, commercial and political grudges will stick and fester. Hong Kong may fall even further into the Chinese sphere and behind the Great Firewall.

Wednesday, January 23, 2019

23Jan 2019 - Interesting Articles and Reports I read today

What Google Trends can tell us About Stock Picking (Source)
Interesting Article one should read

Most in the behavioral psychology world agree that cognitive biases affect every part of our lives, so it is safe to assume that it happens with stocks as well. Lack of focus on selling stocks sounds right as well, but it looks like there is no hard data to confirm this, at least where I looked.
Davidowitz is a data scientist who gained notoriety for his use of the tool Google Trends to compare what we say we are going to do vs. what we actually do. For instance, one of the insights he found was searching for the n-word had the highest correlation to voting for Trump in the 2016 electionFor those unfamiliar, Google Trends is a free product that can tell you how popular a search term is over certain time frames. You can also compare the popularity of one search term vs. another.

Investors in debt-laden companies should brace for messy workouts (FT Article)
Article highlights workings which are very similar to 2009 times. I wonder if the magnitude is similar to that. However, my instincts says its not. However, the total debt and money under circulation is another datapoint which I am scared of
Fierce competition from the likes of Amazon took most of the blame for Toys R Us's demise. But observers also pointed to a $5bn debt structure so complex it made a job-destroying liquidation the best choice for the company's creditors. The company could have pursued a reorganisation, but its web of debt and other liabilities was simply too tricky to untangle.

The consequence may be a sharp divide in the type of corporate bankruptcies the next US recession delivers. On the one hand will be smaller companies not owned by PE firms, which can reorganise themselves relatively swiftly. On the other will be billion-dollar companies with PE owners, like Toys R Us, whose byzantine debt structures will lead to lengthy, litigious and very costly bankruptcies. The workout of Toys R Us, for example, cost $200m in adviser fees. These battles may appear to be waged between private equity owners and often sophisticated credit hedge funds, but individual investors are likely to get caught in the crossfire too. In recent years, leveraged loans, a favourite funding tool for buyouts, have become more popular with retail investors, lured by a buoyant market and relatively few defaults. 

"Going into the last cycle, leveraged loans and high-yield bonds were mainly held by institutions", says Bruce Bennett of Jones Day, referring to the banks and insurance companies that previously dominated ranks of buyers. But between the start of 2016 and the end of 2017 more than $20bn flowed into retail leveraged-loan funds, according to Lipper. Such investors "may not be ready for the effects of higher rates, larger spreads and increased default rates," says Mr Bennett. Another factor adding to complexity: documents on the bonds and loans underpinning buyouts have been written loosely enough to allow companies to move corporate assets out of reach of senior creditors, or to sell them, for the benefit of the PE owner. 
A huge wave of defaults may not be imminent. Moody's, the rating agency, expects that the US corporate default rate will edge up to 3.4 per cent by year's end, from 2.8 per cent at end-2018. However, when a slowing economy does eventually trip up overleveraged companies with convoluted capital structures, the battle to carve up whatever spoils are left will be messy, says Jim Millstein, a restructuring veteran who now co-chairs Guggenheim Securities. "Whether there are valid claims or not, it becomes a field day for the lawyers.

Retrospective changes: Changing policy midstream turns off investors (source)
One thing is for sure that Indian Government is not making a well thought out policy. And it seems very clear from various actions that incremental policies will be more tilted towards one group who has grand plans. Whoever wants to exists in India will have to go to this company first and then explore other options if he has the guts to do so.

Restricting foreign investment to just marketplaces was in any case overly harsh, reducing the benefits to consumers and suppliers. Now the government has, midstream, made the rules even harsher. It has also forbidden exclusive merchandising deals — in other words, Amazon India, for example, cannot tie up to exclusively sell a particular smartphone. This had enabled cheap and promotional roll-outs, which benefited consumers. Here, again, the government waited for big investments to come in before changing the rules — changing the return on capital and ensuring thereby that investors feel cheated. Walmart has just put billions in Flipkart, for example. Only days after the government's policy change, Reliance Retail and Jio announced they would roll out an e-commerce venture. In order to insulate itself from charges of favouritism, the government should not only rethink its ham-handed attempts at protection, which will always be seen as favouring big business, but also seek to avoid changing rules in this unfair and retrospective manner.

How the U.S. Could Lose a Tech Cold War: Misreading the lessons of the conflict with the Soviet Union is a good place to start (Source: WSJ)
China is not too dumb to not realize what other countries (mainly US) can do to block their route to dominance specially when they have all the cash (foreign reserve). Full article below.
Today, as the U.S. seeks to deny China access to advanced technologies — in the latest move, U.S. legislators introduced a bill last week to ban chip sales to Chinese tech companies that defy U.S. sanctions — many talk glibly of a tech Cold War, as though there are simple parallels with Washington's efforts in an earlier era to impede the advance of a strategic competitor. That assumption not only misconstrues the Chinese economy, which is nothing like the Soviet one, but gets the Cold War completely wrong. A key lesson from that confrontation is that it's extremely difficult to ring-fence technologies and prevent their export to a rival. The challenge is immeasurably more complicated in today's hyper-connected global economy. Indeed, any attempt to reprise the actual Cold War will almost certainly end up hurting the U.S. economy and those of its friends and allies as much, if not more, than China's.
China is not the Soviet Union: In many areas of technology, including AI, it's already close to parity with the U.S. And misreading the Cold War will inevitably lead to misguided policies. While the U.S.-led technology blockade may have slowed Soviet expansionism, the Soviet system ultimately collapsed under its own weaknesses — lack of innovation, a chronic shortage of consumer goods, inept central planningNone of these are obvious Chinese failings. It's one thing to convince China to halt its state-sponsored theft of commercial secrets, stop forcing multinationals to hand over technology in exchange for market access, and scale back its mercantilist ambitions to dominate the technologies of the future. This is only asking China to play by the same rules as everyone else as it pursues its goals. Security concerns, on the other hand, require a different, more targeted approach that seeks to minimize both the threat and the harm to the U.S. economy. Susan Shirk, a former Deputy Assistant Secretary of State during the Clinton administration, sensibly proposes a "small yard, high fence" approach: Narrowly define technologies such as long-range radars, or advanced turbofan engines, whose loss could endanger U.S. national security, and then aggressively protect them. In a similar vein, it makes more sense to punish individual Chinese companies that benefit from technology theft rather than resort to blanket measures against entire industries. Above all, the U.S. should focus on its own industrial competitiveness. "For every dollar we spend on containing China, we should be spending on our labs and innovation centers," says Gary Rieschel, the founder of Qiming Venture Partners and a pioneer U.S. investor in the Chinese tech sector. He adds: "The U.S. does not do defense well."

Chart: The Evolution of Standard Oil - ROCKEFELLER'S JUGGERNAUT WAS SPLIT INTO 34 COMPANIES (Source)

Near the top of that list in 1917 is The Standard Oil Company of New Jersey, which is just one of the 34 forced spin-offs from the original Standard Oil juggernaut that was split up in 1911. In this chart, we look at the "fragments" of Standard Oil, and who owns these assets today.
At the turn of the 20th century, John D. Rockefeller's Standard Oil was a force to be reckoned with. In the year 1904, it controlled 91% of oil production and 85% of final sales in the United States. As a result, an antitrust case was filed against the company in 1906 under the Sherman Antitrust Act, arguing that the company used tactics such as raising prices in areas where it had a monopoly, while price gouging in areas where it still faced competition. By the time the Standard Oil was broken up in 1911, its market share had eroded to 64%, and there were at least 147 refining companies competing with it in the United States. Meanwhile, John D. Rockefeller had left the company, yet the value of his stock doubled as a result of the split. This made him the world's richest person at the time.
The company was split into 34 separate entities, mainly based on geographical area. Today, the biggest of these companies form the core of the U.S. oil industry:
  • Standard Oil of New Jersey: Merged with Humble Oil and eventually became Exxon
  • Standard Oil of New York: Merged with Vacuum Oil, and eventually became Mobil
  • Standard Oil of California: Acquired Standard Oil of Kentucky, Texaco, and Unocal, and is now Chevron
  • Standard Oil of Indiana: Renamed Amoco, and was acquired by BP
  • Standard Oil of Ohio: Acquired by BP
  • The Ohio Oil Company: Became Marathon Oil, which eventually also spun-off Marathon Petroleum
But that's not all – the Standard Oil asset portfolio also carried some other interesting brands that you'd recognize today:

Yes, even Vaseline was originally a part of Standard Oil. Inventor Robert Chesebrough derived the product from petroleum residue, and the spun-off company (Chesebrough Manufacturing Company) was purchased by Unilever in 1987. Meanwhile, the Union Tank Car Company is a part of Berkshire Hathaway today – and Pennzoil is owned by Royal Dutch Shell.

If you believe "experts" have enough foresight about financial events to make a meaningful difference. Unfortunately they don't. After reviewing brokerage reports, you will quickly realize most of what passes for financial advice and forecast is really 'financial fiction' (Source: Tweet from Pankaj Baid)

!During the last severe stock market correction in 2015, US #earnings growth turned negative, but no #recession followed (Source)

CLSA has a sell on Ashok Leyland...Ouch

CLSA has a sell rating on Ashok Leyland...Ouch
I am a fan of the turnaround that happened in this company in the past decade. It pains to see the company getting impacted in this downturn.
Btw, the analyst Nitij Mangal's sell call played out well. His grip on Tamo is better than many other analyst.

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