Stray Thoughts: Demonetisation – Make India Great Again

(Image Courtesy nytimes.com)(Sunday, 20 November 2016)   And, for a Monday morning, a few stray thoughts and a few general observations and a few points of view: Like the Indian Stock Market has been in a tailspin since the demonetisation of high-value currency notes was announced by the Prime Minister on the 8th of November 2016. Bulls got punched in the mouth twice, once as a result of the demonetisation and again as Emerging Markets (EM’s) cratered in response to […]

Is Benchmarking a Curse or an Opportunity?

Cartoonist: Rosandich, Dan; cartoonstock.com – Sunday, 6 November 2016 Do you benchmark? More often than not, the answer to this question will be in the negative. Reality is a bit nuanced. Investors do end up getting caught up in the benchmarking process, albeit inadvertently. Benchmarking  Benchmarking is the act of comparing our investment performance with that of a standard. I have written on benchmarking before. But I have never spelled out how it works in the market. I need to […]

Algorithmic Trading: Is the Stock Market Rigged?

Cartoonist: Bacall, Aaron; cartoonstock.com – Sunday, 23 October 2016 Algorithmic Trading refers to the use of electronic strategies for enhancing the speed and execution of orders on the stock exchange. What is Algorithmic Trading?  A trading algorithm (ALGO) is a set of rules that are used to enter and exit a trade. Instead of manually entering buy and sell orders, a computer program (Algorithm) is used to trigger the same. For this post, I have used the term ALGO to […]

How to Generate Alpha – The Nifty Alpha 50 Index

(Cartoonist: Bacall, Aaron; cartoonstock.com)(Sunday, 9 October 2016) The connotation of the term Alpha in the investing world has nothing to do with it being the first letter of the Greek alphabet. What is Alpha? Before talking about investing Alpha, a word about benchmarking. In the investing world, a benchmark is considered to be representative of the returns of the market. A benchmark is a barometer against which a fund’s performance is measured. It is supposed to be an investing lifeline. […]

How to Build a Coffee Can Portfolio?

(Cartoonist: Schwadron, Harley; cartoonstock.com)(Sunday, 25 September 2016) The Coffee Can Portfolio is a buy and hold portfolio strategy. Much like the ‘fill it, forget it’ motorcycle commercial, a Coffee Can Portfolio is a ‘Buy it and Forget it’ investing idea. The Coffee Can Portfolio In 1984 Robert G. Kirby wrote an article about portfolio construction and management. He called it the Coffee Can Portfolio. Click here to read. In the words of Robert Kirby: “The Coffee Can Portfolio concept harkens […]

Why is India Underperforming the Emerging Markets Rally?

(Cartoonist: Schwadron, Harley; cartoonstock.com)(Sunday, 11 September 2016) Emerging Markets (EM’s) have been moving higher since February 2016. Before I get into the performance of the Indian Stock Market, the question is how long can EM’s continue to rally. Does the rally in Emerging Markets have Legs? While trying to guess market direction in the EM world, one does need to remember that what happens in EM’s is a function of what happens to global stock markets. The decoupling rhetoric is trash. In other […]

Stock Buybacks: The Good, The Bad and The Ugly

(Cartoonist: Mark Lynch; jantoo.com) (Sunday, 28 August 2016) Stock buybacks or repurchases by companies of their floating stock is a relatively new concept in the Indian Stock Market. Of late buybacks seem to be gaining traction. Types of Buybacks When and how can Indian Corporates buyback their shares? The Securities and Exchanges Board of India (SEBI) has issued guidelines for governing buyback of shares by Indian Corporates. Broadly, there are two types of buybacks: From the existing security holders on […]

Can Expense Ratios Predict Mutual Fund Performance?

(Cartoonist: Mike Shapiro; cartoonstock.com) (Sunday, 14 August 2016) Mutual Funds are now the preferred vehicles for investing in the Indian Stock Market. Can Expense Ratios predict future performance of any given Mutual Fund Scheme? What are Expense Ratios? Expense Ratios refer to the annual fee that all Mutual Fund Schemes charge their shareholders. Expense Ratios are expressed as a percentage of the Assets Under Management (AUM) of the concerned scheme. The calculation is pretty simple. In India, Asset Management Companies […]

PE Ratios: Is it Too Late to Buy Stocks?

(Cartoonist:Karsten Schley; cartoonstock.com) (Saturday, 30 July 2016) The sharp run up in the benchmark indices, post-Brexit, has left investors wondering whether it is too late to join the rally. In such a situation, more often than not, one looks at the Price to Earning (PE) multiple in an attempt to get a ‘handle’ on current valuations. For the uninitiated, the PE ratio is computed by dividing the current market price by the latest earnings per share of any given company. […]

Is an RBI Interest Rate Cut Imminent?

(Cartoonist: David Brown; cartoonstock.com) (Sunday, 17 July 2016) An RBI interest rate cut is always considered as bullish. It is a signal that inflation readings are favourable, and the economy is moving in the right direction. The 10 Year GOI Bond The 10 Year Government of India Bond (10 Year GOI) is a sovereign Bond issued by the Indian Government, denominated in Indian Rupees (INR) and represents government debt. Sovereign Bonds are those that are issued by governments. Just as […]