Many are loudly criticizing Paulson’s mega bailout fund. $700bn is not a small amount considering the fact that the global GDP as of 2007 is estimated at around $55 trn (1% of global GDP), and the size of the US economy is around $14 trn (therefore around 5% of US GDP).
People are saying that the US taxpayer is getting squeezed from every which angle to make up for the irresponsibility of mega ‘sophisticated’ financial institutions. Not only is he having to deal with a fall in the prices of his real estate assets, costlier credit, job insecurity and business uncertainty, he’s now having to subsidize something that he doesn’t even understand. This is not entirely true however Read the rest of this entry »
I attended my first Startup Saturday Mumbai event today at the SP Jain Management Institute. I must say that overall I was quite pleased by the entire event. By the end of the event (in our true Indian style, people including the speakers and myself arrived late), 35 odd people showed up. This was a good mix of entrepreneurs, would-be entrepreneurs, bloggers and (unfortunately only) one person from the VC community – Hemir Doshi from IDG VC India. Both speakers were good, but I enjoyed listening to Rang De’s founders’ story more than the talk on the ‘importance of monitoring competition’. Read the rest of this entry »
Analysts blame the high interest rate environment on the poor results. Some 70% of car sales are financed, and high interest rates make it more expensive to take out loans to pay for their car purchases. The small car segment is thought to be more sensitive to interest rate fluctuations, as the middle class families that buy from this segment cannot afford to make outright purchases.
I largely agree with the rationale presented above. However, the high interest rate environment should have had an equally damaging effect on Hyundai’s sales as well. Even if you take into account that Hyundai’s August 2007 base of 16,000 cars was lower than Maruti’s base of 60,000 cars – you cannot explain away such a dramatic a dramatic difference in results.
The reason for Maruti’s poor performance goes beyond the interest rate environment. Since the Swift Maruti hasn’t had any new launches of note. Moreover, its marketing has been limited and unfocussed. Its strategy of driving sales through schemes in the rural and semi-urban segment – although intuitively appealing (tap into less served segments) – failed to provide results. The likely reason is that households in these regions, who have fewer financing options, are even more interest rate Read the rest of this entry »
The past couple of months have seen a strong correlation between oil prices and the Indian and Chinese equity markets. As oil fell, Indian equities rose, while China’s continued to fall. High oil prices are bad for everyone (except for the oil producing companies/countries, of course), even if governments subsidize petrol diesel by not passing on the price increases onto customers – as it happens in India. This is because the government needs to pay for subsidies by borrowing from the public – that is by selling more government bonds, which leads to an increase in interest rates.
A fall in crude means that the government needs to borrow less to subsidize oil, therefore reducing the upward pressure on interest rates. Lower interest rates are of course great for boosting demand for goods and services, as companies are individuals are able to more borrow more cheaply to fund their consumption and Read the rest of this entry »
The 12-13% Wholesale price index (WPI) inflation in India is usually blamed on two things: higher energy prices and higher crude. If you look at food prices, they’ve only increased by 6.2% this year. Crude has gone up by 16.5% but these prices have not been passed on to consumers as it is being subsidized by government. So where are these 12% plus inflation figures originating from?
The culprit is manufactured goods. Inflation here is running at 10.8% - this despite the fact that industrial growth has slowed. In April, the year on year (yoy) inflation was 6.2%, and in May this fell to 3.8%. This begs the question – why are prices increasing so much if growth is so muted? And if you cannot blame oil or food for rising input costs what can you blame? Read the rest of this entry »
I visit the NSE’s site several times a day, everyday. For the first time today, however, as I scrolled down the homepage, I noticed a little image that advertised the ‘NSE theme song’. Apparently they’ve been playing it on Radio City 91.1 in Mumbai and Delhi (if you visit the site they’ve got a link to the PDF with the timings so that you can tune in and listen out for it!). Here are they lyrics Read the rest of this entry »
There has been a lot of chatter in the market about FIIs staying away from the Indian markets because they feel that the valuations in India are still relatively quite expensive. Index PE ratios, when looked at in comparison to historical levels are a good way to determine how cheaply/fairly/expensively the companies that make up the index are relative to their historical levels.
But first, an explanation of how an ‘Index’ is calculated: There several ways to create an ‘index’ but the method commonly used is the ‘free float market capitalisation methodology’ where very crudely Indices are calculated adding together the market capitalisation of each of the companies chosen for that index based on some sort of criteria, dividing that figure by the sum of the market capitalisation of those companies that met the same criteria in a base year and then Read the rest of this entry »
After the January 21 crash, I was pretty sure that the investor participation in both cash and derivatives had suffered, but when I had look at the NSE turnover figures, I was pleasantly surprised. For the first four months of the fiscal, turnover in the cash segment has averaged at around 13,200 Cr., only 7% from the previous fiscal. Admittedly, the numbers for Feb and March must have pulled down the 2008 average - the average daily cash segment turnover for October 2007 peaked at almost 21,000 Cr. for the NSE. In January, the figure was Read the rest of this entry »
Marshall Wace has taken the concept of social investing / wisdom of the crowd investing to a whole new level. These guys created a trading system called Trade Optimized Portfolio System (TOPS), which basically ranks analysts from brokerages on the performance of their tips, benchmarks them, and follows the investment recommendations of the best performers. They’re not exactly small fries either - with an estimated $15bn dollars in Assets Under Management (AUM), they’re responsible for some 3-4% of the daily volumes of all equites traded on the London Exchanges, and are ranked amongst the 10 biggest hedge funds in Europe.
As one investment banker put it, the idea behind TOPS was simple (in concept, though probably fairly complex in the algorithms used). It was the equivalent of ’skimming the cream to get the best investment ideas’. The incentive system is clearly in place, as well - if you rank highly according to the the ranking table spat out by the TOPS system, then Marshall Wace will not only take your advice, but transact through your brokering outfit - and this means millions of dollars in Read the rest of this entry »
