Nov 2014 Sees Highest Trade Deficit in 18 months, on Heavy Gold Imports

India’s trade deficit for November shot up to $16.8 bn, the highest single month deficit since May 2013. (When the dollar was at 55, and in November it was 61+)

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What happened here? Exports grew 7% from last year but imports grew at a much faster pace at nearly 27%!

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And while oil imports fell (due to the collapse in crude oil prices) we saw non-oil exports hit the roof!

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(This is the highest non-oil import number, ever)

Mostly, the non-oil number is Gold – […]

By |December 17th, 2014|Categories: Macro|Tags: , |0 Comments

Spicejet Grounded. A Government Rescue is Not Going to Happen.

It’s the Kingfisher thing, all over again.

An airline hasn’t paid salaries.

It hasn’t paid up its past fuel dues.

It owes airports money.

It gets booked by the DGCA for all this and more, and is told to stop booking flights more than a month in advance.

That leaves it even more short of cash, so it starts cancelling flights and returning aircraft to the lease lenders.

It then goes to the government asking for a bailout.

That’s how the Spicejet story is evolving as we speak. I was in three airports and four flights yesterday. And in Delhi and Bangalore the Spicejet monitor was a sea of red – either “Cancelled” or “Delayed”. Passengers who had bookings were livid, and in one airport gun-toting cops were required to calm everyone down.

In the midst of all this, the government gets into a quasi rescue act, asking the regulator to ease the 30 day booking window all the way […]

By |December 17th, 2014|Categories: Stocks|Tags: |6 Comments

Aban Offshore Shares Touches Fresh 10-Month Low

Shares of Aban Offshore are trading at Rs. 393.5 currently, down 2.53% from yesterday’s close of Rs. 403.70. However, the share price of Aban has been on a decline since early December itself. This current share price is the lowest since the 30th of Jan earlier this year. That makes it a new 10-month low for the share price.

Aban Offshore

Having said that, the share price has been on a downward trend since November this year, when it was at around Rs. 600. The recent fall in share prices has coincided with the fall in global oil prices.

Aban Offshore is India’s largest offshore drilling services provider, with revenues of Rs. 1018.5 cr. (for Q2 FY2015). As part of its operations, they provide exploratory and drilling services to their clients. Their clients include a who’s-who from the OnG industry, from ONGC to RIL to Shell and Petrobras.

They also operate and […]

By |December 17th, 2014|Categories: Stocks|Tags: |0 Comments

Premium: How the Fall in Crude Oil Prices Can Hurt Indian Markets

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With the fall of the price of Crude oil, we see a few things emerging, and in this post, we highlight what could be the huge negative for Indian markets.See:

• Why is the Crude Price Falling?

• How it is good for Indian stocks

• But there is a bad too: Inflows

• That Big Problem in High Yield US Bonds

• USDINR fall compounds the problem

• Where the problem will manifest and how to deal with it.

The price of crude has dropped to below $65 (Brent, which is more close to what India purchases). From highs of over $110 just a year or so back, this is a dramatic fall. And then, it is a huge part of our imports – more than $100 billion worth of crude is imported every year, and you can imagine that we will be paying much lesser now. In fact, the price of crude that we import fell to a low of $60.58 on Friday.

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By |December 15th, 2014|Categories: Premium|Tags: |2 Comments

Dissecting the -4.2% IIP Drop in October: Big One Time and Diwali Impact, But it’s Still Bad

Diving deeply into the Index of Industrial Production (IIP) in October 2014, and the large drop gives us a few insights.

  • The biggest negative contributor to IIP was “communications equipment” which is amplified due to a base effect. Its contribution to IIP will be more muted next month.
  • Even if you disregard that bit, IIP growth was negative. First time in seven months!
  • The Diwali effect being in different months in the last two years means our October Data is off base.
  • November data will therefore look good anyhow.
  • Even after all this, the data is the worst since April 2014

That Big Fat Contributor

How did we get the -4.26% number on IIP we saw in October 2014?

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By |December 15th, 2014|Categories: Analysis, IIP|Tags: |0 Comments

We Need More Financial Institutions and To Let Indians Invest in Them

Our institutions have, for the most part, failed us. LIC is the biggest receiver of savings as a public insurer, and yet, it puts very little of its money into the non-government economy. As of September 2014, nearly 10 lakh crore out of the 15 lakh crore of policy holders’ money with LIC was in Government securities. (Some of this is by regulation, but a very large portion, by choice). Of the rest, much is invested in buying stakes in public sector enterprises, in equity and debt.

Further, LIC works hard to backstop public sector disinvestment. Banks are similar – they don’t even want to lend to SMEs, for the most part. Indians don’t (for the most part) invest in venture funds or private equity, at least not directly. Our EPFO doesn’t want to invest even in listed equities – and that’s a big source of pensions. And it seems our institutions also don’t bother to invest in them either.

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By |December 14th, 2014|Categories: Commentary|Tags: |0 Comments

IIP for Oct 2014 at Three Year Low, at -4.2%

The Index of Industrial Production (IIP) went to the lowest growth seen since October 2011, with a -4.25% number. There might be an element of seasonality here as this year, Diwali was in October while last year, it was in November. (Diwali’s the month when, usually, IIP goes down.But this year has been more than others)

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The last time IIP dropped so much was again a Diwali month, (Oct 2011) after which the next month was awesome (6%!).

From a sector perspective:

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The worst performer was manufacturing (which has the highest weight in the index).

The official […]

By |December 13th, 2014|Categories: IIP|Tags: |0 Comments

Correction: Error in Structured Plan Calculation, But Still Attractive

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Correction: Sorry, It’s not 85% of the Upmove!

By |December 12th, 2014|Categories: Premium|Tags: |0 Comments

Lose Nothing if the Nifty Falls, Make 85% of any Upmove: Capital Mind’s Do It Yourself Products

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Lose Nothing if the Nifty Falls, Make 85% of any Upmove: Capital Mind’s Do It Yourself Products

Last year, just as we started with Capital Mind, we talked about many ways to build your own“Capital Protection” structured product. In a mid-term review we took an interim look at the product. We were on track.

The idea was:

• Protect the downside completely – do not lose money if the Nifty falls.

• Get a kicker on the upside – if the Nifty scaled new heights

• Exit time: 1 year.

• Capital: Rs. 500,000

We put in three methods to achieve them – we’ll re-evaluate how they’ve done as we reach the end – the products are about to mature.

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By |December 12th, 2014|Categories: Premium|Tags: |0 Comments

Russia Hikes Interest Rates as Ruble Goes Through the Roof

Russia’s being deep sixed by the fall in crude oil prices. The Russian Ruble has crashed to a record low of 55 to a dollar, which would make its 2014 performance devastating.

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That is because the crude oil prices have fallen all the way to $60 a barrel. (This is WTI, Brent is below $65)

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This hurts Russia because it is a massive exporter of crude. But let’s think in rubles. If crude at $100 was giving them 3,300 rubles at the 33 USD/RUB rate, then crude at $60 is giving them the same $3,300 at 55 […]

By |December 11th, 2014|Categories: General|Tags: |3 Comments

Optionalysis: The Strange Negative Time Value In the Nifty and the Opportunities It Brings

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Why are put options expiring on Dec 24 trading with NEGATIVE time value? This is surprising, but not quite if you understand the logistics of how markets operate.

Let’s see right now, as the index is at 8277, how the put options are behaving:

Option Chain

The 8400 put trades at 116, but the underlying index is at 8277.

The intrinsic value of the put is the strike price minus the index value, which is 8400 minus 8277 = 123.

And still, the option trades at 116!

It gets even more strange with other options. The 8600 put trades at 276, which is a break-even price of 8324. And the index at 8277 means there’s a 47 point spread!

Let’s see this another way. If you bought the 8600 put right now and the index, you will make at least Rs. 47 per Nifty risk free! (Well there is some risk, like if the NSE defaults, but that is so tiny today)

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By |December 11th, 2014|Categories: Premium|Tags: |3 Comments

Inexplicably, The Government Isn’t Selling ITC Shares It Owns, But Insiders Continue Their Selling

Surjit Bhalla has an interesting take on why the government isn’t selling ITC shares it owns through the SUUTI stake (HT @baddutt):

A suggested explanation for the Indian government (read that as politicians and IAS bureaucrats, plus others) not selling Ashoka or ITC is that they gain enormously from “kickbacks” in the form of discounted or free rooms, or discounted or free dinners, or discounted or free marriage parties. For those not knowing, more than 54% of ITC revenue is not from tobacco.

This is a great conspiracy theory but it’s a little difficult to believe because:

a) the bureaucracy can extract those favours anyway, since ITC depends on the government in too many way, being a tobacco giant, an FMCG and Agri company.

b) the revenue ITC makes from hotels is 1100 cr. out of a total revenue of Rs. 33,000 cr. Of profits, it’s even more tiny – the Hotels business makes 140 cr. out […]

By |December 10th, 2014|Categories: ITC, Stocks|Tags: |1 Comment

Premium: CAPM 20DMA Shows More Damage To Come, Options Underpriced?

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By |December 10th, 2014|Categories: Premium|Tags: |0 Comments

Greece Gives Markets Jitters While China Surprises With a Big Fall

Greece is back in the news again. Antonio Samaras, the Greek Prime Minister, has called for what is effectively a “vote of confidence” for his party. Greece’s president – which, like in India, is a ceremonial post – was due to leave in February. He’s leaving early – that is, now.

A vote for his replacement will require 200 out of 300 votes in favour of the new presidential candidate. Three rounds of voting will happen, and if the requisite 200 aren’t found, 180 is the cut off. The problem? Samaras’ coalition has only 155.

If they can’t cobble together 180 votes to get their ceremonial president in place, this is effectively a loss of a vote of confidence, and elections will be called for.

And why is that a problem? Because Syriza, the opposition party, could come to power. This poll suggests Syriza will get the majority of the vote.

So what? Well, it turns out […]

By |December 9th, 2014|Categories: China, Greece|Tags: |2 Comments