Financial Technologies to be Merged With NSEL; End of the FT Saga

The government now merges The National Spot Exchange Limited (NSEL) with its parent, Financial Technologies (FT). NSEL has been involved in a mega scam (see Capital Mind’s complete coverage) where it was unable to payout exchange trades. The scam was that the whole thing was supposed to be a commodity exchange, but instead it was used by the exchange and by certain parties to finance themselves, with lay investors buying commodities and selling them immediately back on a forward contract to lock in returns. NSEL is a subsidiary of FT.

The problem came when the government banned the “forward” part of the scheme, which unravelled the whole thing – it turned out that the commodities that people had bought (which were sold back), didn’t even exist. That they didn’t exist was because the stocks were held by the counterparties of these trades i.e. the people who were being financed. THose being financed didn’t have enough cash (or commodities) to […]

By |October 21st, 2014|Categories: FinanTech|Tags: |0 Comments

RBI and Bhalla Slug it out over Inflation and Policy

There’s a fight happening in the intellectual circles around inflation, and you shouldn’t be surprised. It involves the terms “model” and “regression” and stuff that involves figments of people’s imagination, but in the end tries to answer the question most important to the RBI: Should we even bother about RBI when we look at inflation? Is Monetary Policy useful at all?

Before my opinion muddles the issue further, let’s see what happened. In a column titled “Where Monetary Policy is Irrevant” (Indian Express, Sep 13, 2014) Surjit Singh Bhalla wrote about how “Tight monetary policy has as much to do with Indian inflation as it has to do with India’s magnificent loss to England in the recently concluded Test series.”. Essentially, he said, monetary policy doesn’t influence inflation. That RBI raises rates or reduces them has no impact on the very thing it is raised or reduced for, that is, to control inflation.

He “proves” this by using […]

By |October 21st, 2014|Categories: Inflation, RBI|Tags: |0 Comments

From 2015, You’ll Pay Market Prices For LPG Cylinders, and Get Subsidy Into Your Bank Account (No-Aadhaar-Version)

The government will continue the direct subsidy transfer for LPG, but this time it won’t need an Aadhaar card. From 54 districts in mid-November 2014, and for all of India from 1 Jan 2015, we will see the subsidy for LPG being credited directly into bank accounts. The earlier scheme – which was based only on the Aadhaar numbers – has been tweaked to remove the requirement of Aadhaar.

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By |October 20th, 2014|Categories: FuelPrices|Tags: , |0 Comments

Portfolio: We’ve Adding An Oil Stock. And Taking Out One.

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By |October 20th, 2014|Categories: Premium|Tags: |0 Comments

3 Things in My TV Interview Last Week: Coffee, IT and Crude Oil Hedges

I was interviewed at ET Now last week, on the morning show with Ayesha Faridi and Niraj Shah. I’ve been itching to bring you more details.

Wake Up And Smell The Coffee

Coffee prices have been going up recently, largely because of a drought in Brazil. I spoke about how Coffee is a promising sector, and like a company (CCL Products) which is in the space. Note that CCL Products is a company we own as part of the Capital Mind Premium portfolio.

Coffee Prices have slightly corrected but if the news on the drought is correct, we are going to see a continued rise in the price of coffee.

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The Crude Oil Hedge

And then I spoke of how India should […]

By |October 20th, 2014|Categories: FuelPrices, InfoTech, Stocks|Tags: |3 Comments

Optionalysis: Making Money When Markets Fall

The market’s falling, eh? So what, says the trader. What difference does it make, if money can be made?

Making money from falling markets is almost considered unethical, but obviously, it’s not. (If it were, selling toothpaste for a profit would be unethical too) There are three ways you can do it:

By |October 20th, 2014|Categories: Premium|Tags: |0 Comments

Diesel Deregulated, Gas Prices Finalized, Coal Auctions Soon: We Have Some Action

Reliance is going to be disappointed. The gas price hike that was supposed to be a huge benefit – and that was supposed to be double to over $8 per mmBTu (Million British Thermal Units). But the final price increase is only to $5.61. Which is not much from the current price of $4.2 in comparison with the increase expected. While this may be bad news in the short term for Reliance, it is good for the industry to have clarity on what will be paid. The new prices will be paid from November 1.

We don’t know yet if in Reliance’s case, there will be an upward revision in the prices of gas from Nov 1 – since they haven’t managed to produce as much gas as they had committed, they might have to make up for the difference with the older price and only then be paid the higher price. This is again, a short term negative. […]

By |October 18th, 2014|Categories: FuelPrices|Tags: |3 Comments

Inflation Ensures Nifty is Nowhere Close to All Time High In “Real” Terms

You know how much inflation eats into your returns? This much: Adjusted for inflation, the Nifty is 10% lower than the highs we saw in 2008. Although the Nifty has moved 30% higher than the 2008 levels in “absolute” (i.e. not inflation adjusted terms). We take the Nifty (including the impact of reinvesting dividends) and show you how inflation has made all the difference:

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Turns out that despite the recent drop in Gold price, the best return in inflation adjusted terms is in the shiny metal since 2007. However, if you had bought after September 2012, it would’ve given you lousy returns.

We map the growth of Rs. 10,000 invested in Gold, Public Provident Fund (PPF) or the Nifty (assume reinvestment of divideds) PPF is the second best, which still lost money […]

By |October 18th, 2014|Categories: Inflation|Tags: , |3 Comments

Nifty Snapshot: At 5% From Peak, We’re Not In A Correction Yet

The Nifty continues to “correct”, although it did rise marginally today.  The recent Nifty “peak” about 8173 has come after a long ride up.

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(Click for a larger image)

This chart maps all the retracements that are 10% or more. You can see here that we haven’t had a 10% retracement in the last full year – and we have had at least one a year since 2007. It’s really a very non-volatile market.

The market’s at a 20 P/E which is not overvalued but is definitely not fair value either.

Even with the recent fall the Nifty’s just 5% below the peak, which is incredible because it has been the biggest retracement in the last year. And, after March, this is the […]

By |October 18th, 2014|Categories: Nifty|Tags: , |0 Comments

Capital Mind Has a New Look!

Logo1Welcome to the new Capital Mind Design! We’ve upgraded to a fully responsive template – so our site looks great on the web, the mobile and on tablets! If you’ve some time, do go through our site and let us know what you think!

Capital Mind has now reached 3,000 posts, and of that 150 are for Capital Mind Premium. We will keep adding new posts and new data, and hope you’ve liked what we’ve done so far. Our office will move to a larger setup next week, as we scale the company to the next level. Thanks for reading, and we hope you will really like what’s coming!

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By |October 17th, 2014|Categories: General|Tags: |0 Comments

Charts: Trade Deficit for Sep 2014 Jumps 40%, Biggest in 16 Months

India’s export situation went a little weird in September, with the deficit going up 40% to $14 bn (for the month). This is the biggest deficit since May 2013, when we had a record level of gold imports.

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Imports grew 26% while exports went up by only 2.7%!

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It wasn’t just oil – while oil imports went up 10%, non-oil imports were up more than 36%!

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By |October 16th, 2014|Categories: Macro|Tags: , |2 Comments

Crash Time: Crude, Ruble, Trade Deficit and World Markets

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It’s been a day of crashes of different sorts.

By |October 16th, 2014|Categories: Premium|Tags: |0 Comments

Equity Mutual Funds Outperform Nifty; AUM Increases Over 60% In 15 Months

Following up on our earlier posts on Mutual Funds (Read “Why AMFI Should Not Ban Upfront Commissions” and “Mutual Funds Hike Exit Loads, Hoping This Time Investors Will Stay”), we take a closer look at the monthly performance of Mutual Funds.

The data that is used in our analysis provides a monthly look at Total Inflows, Redemptions/Repurchases Assets Under Management (AUM) and a few more metrics. The data was obtained from AMFIs database. […]

By |October 15th, 2014|Categories: MutualFunds|Tags: |1 Comment

DLF Tanks After SEBI Bans It for 3 Years, Says Company Hid Information From IPO Investors

DLF and six of its directors have been banned from accessing the securities markets for three years. Because they lied during the IPO.

The details are fascinating. This SEBI report has phenomenal investigative details, and let me try and decode this for you:

  • DLF owned some companies as subsidiaries
  • Just before the IPO they moved the holding of these companies to the wives of key executives
  • so that these companies weren’t shown as subsidiaries
  • But DLF still controlled them (an employee was even the cheque signatory!)
  • And DLF had rights to develop the land owned by these companies
  • So much land that it was 38% of the company’s total land reserves
  • And the wives of key executives had no other sources of income (in this context, housewives)
  • So how did they pay for their stake?
  • Their husbands took personal loans. And put the money into joint accounts with their wives.
  • The wives paid for their stake. And […]
By |October 14th, 2014|Categories: DLF|Tags: |6 Comments