Posted at 12:39 PM , on May 31, 2015
We saw this happen umpteen times between 2008 and 2013. Frenetic rallies from an apparent bottom seemed to fizzle out with equal speed. In most cases, the index gave away most of its gains, while specific stocks touched new lows. The key challenge is how to differentiate between a false rally and a genuine pullback in the market? Easier said than done, but here are some pointers.
False pullbacks and true rallies
Between 1994, when the markets corrected after the US raised rates and 1999, when the tech boom began, there were at least 14 intermittent rallies that fizzled out. Similarly, between 2000, when tech crashed and 2003, when the long term rally started, there were again 7 substantial rallies that fizzled out. So how do you differentiate between a genuine rerating and a false rally? Continue reading
Posted at 1:42 PM , on May 28, 2015
A few misses, but a lot many hits too…
The media is rife with analyses of the first year of the Modi government. To be fair, 365 days is not exactly a long enough period to assess the performance of any government. More so since the economy was in virtual shambles when the NDA under Modi assumed power. Growth was low, inflation was high, projects were stalled and the bureaucracy had come to a grinding halt. As one looks back there have been a few misses, but a good number of hits too. Continue reading
Posted at 1:39 PM , on May 28, 2015
How effective will this scheme eventually be?
The draft Gold Monetization Scheme has been put up by the Ministry of Finance for public comments. Principally, it is different from the 1999 scheme in 2 ways. Firstly, the minimum entry point has been lowered from 500 gm to 30 gm. Second, the setting of interest rates has been left to the discretion of the banks.
Costs are still high
That was the bane of the old gold monetization scheme and that problem continues. If you add up the cost of hallmarking, assaying, purifying, storage it adds up to nearly Rs.1400-1500. That means even if you deposit 60 grams of gold, your first year interest will be eaten away by costs. That could be a major disappointment. Consequently, the reduction of entry level to 30 grams may not really add any practical value. Continue reading
Posted at 1:37 PM , on May 28, 2015
Two risks that could eventually peter out…
If there are two risks that can spook the global markets, it would have to be the US Fed and Greece. In her latest public announcement, Janet Yellen has underlined that the labor market and US inflation still need to go higher before rate hikes can be considered. As and when the rates are hiked, the impact will be felt across the globe. This is especially true for countries in emerging markets which are dependent on capital inflows! Greece is a slightly different ball game. The entire EU is keen to retain Greece in the Euro zone and hence Greece can act pricey. But reality will dawn on them, sooner rather than later. Continue reading
Posted at 7:06 PM , on May 22, 2015
Most traders and investors ignore this very important rule. They believe that identifying a good stock and managing the risk is good enough. For your information, trading details are not for clerks to worry about. When you buy a little higher and sell a little lower, your total cost of trading is adding up over a longer period of time. And you are missing the icing on the cake!
Why order execution is so critical
A delighted investor told me that his investment had earned an incredible return of 12% in a 3-month period between May 2014 and August 2014. I was hardly surprised, considering that the market was up 30% during this period. In such a raging bull market, a 12% return was nothing to write home about. But it set me thinking on a different trajectory altogether! Continue reading