Indian Bond yield cooled off
India had started 2013 with many concerns like low GDP & IIP growth, High inflation, High current account and fiscal deficit, threat to be downgraded by global rating agency, Increase in the reserve ratio by RBI to deal with the inflation which led Indian bond to trade with high country risk premium. Now, all factors are moving into opposite directions with the effective steps taken by RBI and the Centre few months back, which led Indian bond to cooled off. 10 year bond yield down by 14bps so far in March and reached to 8.72% from 8.86%. FIIs were the net buyers into the Indian bond for the ninth consecutive day bringing the total during that period to $2.4 billion.
One basis point reduction in the yield can add millions into the bond portfolio of financial institutions. We will see good amount of mark to market gain in the bond portfolio of Indian banks in their Q4 numbers. With the reduction in current account deficit, low inflation will hold RBI to change policy rate in the next meet schedule in April, which can again cool bond yields by some basis points in the days to come.
What next for the Capital market?
It’s been 12 months from I’ve written my last post and since then, Sensex has touched to 13 P/E and now it’s been trading at around 17 P/E against the other emerging market indices of around 14 P/E making it an expensive basket for the Global Investors.
There are some of the factors, which led Indian market to perform best against the other Indices. Some of them are:
– Rise in Government yield (Short term yield is more than long term yield now, hence FIIs are exhausted with their T-bill limit now days)
– Rupee appreciation – (This will lead FII’s to get more dollar return in addition to the benchmark return)
– Anticipation of new political party (Namo – Narendra Modi)
– Low current account deficit
– GDP growth almost reached to the budgeted figure of 4.8%
We have already seen dollar inflow of around 6 billion into the debt market from the start of 2014 and this trend will continue till the new government forms. There are many factors associated with the new government formation. If new government and likely Narendra modi comes as PM candidate, we can see major infrastructure projects to come into live again, which is indirectly or directly attached with some of the sectors like Financial services, Metal, Cement etc. and hence, one sector will lead other sectors to perform better in the future. Therefore we have seen rally in those sectors just few days back because market discounts all such factors in advance.
We can see more employment into the Infrastructure sector and hence, more demand for the consumer durables and non-durables can also be seen in the future, which will led FMCG to perform good. All these factors will led rupee to get stronger against the dollar and hence, export driven industries like IT and Pharma will not be the shining star in FY15 as was seen in FY14.
Coaching – Financial Modeling in Excel
I’m very glad to announce new program related to Financial Modeling in Excel.
What is Financial Modeling School?
This is training program to teach you,
» How to do Financial Modeling using MS Excel
At the end of the program you will be able to develop an integrated financial model or project finance model. We will use a practical case study to understand various steps of modeling & build one by the end of the program.
This program is suitable for people in investment banking, project management, equity research, business planning, strategy, private equity, funds or commercial banking. It is also ideal for people who want a career with any of the above activities.
The program assumes you have basic knowledge of MS Excel. We will teach you various features Excel as part of the course, it is advisable that you know how to use Excel.
Please download our course brochure: Financial Modeling School [PDF]
Coaching – Basic to Advance Excel Program
Hello Friends and Readers,
I’m very glad to announce excel course on the basic to Advance excel, you can go through it and if you are interested then welcome to join my classes. In this post, you can understand details about this course & how to join us.
Excel School is structured and comprehensive training program for learning Microsoft Excel. It is full of real world examples.
The aim of Excel School is to make beginners become productive and awesome in Excel. It has an optional module on Dashboards, which can teach you how to design awesome Excel Dashboards.
I have prepared a short document explaining the whole process, course contents to you. You can download it here:
Basic to Advance Excel Program (PDF). Fees mentioned in the PDF is in Indian rupees, if you convert into US$, its between $25 to $40.
This program can be availed by other members across the globe as well. They must be having following things before joining this program.
1. Laptop or PC
2. Office 2007,2010 or 2013
3. Skype and Team viewer
4. Good internet connection
If you are interested then drop me an email on the mentioned ID in the PDF, I’ll give you the details, how to make a payment?
Concern – Rising NPA
This problem is indeed for all countries because this is also one of the phase to list down each country into the developed economy list. During the developing phase, banks are crazy to pumped more money into the market to get good amount of market share, which results into more NPA with the growth as well. Our economy is also facing this problem at this moment. NPA of most of the PSU banks are rising. Gross NPA stood at 4% in Sep 2012 and, Gross NPA of PSU banks rised by 0.98% in Sep 2012.
Our FM realized that, our PSU banks require 15K crore to come out from this NPA concern because recently, RBI raised provision limit for the banks and which hurted most of the PSU bank. Some of them are Indian overseas bank, Cenral bank of India and Bank of Maharastra.
There is another solution as well, banks have to reduce the interest rate on lending and this can be possible only when govt permits banking licence and more competitors come into the market to beat one another through competitive lending. I think, this move has to come sooner or later to move our country into the developed economy list.
Thanks all Visitors!!
I’m here to thank everyone who visited my blog since Feb 2012. I know, i have not written many post from Feb 2012 but looking forward for writing few of the articles in next few months. Thanks again!!
This table summarize the list of viewers across the globe, who visited this blog.
| Country | Views |
|---|---|
 India |
119 |
 United States |
75 |
 South Africa |
56 |
 Australia |
29 |
 Malaysia |
25 |
 Philippines |
24 |
 Canada |
22 |
 Pakistan |
19 |
 Singapore |
16 |
 Bangladesh |
16 |
 United Kingdom |
8 |
 Indonesia |
5 |
 New Zealand |
4 |
 Ghana |
4 |
 Egypt |
4 |
 Nepal |
4 |
 United Arab Emirates |
4 |
 Thailand |
3 |
 Spain |
3 |
 Germany |
3 |
 Puerto Rico |
2 |
 Kenya |
2 |
 Colombia |
2 |
 Trinidad and Tobago |
2 |
 Hong Kong |
2 |
 Sri Lanka |
2 |
 Netherlands |
1 |
 Portugal |
1 |
 Belize |
1 |
 Jamaica |
1 |
 Finland |
1 |
 Qatar |
1 |
 Cambodia |
1 |
 Brazil |
1 |
 Jordan |
1 |
 Nigeria |
1 |
 Russian Federation |
1 |
 Slovenia |
1 |
 Montenegro |
1 |
 Iceland |
1 |
 Belgium |
1 |
 Guatemala |
1 |
 Denmark |
1 |
 Venezuela |
1 |
 Zimbabwe |
1 |
 Namibia |
1 |
 Viet Nam |
1 |
 Saudi Arabia |
1 |
The LIBOR $candal
I know, we won’t be having any issue on this because we use to it after seeing so many scandals. Libor, a rate which is used to value any kind of derivative instruments and used to determine borrowing rate for UK Govt. This rate will be useful for UK to determine the rate at which they buy dollars from the market, after all – it is connected with all inter bank transaction. Each morning at 11 A.M, panel of some world biggest banks send borrowing cost in various currency and for various terms. A few minutes later the benchmark figures flash to life on tens of thousands of traders’ machines around the world and then, ripple out into the pricing of all loans, derivatives and other financial instruments.
Libor is determined based on the average rate. Govt excludes top 4 and bottom 4 estimates from the calculation and then give the average rate. From 2005-2009, barclays gave manipulative rates, which fall in the top 4 estimates and hence more than the average rate. Barclays did this because it is the big trader in derivative market and one basis point movement in the interest rate can make millions or lose millions. Hence, it’s been penalized to pay $450m to US and UK govt. There are other banks as well, who are involved in this big scandal because crime never happens only with one hand.
Our Indian Financial market is not bigger or famous in terms of valuation of Swaps, Interest rate derivatives and Securitization because our banks are so smart not to drag Indian economy into turmoil. After all, this derivatives draged US and Europe into turmoil. If Govt starts to value the scandal of Libor, we will be in need of another stimulus because Smart Hedge funds, Investment Banks in US and Europe are used to play with the common people’s money. They are the one, who have the power to do any thing.
Lets find out the Return earned on your Investment?
I have posted in my previous post dated 15th Dec, 2011 that, Investment in ONGC, Bajaj Auto and Tata Steel would give you good amount of return in the short span of time.
At the time of previous post, ONGC was trading at 251.65 (Now – 281.75), Tata Steel was trading at 375.9 (Now – 475.05), Bajaj Auto was trading at 1,660 (Now – 1736.05) and Nifty 4746.35 (Now – 5381.6).
If you have invested your corpus in three of the above mentioned stock in equal proportion, you would have earned average return of 14.31% against the benchmark Nifty gave 13.38%. You bet the market little bit… 🙂 Still, lot more to come, wait and watch.
Confused, Which Stock to Pick?
I am here to solve your doubt. I made dashboard in Excel, which will give you an idea, where to invest. This calculation is based on the relative valuations, which will give you an idea about an investment decision to be made based on the P/E, P/BV and P/CF ratios etc.
I have added other factors as well like D/E, ROE (%) and Dividend Yield (%). You’ll be amazed, why i considered dividend yield for an investment decision. The reason behind taking dividend yield is, it’s the only way to give you risk free return.
I took total 25 blue chip stocks and based on that, i feel, Investment in ONGC, Tata Steel and Bajaj Auto will give you a good return in the future. We have other competitor of Bajaj Auto and that is Hero Motocorp, whose Dividend yield is 5.3% but its trading at the range of 20, which is too high in this market so we’ll avoid to invest in Hero. We need to consider other factors as well, while investing just based on the Relative valuation so this is just an expectation based on the past performance of the company.
You just need to play in the first sheet based on the sorting. Here, the Dashboard for Stock Selection.
Will Foreign Investors lend their money to European Countries?
This is an indeed question that, Is there anyone have a courage to lend their money to European countries in near future? I feel, no foreign investor will lend their precious money into this market because it’s indeed that, the currency of most of the European countries like Euro, British Pound will depreciate in near future because of QE happening in Britain and Capital Injection happening in Europe.
Now, How foreign investors will loose their money, if they lend to those countries? They will be having a loss of at least 5% due to Currency depreciation of an invested market so when they convert their holding into their currency, they will be having a Currency translation loss and one more thing, at present. Interest rate of Gilt bonds in Britain for 10 year is hovering at around 2.3% so if an investor invest his holding for 10 year in Britain, he’ll be getting only 2.3% return per annum and when he converts his holding to his currency, he’ll be having a loss of at least 5% so net gain would be around -2.7%. Hence, No investor would prefer to help any Government without having any benefit of his investment.
Dhavan Shah 