Is Indian Equity doomed?

The following excerpt from Warren Buffett’s latest letter to investors makes for fascinating reading:

“There is, however, one clear, present and enduring danger to Berkshire against which Charlie and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a “successful” (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States. That is a risk Berkshire shares with all of American business.

The probability of such mass destruction in any given year is likely very small. It’s been more than 70 years since I delivered a Washington Post newspaper headlining the fact that the United States had dropped the first atomic bomb. Subsequently, we’ve had a few close calls but avoided catastrophic destruction. We can thank our government – and luck! – for this result.

Nevertheless, what’s a small probability in a short period approaches certainty in the longer run. (If there is only one chance in thirty of an event occurring in a given year, the likelihood of it occurring at least once in a century is 96.6%.) The added bad news is that there will forever be people and organizations and perhaps even nations that would like to inflict maximum damage on our country. Their means of doing so have increased exponentially during my lifetime. “Innovation” has its dark side.

There is no way for American corporations or their investors to shed this risk. If an event occurs in the U.S. that leads to mass devastation, the value of all equity investments will almost certainly be decimated.”

We are neighbors to a fanatical nuclear armed failed state Pakistan with whom we have fought 4 wars and continue to have unceasing hostilities on the LOC.

Are Indian equities eventually doomed due to this geo-political risk?

Fed Rate hikes and the Indian Markets

The table below shows the size and length of the FED Tightening Cycle

Source: Samir Arora

In recent memory,the FED started tightening on 30 June 2004,hiked rates 17 times till the rate was 5.25% and the cycle lasted 25 months i.e. till July end 2006

How did the Indian markets fare in this period?

The Nifty went from 1505.6 on 30 June 2004 to 3143.2 on 31 July 2006 i.e. it doubled.


Marquee Pre-IPO Investors of Coffee Day

Coffee Day Enterprises Limited (parent company of Cafe Coffee Day) is coming out with its IPO next week with the price band in the range of Rs.316-Rs.328

Six months back,on March 02,2015, the Company had placed shares with India’s most prominent investors at Rs.362.5 per share (Adjusting for bonus)

The list of investors with the amounts invested is shown below:

Entity # of Shares (Pre-Bonus) Amount Invested (In Crores)
Nandan Nilekani 258620 75.00
Rare Enterprises (Rakesh Jhunjhunwala) 34482 10.00
Derive Investments (Radhakishan Damani) 34482 10.00
Ramesh Damani 10344 3.00
Ketan Sheth 6896 2.00