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Observations

Passive investing in India

The Nifty index is the most popular index used to track the Indian equity markets.

The index was launched on November 3, 1995 with a base value of 1000.

Today Nifty closed at 7300 levels.

If one held the Nifty tenaciously for all these years,one would have got a return of around 12% p.a.

The average dividend yield on Nifty stocks has been around 1%-2% but the gain would have been negated  by the impact cost.

The impact cost of holding the Nifty would have been very high.In all these years, there have been 151 changes to the Nifty-that’s an average of 8 changes every year !!

So passive investing in India is actually active investing-a momentum play on the biggest market cap stocks.Here the “active” role is played by the index maintenance folks.

On a different note, is 12% pa that great a return in the Indian  inflation environment of 10% to justify the time,energy,money spent by investors to get the next multi bagger?

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Tweets

What moves a stock

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Cartoon

Advice from a broker

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Links

Linkfest:27 May,2014

Some stuff I am reading today morning:

Warren Buffett:These were my biggest early mistakes (TRB)

Here’s why Sensex can crash 20% (ET)

The Amazon of India is not Flipkart,its’ Amazon (MaheshMurthy)

Sophisticated Vs Effective (DynamicHedge)

Do you need a critical illness plan? (Mint)

Book Review:Stress Test by Timothy Geithner (MichaelLewis)

India’s Modi needs to act quickly (Bloomberg)

5 Ways in which Modi’s cabinet is different (Quartz)

Remedies against unfair practices of builders (HelplineLaw)

Goldman Sachs explains the Return on Equity formula (BI)

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5Stocks

5 Penny Stocks that rocketed

Modi’s win was declared on 16 May,2014 and he is taking the oath today.

5 Penny Stocks (Kutta-Billi in Dalal Street parlance) that rocketed in this short period are given below:

Symbol Close on 16 May,2014 Close on 23 May,2014 Gain
MIC 3 5.65 88.33%
MOSERBAER 4 7.55 88.75%
SELMCL 3.3 6.25 89.39%
ANDHRACEMT 6.05 11.5 90.08%
TULSI 4.55 8.65 90.11%