Author: Raoji

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ConferenceCall

Notes from the Kotak Mutual Fund Conference Call

Attended the Kotak Mutual Fund Conference Call today where Nilesh Shah,MD,Kotak Mutual Fund spoke on the Market Outlook.

Key takeaways:

  • Major fears/overhangs on the market
    • Farm Loan Waivers-Feels the impact won’t be much despite the scary headline numbers
    • NPAs-Feels a beginning has been made to end this problem.But there is a long way to go.Narrated a humorous anecdote where the MD of a PSU Bank told him: “If RBI wants me to make so much provisions, they should provide the capital also else they should run the Bank”
    • Geo-Political Risks- Border fight with China & North Korea may impact EM flows
    • MSCI Index Changes-Addition of Chinese mainland stocks can reduce India’s weightage impacting ETF flows
  • On GST
    • Feels the initial implementation has been very smooth
    • Q1 will be impacted as companies have reduced their inventories, compensated dealers and cut prices
  • On interest rates
    • Feels markets have priced in a rate cut
    • Expects RBI to cut rates by 25 bps in August 2017
  • On political risk
    • Feels markets have priced in a Modi re-election in 2019
    • Expects BJP to continue winning in 2017 Karnataka & Gujarat elections
  • On fund flows
    • Continues to be strong-Kotak has crossed 1L Crores AUM this month
    • Says an IPO can be fully subscribed by going to Bandra-Kurla,Lower Parel and Nariman Point (Different locations in Mumbai) .No need to go to New York,London and Singapore !
  • Believes 3 Themes are playing out
    • Movement from Unorganized to Organized
    • Movement from Physical Savings to Financial Savings
    • Govt spending on Infrastructure
  • Bullish on the following Sectors:
    • Cement/Capital Goods/Autos/Auto Components
    • Private Sector Banks
    • Consumer NBFCs
  • Bearish on the following Sectors:
    • Export Based Companies (Including IT/Pharma)
    • Telecom
    • Commodities
    • Real Estate
Categories
Excerpts

Why Bubbles get formed

Hat Tip: Niraj Bardia

Ask yourself: How much should you have paid for Yahoo! stock in 1999?

The answer depends on who “you” are.

If you have a 30-year time horizon, the smart price to pay was a sober analysis of Yahoo!’s discounted cash flows over the subsequent 30-years.

If you have a 10-year time horizon, it’s some analysis about the industry’s potential over the next decade and whether management could execute on its vision.

If you have a 1-year time horizon, it’s an analysis of current product sales cycles and whether we’ll have a bear market.

If you’re a daytrader, the smart price to pay is “who the hell cares?,” because you’re just trying to squeeze a few basis points out of whatever happens between now and lunchtime, which can be accomplished at any price.

When investors have different goals and time horizons — and they do in every asset class — prices that look ridiculous for one person make sense to another, because the factors worth paying attention to are totally different.

People can look at Yahoo! stock in 1999 and say “This is crazy! A zillion times revenue!

This valuation makes no sense!”

But many investors who owned Yahoo! stock in 1999 had time horizons so short that it made sense for them to pay a ridiculous price.

A daytrader could accomplish what they need whether Yahoo! was at $5 a share or $500 a share, as long as it moved in the right direction. Which it did, for years.

Money chases returns. Bubbles form when the momentum of short-term returns attracts enough money that the makeup of investors shifts from mostly long term to mostly short term.

That process feeds on itself. As traders push up short-term returns, they attract more traders. Before long — and it really doesn’t take long — the dominant price-setters with the most authority are those with ever-shortening time horizons.

Bubbles aren’t so much about valuations rising. That’s just a symptom of something else: Time horizons shrinking. This might seem like subtle point, but it explains a lot about why the mere existence of bubbles confuses so many smart investors.

-from Collaborative Fund

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Links

Linkfest: July 06, 2017

Some stuff I am reading today morning:

Ajay Singh took over Spice Jet for Rs.2 (Quint)

8% Mahindra Finance NCD (My Investment Ideas)

What are ITC’s investors smoking? (Mint)

Bourses bat for longer trading hours (BL)

Tech Mahindra’s Gurnani makes 147 Crores from ESOPs (BS)

Video: Interview with Porinju Veliyath (ETNow)

Fragrance King: Vini Cosmetics (OB)

The best portfolio (Subramoney)

People have emotions, ,markets don’t (AR)

Nasi Goreng Bonds, anyone? (Bloomberg)

Categories
Excerpts Insurance

Where you die matters

Excerpt from a policy:

Categories
Observations

Stock Markets know ABC better than you

Hat Tip:  DivyeshBhai

Ben Graham had a phrase “clairvoyance of the stock markets”  where the stock markets knows stuff even though there is no apparent news item

Yesterday, at 11:00 am, suddenly the stock of ABC Bearings started zooming and it hit the Upper Circuit.

More than 12 hours later, on 5th July,2017 at 02:09 am, the following announcement was put up on the stock exchanges:

The Board of Directors of ABC Bearings Limited at its meeting held on 4th July, 2017 has approved, pursuant to the provisions of Sections 230 to 232 of the Companies Act, 2013, the merger of ABC Bearing Limited into Timken India Limited through a Scheme of Amalgamation and Arrangement amongst ABC Bearing Limited, Timken India Limited and their respective shareholders and creditors.

Jaago, SEBI Jaago