Category: Excerpts

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Atleast 6 months before BSE can list

(Disclosure:I am market making in the shares of BSE)

A merger between the Securities and Exchange Board of India (Sebi) and the Forward Markets Commission (FMC) could delay initial public offerings (IPOs) by India’s stock exchanges. The merger is likely to alter the definition of the term ‘securities’ and this will have to be addressed before Sebi allows stock exchanges, including the BSE, to list.

Sebi Chairman U K Sinha on Tuesday said the integration had led to issues that had to be resolved before exchanges were allowed to list. “One (issue) is how will the exchange space shape up with the commodity market coming to Sebi. Those (commodity) exchanges will technically become securities market exchanges. So, there are issues around that,” Sinha said on the sidelines of an event organised by the Indian Merchants’ Chamber.

“Since commodity futures will be defined as securities, these (commodity exchanges) could technically demand and be eligible for trading in (equity) futures,” he added.

Sinha said Sebi was working towards resolving these issues and it would take another six months to enable exchanges to list.

He said the regulatory functions of exchanges had to be separated, before these entities were allowed to go public. “Today, exchanges in India are performing regulatory functions. These include regulation of brokers and listed entities… We are trying to evaluate whether we are comfortable with the current arrangement,” he said.

The BSE has, in the past, made public its plans to list. It had also appointed investment bankers to manage its IPO.-from BS

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The Stock Market is not a place to “get rich”

“If you’re like most people you are maximizing your primary source of income (your real investment) and allocating your savings in a prudent manner that allows you to plan for the future.  The goal with your savings isn’t actually return maximization, but return maximization within the parameters of appropriate risk taking. If you’re a real saver who is looking for stability then this means your primary portfolio goal isn’t just protecting against purchasing power loss, but also the risk of permanent loss. And this means accepting the reality that it’s probably imprudent to excessively overweight your portfolio in favor of purchasing power protection.

Unfortunately, most people view the stock market as a place where they will “get rich” and generate Warren Buffet style returns. They tend not to view it as a place to allocate their savings. And this leads to many behavioral biases which lead people to take more risk than they’re actually comfortable with. If you’re a real saver then stop running with the herd into crowded trades in pursuit of a goal that isn’t in-line with your portfolio’s actual goals”.-wrote Cullen Roche

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FIIs may have Chinese instead of Tandoor

Most foreigners are very overweight on India, an investment stance that worked in 2014. However in 2015, India has begun to underperform, while China has been on a roll. With most investors underweight on the country, China’s surge is hurting money managers’ performance.

India is no longer the only game in town. In China, one can deploy large pools of capital, the government seems to be writing a put on the market, valuations are not yet over the top and momentum is very strong. It is only a matter of time before money moves, and the India overweight reduces among global emerging market as well as regional managers. The pain associated with remaining short on China is just too much.–wrote Akash Prakash,Amansa Capital

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The perfect stock idea

“The perfect idea for Curtis,” says Jim Vincent, a managing director at AllianceBern­stein who has been pitching ideas to Macnguyen for years, “would be a company that’s profoundly oversold and hated and has a new CEO who has a chip on his shoulder and a heavy ownership of stock that’s locked up for a long time, in a cyclical business that just troughed.”-from Bloomberg

Any such candidates in the Indian market?

 

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A powerful lesson for investors

Mr. Grantham heard a pitch for American Raceways, a company that was going to introduce Formula One racing in the U.S. “I got hooked,” he says. “We thought we would make money beyond our dreams.”

Mr. Grantham bought 300 shares for himself at $7 and went on vacation to Germany with his wife. When they came home three weeks later, the stock was at $21. He sold everything else he had, borrowed more money and soon owned 900 shares. Months later, American Raceways hit $100. “I figured I had the golden touch.” Were millions of dollars to come?

But the stock began tumbling. It dropped more each day, torturing Mr. Grantham. Americans weren’t ready to embrace Formula One racing after all.

The stock went down so fast that Mr. Grantham worried he wouldn’t be able to pay back his lenders. He managed to exit the position with just enough money to pay his debt.

THE LESSON: “I realized investing wasn’t a game,” says Mr. Grantham. “I swore off speculation for life. I became a cautious, value investor.” (Meanwhile, as the couple’s net worth soared and then plunged, Mr. Grantham’s wife refrained from pointing the finger at him—another “powerful lesson,” this time in the importance of marrying the right person, he says.)-from WSJ