Category: Observations

The public issue of RBL Bank  opens between 19 August,2016-23 August, 2016 with a price band between 224-225 Rs/share.

RBL Bank has a very generous ESOP program which can issue Stock Options upto 12 % of the Bank’s Equity.

As such,employees are keenly awaiting the listing as it will convert many of them into multimillionaires

Some key employees who will be laughing all the way to the Bank (literally !) are:

What were you doing when RBL Bank was recruiting?

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?

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.