Gold: Time to rise & shine?

Humanity’s fascination with gold is 4,500 years old. Current opinions &emotions about gold swing from it being an unproductive investment with no cashflows, to being a store of value, to being a hedge against inflation & human madness, to being a measure of wealth, to being an investment avenue, to being a bet against the declining dominance of USD and so on. While all of the above arguments hold some water, it was the last opinion that caught our attention and called for more analy...
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PSU Banks – Time to get stock specific

The rally in PSU Banks that started with SBI in 2021, was strengthened by BoB & Canara & Union Bank in 2022, and then furthered by long tail of PNB, Bank of India, IDBI, UCO, Central Bank and IOB in 2023. While the rally in most cases has been backed by improving earnings delivery, there is an ancient investing rule that subtly reminds us “when the strongest rally is witnessed in the weakest pockets of the sector, it is time to re-assess the merit of the rally and its future prospects” ...
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Memo37- All time high; What next?

Over the last 50 days, Indian stock markets have been hitting new lifetime highs almost every alternate day and there is palpable excitement among the investing community. Not just India, but the stock markets across the globe have been hitting 52-week highs or life time highs. While it is surely a time to rejoice and celebrate, it is also the time for the ritualistic contra thinking, some of which is useful and some of which is only for the sake of satisfying one’s intellectual curiosity. I...
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Microfinance – Upcycle set to get stronger!

Microfinance – Upcycle set to get stronger! Microfinance (MFI) & 2W finance were the worst impacted amongst the various segments of BFSI sector. While 2W finance is still struggling to recover, the recovery in MFI sector started sometime in mid of 2022 and the Q3FY23 results & commentaries of various players suggest that the momentum is set to get stronger. The current macro & micro set-up for the MFI sector can be termed as the “goldilocks situation” due to the following rea...
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Memo 36 – A good entry point!

In one of the recent social gatherings with friends, the discussion drifted to a familiar territory – is this the right time to enter the stock markets? In the past, the standard response to this question would have been “Nobody can time the market again & again and it is far easier to have a systematic approach towards investing, where you invest small amounts at regular intervals”. But this time, did not give the standard response, partly because many recipients of this response have hinted to...
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Memo 35 – Has India’s glorious period started?

A year ago, the global markets were clearly in a state of liquidity driven euphoria (stocks, tech,cryptos, start-ups). Had someone told us then that in the next 12 months the US stock markets would fall 30%, crude oil would rise to $100, the start-up & crypto world would be badly bruised, and that Europe’s mindless ESG drive would be punctured – we would have gladly agreed with them. But had the same person told me that in midst of the above chaos, India would not only remain an island of ca...
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Memo 34 – Winds of change!

"All good things must come to an end, so that better things can happen" For long term investors like us, falling markets are time for mixed emotions. The fear of mark down in portfolio values is interspersed with hope of buying long-awaited stocks at attractive prices. But this time, the emotions are tilting more towards relief that falling markets will bring sanity back to the world of business & investing. Relief that focus is changing from “growth at any cost” to “growth with profits”; that ...
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Microfinance – Cyclical recovery is underway!

Microfinance – Cyclical recovery is underway! Cyclicality in microfinance sector is as old as the sector itself. A good cycle usually lasts for few years and is inevitably followed by bad cycle. The sector witnessed its worst cycle over 2019-21 courtesy the build-up that happened over 2017-19 and the disruptions caused by the pandemic. Over the past two years, most MFI players have provided for or written-off around 10-20% of their portfolios. Credit losses of MFI players ...
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Gold price & gold loan NBFCs – Is the correlation breaking down?

Gold price & gold loan NBFCs – Is the correlation breaking down? All through the last 10 years, there has been a simple linkage between gold price and the perception of performance of gold loan NBFCs. If gold prices went up, stocks of gold loan NBFCs like Muthoot & Manappuram would do well and vice-versa if the prices went down. This simple correlation was based on the understanding that if gold prices go up, loan growth improves, operating leverage kicks-in, auctions reduce and profitabili...
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Memo 33 – Heads, I win; Tails, I don’t lose much!

Memo 33 – Heads, I win; Tails, I don’t lose much! The above title pretty much summarises the investor experience in stock markets over past 18 months. Markets continue to celebrate even the smallest of positive developments like revenge travel, re-opening of cinemas or the rise in valuation of start-up unicorns. Business media, Twitter & Instagram are full of positive interpretation even around the not-so-positive developments like: • Rising inflation (is good because far...
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