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...
More

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” ...
More

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...
More

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 ...
More

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...
More

Gold loans: The “Titan” moment for Muthoot Finance

Gold loans: The “Titan” moment for Muthoot Finance Q1FY22 represented a perfect storm for the gold loan sector. Gold prices had crashed 15% towards the end of Q4FY21, lock-downs had impacted demand as well as ability of customers of earn & repay, and banks had to deal with additional problem of lowering LTVs from 83% to 68%. It was no surprise that most players witnessed de-growth in loan book, rise in NPAs and subdued profitability for the quarter. Tough times generally separate the men ...
More

Microfinance (MFI) – Blame it all on COVID?

Just when the MFIs were trying to write-off the Covid losses and re-start their growth journey, the 2 nd wave came and hit them. Given that this wave has penetrated the depth of India’s hinterland, the MFI sector has been very vocal is demanding an emergency credit line of Rs.15,000crs, government relief through Partial Guarantee scheme and enhancement the lending rate. As investors, we may be tempted to think that last few quarters should be treated as “exceptional” due to cyclones, special ...
More

Gold – Give your portfolio the golden touch!

It was refreshing to meet some old friends outside a popular sandwich joint; especially after being home confined for almost 7 months. An unsaid ritual of sorts, I was asked for a “stock tip”. This time, I shared that ‘Gold’ seems attractive for the next few years. On expected lines, one of them quickly retorted “Markets are on steroids, so many stocks are flying up 5% & 10% daily. Of all the stocks in the world, you want us to buy gold, which is already at Rs. 50,000!”. Surely, a lot...
More

REITs – “Office” in your Demat account!

Exasperated of being confined to home since Covid-19 outbreak, Mr. Kapoor & family finally decided to take a break and drive down from Mumbai to Khandala, a popular weekend getaway. While driving through Mumbai, his eyes fell on the glittering office buildings, first at the Bandra Kurla Complex (BKC) and later at Airoli/Ghansoli. A simple thought crossed his mind: “This work from home (WFH) trend would have reduced the property prices here too. Once Covid is over, these offices will o...
More

Fixed Deposits – Something’s Surely Not Fixed!

Fixed Deposits – Something’s Surely Not Fixed! Like many Indians, Sonali prefers to park most of her savings in bank fixed deposits (FDs). She is well aware that due to the safe nature of FDs, the returns on them are low. Yet, she was in for a surprise when she had to renew one of her maturing FD, and could hardly believe that long term FDs were just yielding ~5.0%, the lowest in her lifetime. What’s happening today has happened before! Most of us do know that post-Covid, Central Bank a...
More