The Food Corporation of India continues to have very high stocks of wheat and rice, but it’s beginning to moderate. We are still storing stocks that are 50% higher than even the revised buffer requirements due to the Food Security Act (which were increased from earlier norms by over 1/3rd). Here’s the current buffer stock of Wheat and Rice (which is pretty much more than 95% of what FCI procures): According to a Business Standard Article , the government will change the buffer norms (the black line above) to the following:   We currently have 48 million tonnes (480 lakh tonnes) in stock. This is higher than even the upwardly revised norms of 33 million tons by about 50%! Subsidy Blowout A less spoken about part of the budget this year was: The Food Subsidy for 2014-15 is going to be 123,000 cr., which is 33,000 cr. higher than the expenditure budgeted in July last year of 90,000 cr. … (Read On…)

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We make a few changes to our CAPM Portfolio. This post is for Capital Mind Premium subscribers only.

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I was on CNBC TV-18 today and spoke about Jindal Steel, Banks and the overall situation in the market. http://videos.moneycontrol.com/web18/mc-vods/2015Mar/deepakshenoy1_23mar.mp4   http://videos.moneycontrol.com/web18/mc-vods/2015Mar/deepakshenoy2_23mar.mp4 … (Read On…)

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In the budget, we asked the question: Is a 30,000 cr. debt switch planned for March?  Of course it was, it turns out. The government was looking to switch debt worth 30,000 cr. from an immediate repayment (FY 2016) to a later year. And here’s why: Government Debt maturity by Financial Year On Friday the RBI switched out 30,228 cr. worth securities from the FY 2016 to Fy 2027. This means the government effectively bought back securities worth Rs. 30,228 cr. maturing FY 2016, and issued new securities maturing FY 2027 in exchange.  Whatever is repaid has to be re-borrowed because our governments are big ponzi-type schemes – debt can only be paid by issuing more debt. So a “shuffle” in maturity patterns can lead to smoother redemptions and reissues; essentially the government will need to reissue 30,000 cr. lesser of new bonds because of this swap. But what’s the big deal? … (Read On…)

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    SEBI will now allowed banks to convert debt to equity with regulatory easing. In its latest board meeting, it has allowed financial institutions to be free of some of the disclosure and acquisition norms (ICDR and SAST) if they convert debt to equity of “ listed borrower companies in distress ” . This is broadly supposed to help banks. In two ways: They can take over the management of the company (convert debt to majority shareholding) and then sell the company over to other people Such conversion may not have the same norms as any other such equity acquisition – such as requirement of an open offer or such. It’s not very clear what the fine-print is like. But here’s a primer: What Does Debt To Equity Mean? Let’s say Bhushan Steel owes State Bank of India Rs. 5,000 cr. Let’s say Bhushan Steel is “distressed”, under whatever definition of the word is eventually acceptable.… (Read On…)

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The story of two fund managers that made themselves money while their investors didn’t.

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