Foreign Investor limits on Indian Government bonds might be raised, according to Raghuram Rajan, the RBI Governor, the Hindu reported . But this will be done after consulting SEBI and there’s hardly any time frame provided. Currently, RBI has all sorts of restrictions on foreign investments: They can’t buy more than $25 billion worth of government bonds And that too only with 3 year residual maturity (so no short term paper) And then also, when holdings reach 90% of the limit, there are auctions in which they have to bid to buy allocations for the remaining They’ve paid as much as 0.8% for such limits (which means their effective yield comes down correspondingly) And then they have $5bn as a special limit for certain kinds of investors (sovereign wealth funds etc) All these limits are in dollars, but converted to rupees at a rate that is historical. Currently they use about Rs. … (Read On…)

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Indian stock market P/E ratio zooms upward, while earnings growth has been horrible for the Nifty. Here’s the standalone metric: We’ve added two metrics here – one is an area coverted by green lines, a one standard deviation from the average (which is about 19). Most of the time the Nifty is within the 1 SD range. The orange dotted lines is a 2 standard deviation move – that is, a much higher extreme. (beyond 2SD is noted at about 5% of the observations). Check out Capital Mind Premium! Get In-Depth Macroeconomic Analysis, Market Metrics, Proprietary Capital Mind Indexes, a look into the CAPM Portfolio and More Actionable Insights, straight to your Inbox. Take a 30-day Free Trial! We are currently at about 23.4 – probably a little bit higher today. The 25 P/E number is a good 500 points away – the Nifty needs to be beyond 9000. But Earnings Growth Sucks The last two times we crossed 23 P/E, our Nifty earnings were growing strong, or trending up.… (Read On…)

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A great read by Ashish Mishra, on the failure of an Indian e-commerce firm , perhaps the first big one, Indiaplaza. Starting 2013, the Indiaplaza story went further downhill. One miserable day. After another. People started quitting, debts piled up and Vaitheeswaran found himself cornered. He had knocked on every door he knew and returned empty-handed. Then came the fateful Monday, 12 August 2013, when Indiaplaza vacated its office. But Vaitheeswaran still had some fight left in him. He hit the road again to see if anyone would be interested in buying whatever remained of Indiaplaza—the brand name, software solutions and even the customer data. Again, there were no buyers. Indiaplaza, earlier Fabmall, remains close to my heart as one of the first startups ever. I remember when I bought a book from them, and they sent me the wrong one. I’d paid by credit card, and I called up the company, and surprisingly, a co-founder answered.… (Read On…)

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We write about how the fall in government bond values during the June quarter could affect Banks’ performances. This post is for Capital Mind Premium subscribers only.

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1Mantri Developers is at it again. They’re offering 100% assured returns on your “investment”, and SEBI/RBI do absolutely nothing! In fact, they even compare their offered guaranteed returns to things like equities and mutual funds! From their web site : Sachin tweets this incredible image :   Note: Someone forgot their mathematics. If you double your money in 3 years, the rate of return is 26%, not 33%. Plus, the “safety” of your principal is exactly what here? What Remember, Mantri did it again last year : Guaranteeing 100% returns on a property in Bangalore . According to @tarun their modus operandi is that you pay 20% down payment, and 80% is a bank loan. They pay interest on the bank loan for three years, and buy back the flat at 120% after three years. Awesome no? (Btw, not legally guaranteed it seems) Let’s assume this is true. What’s in it for Mantri? … (Read On…)

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FIIs continue to sell equity as they sold about Rs. 3,300 cr. in June in equity. However, they have been net purchasers of debt with about Rs. 1,700 cr. worth of purchased positions. While they have sold equity positions in May and June, it’s still a big positive for the whole year. And in Debt too: Foreign investments might have slowed but it looks like domestic investments have come to meet them more than half way. In the near term there are two fears that will keep foreign money tentative: The impact of Greece (the eventual default impact will be known only next week) The eventual US Rate Hike Meanwhile Indian markets are running up like there’s no tomorrow! We should expect extreme volatility…and not in one direction, so this is pretty much par for the course. … (Read On…)

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We add 2 stocks to the CAPM Portfolio based on Outlier analysis. This post is for Capital Mind Premium subscribers only.

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We’re done with half the year and the Nifty has returned….next to nothing. With a 1% return in 2015 so far, it’s almost been like you could have sold in January and gone away:   It’s just the first half though, and the end of the year could be substantially different: Just a monthly summary. … (Read On…)

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It’s seems some big hedge funds have set up positions in Greece recently that might become stressed (HT ValueWalk.com): John Paulson’s firm acquired a 5.4% stake in Alpha Bank, the fourth largest lender in Greece and a 9.9% stake in EYDAP SA, the largest water supply and sewage company in the country with approximately 4.3 million customers. Alpha Bank disclosed the investment of Paulson &Co., but did not provide further details about it. Based on Thomson Reuters Eikon data, the 5.4% stake in Alpha Bank has a market value of €407 million or $565 million on Tuesday at the Athens Stock Exchange. And he’s not alone: Some of the largest hedge fund managers  betting on Greek banks include, Daniel Loeb’s Third Point LLC and Seth Klarman’s Baupost Group, Farallon Capital, York Capital Management, QVT Financial, and Dromeus. Also our friend Prem Watsa is part of this crowd: Prem Watsa, chairman of Fairfax Financial Holdings Ltd ( TSE:FFH ) (OTCMKTS:FRFHF) invested in JUMBO SA (OTCMKTS:JUMSF),  MYTILINEOS HLDGS SA (OTCMKTS:MYTHF), and Eurobank Properties. … (Read On…)

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I would technically want to write something beyond Greece. But it beckons. Because: Greek Banks to be closed on Monday after ECB freezes liquidity tap: Greece will introduce capital controls and keep its banks closed tomorrow after international creditors refused to extend the country’s bailout and savers queued to withdraw cash, taking Athens’ standoff to a dangerous new level. The Athens stock exchange will also be closed as the government tries to manage the financial fallout of the disagreement with the European Union and the International Monetary Fund. Greeks can only withdraw 60 Euros a day after Tuesday. (As in, banks are closed, but ATMs will reopen) The ECB won’t give any further liquidity (it stays at current levels). Greek people have already withdrawn 1.3 billion euros just over the weekend and only 40% of ATMs had any money in them before this call. Also read: One third of Greek ATMs Emptied as Greece Goes Political : Greece has a referendum next Sunday on whether they should accept the bailout or not.… (Read On…)

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