Latest Posts

RBI Ups Repo to 6.75%

RBI today increased the Repo rate by 0.25% to 6.75%. Repo is what banks pay the RBI for overnight (1 to 3 days) borrowing. Reverse repo, or what the RBI pays for excess cash parked with them, is up to 5.75%.

Please don't consider this a big deal just yet. here's the long term history of rates:

India Repo Rate Chart

What does 40% Dividend Mean?

Mutual Funds in India often declare dividends like "40%" or "20%" - and if it gets you salivating that

Weak Oily Chains and Weak Probability Implications

Fundoo Professor writes: How Weak is this Oily Chain?

Today’s Finanical Express carries an interesting column by Vikram Mehta, Chairman of the Shell Group in India.

The following passage caught my eye:

“Success in the exploration and production of oil & gas requires a company to overcome three interlocking sets of probabilities. The probability that a given geologic structure contains hydrocarbons [let's call this Event A]; the probability that hydrocarbons will be located [lets call this Event B], and the probability that once located, the find can be commercially exploited [let's call this Event C].”

Vikram’s statement has vast practical implications for security analysts.

The market value of an asset is the present value of its expected future cash flows. Cash flows from an oil exploration company can be derived only out of hydrocarbons which can be commercially exploited. And for that to happen ALL of the above three events must happen.

Suppose that the probability of Event A happening is 40%, that of Event B happening is 20%, and that of Event C happening is 25%.

Then the probability of seeing cash flow which is valuable is 0.40 x 0.20 x 0.25 or 0.02. That comes to just 2%!

I wonder if the market participants think in those terms before valuing oil exploration stocks.

My comment to it was:

Sir, what matter is returns. If they can make 100x their investment on an oil find that meets all three parameters, and they have enough blocks to explore, then the 2% probability is ultimately a reasonably large return. For every $100 they invest they will eventually make $200.

The Game Of Dice

“I challenge you to a game of dice”, said Shakuni, his various large rings glimmering as he tried to keep his glee under control.

Yudishtir frowned. “Can’t we do poker or teen patti or something?”

“Look, this is the Mahabharata, even before Krish did the Gita, so can you hunker down and get with dice?”

“Oh, okay”, said Yudishtir, trapped in a time warp, “but you gotta play fair, okay?”

Feb 2011 Inflation at 8.3%: Visualized!

February 2011 Inflation came in at 8.3%, with a pick-up in manufacturing goods. I had written earlier that the danger remains of inflation moving from primary items to secondary items and now that seems to be happening.

Super Hot TataCoffee! What's Roasting?

Unbelievable move by Tata Coffee over the last week or so. The stock's up from 570 to 907 in five days, a ridiculously massive move. I've been caught in this stock before - lost about 10% - but got back in a couple days back. It's very flaky, so you have to stay nimble.

The strategy here is all about position size. It's a volatile stock, so you have to keep wide stop losses. With a large position, you can't afford wide SLs, so you cut the volume down dramatically. Where a regular stock would be 5 to 10% of your portfolio, this stock will end up being 3 to 4%, perhaps pyramiding in with 2% as your first entry. First stop is 740 (see, that's a 20% loss right there) and the subsequent one is between 600 and 630.

TTKPrestige: Still At All Time Highs

ttkprestigelogo A kitchen appliance company, TTK Prestige seems to be really strong. Despite the broader market having come down 20% or more, this stock is pushing to new highs. I've held the stock, on and off, over the last year or so.

They have very good cash flow. According to an interview with Moneycontrol, the promoter said they will be adding substantial capacity in the next year, just with internally generated money. Low debt in a high interest rate situation is always good.

Third Quarter results were excellent, with their nearly doubling EPS from 13.54 to 25.87. Their TTM EPS is 70, which makes their P/E nearly equal to 30 - a very good price for a company that's just been growing and growing.

10 Tax Saving Avenues : MV Chronicle

At the March 12, 2011 MarketVision Chronicle, we present 10 Tax Saving Avenues for you to consider. And, of course, all else at MV.

 

You need to register (free).

Primary Articles Inflation Down To 13.96% for Feb 26, 2011

Primary Articles Inflation for Feb 26, 2011 has mellowed down to 13.96%. This is the lowest figure since November 2009, which is a good sign.
image

You Can Trade 91-day T-Bills Soon

Every regulatory body in the Indian market woke up recently and decided to allow Interest rate futures on treasury bills. SEBI said ok, and RBI said ok.

What does this mean? The Indian government keeps borrowing short term money as "Treasury-Bills". The 91-day T-bill sold on 09 Mar 2011 was at 98.25, where the yield was an annualized 7.1443%. The T-Bill is bought at a discount (say 98.5 or something) and on maturity (91 days later) you get the full Rs. 100. The difference is the interest you expect, and it's multiplied by 4 to get an annual yield.

The idea now is to buy (or sell) a futures contract that trades on the "yield" piece - that is, you trade on the direction of this yield. But it's a little complex: What you'll see on the screen is something like 95 (which indicates a 5% yield - the distance from 100 being the yield).

Each contract is for 2000 bills, cash-settled. Let me construct an example - this is how I imagine it working: