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August 30, 2015

QE 1, 2, 3 and now 4?

FPIs press exit button, takes out Rs 17,555 cr in August

Overseas investors have pulled out Rs 17,555 crore (USD 2.65 billion) from the Indian capital markets in the month due to sharp global sell-off triggered by a rout in Chinese equities.

The net outflow by Foreign Portfolio Investors (FPIs) come following a net investment of Rs 5,323 crore last month.

FPIs withdrew a net amount of Rs 16,936 crore from the equities till August 28, while they pulled out Rs 619 crore from the debt markets during the same period, translating into a net outflow of Rs 17,555 crore (USD 2.65 billion), according to data available with the depositories.

The final figure for August is likely to change as there is still one trading session left.


Rajan hints at rate cut; inflation down quicker than expected

WASHINGTON: Indicating an imminent rate cut, RBI Governor Raghuram Rajan has said inflation has come down to the comfort zone quicker than expected and he is keeping a watch on data to see how much room is there for further easing of the monetary policy.

"We are on a phase of accommodation. We are still in that phase. We are looking at the data to see what more room we have," Rajan said.

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SEP 2015 stock market crash

List of some interesting videos

There is no correlation between intelligence and trading

Many people assume that those who regularly make money in stock markets must be very clever. Or that you must be blessed with some intelligence to "make it big" in the markets.

This is a very wrong assumption as there is no correlation between intelligence and trading.

RIL, ONGC, SBI, BHEL, L&T could be out of Sensex in 10 years

This is wild speculation but I will not be surprised if this happens.

I have seen many bluechip stocks, so called A group stocks fall by the wayside and become shells of their former shining days of crowning glory.

Index heavyweights stocks such as Reliance Industries (RIL), ONGC, Larsen & Toubro (L&T), State Bank of India (SBI) and Bharat Heavy Electricals are among the 15 stocks that could see an exit from S&P BSE Sensex over the next decade, according to a June 2015 study co-authored by Saurabh Mukherjea, CEO (institutional equities) at Ambit Capital, titled 'The Sensex in 2025.'

Ambit Capital says high chance Sensex hitting 22000

Ambit Capital says that there is a high risk of the Sensex dropping to as low as 22,000, as the odds appear to be in favour of a continued yuan devaluation.

Exit the fantasy, enter the reality

As the fantasy of a ‘secular bull market’ fades, we cut not just our FY16 GDP growth estimate from 7% to 6.8% (driven largely by a drop in industrial growth) but also our end-FY16 Sensex target from 32K to 28K.

We further highlight that there is a high risk of the Sensex dropping to as low as 22K, as the odds appear to be in favour of a continued yuan devaluation. The combination of a enfeebled banking system, a sliding real estate sector and a PM determined to reset the way the Indian economy works makes India a risky investment destination. To mitigate this risk, we recommend that investors focus on financially robust, market leading franchises which are trading at sensible valuations.

Simple NIFTY options trading strategy

This is one of my favorite plays on nifty options and takes advantage of time decay.

The trade is to short nearest call and buy the next call above in the series (100 point gap). Here the view is of limited upsides. This works best when premium difference is 40-50 points.

This is an example of a trade I took on Friday.

August 29, 2015

Bitcoin Interest Grows in India From Cross-Border Payments and Corporate Support

Tech giants including Microsoft and IBM have been supporting Bitcoin startups, conferences, accelerators and developers in India. The efforts of these companies are beginning to pay off, as India has seen a gradual increase in the number of developers and freelancers in the Bitcoin ecosystem.

“There is lot of interest from freelancers in India who suddenly are now getting bitcoins from U.S.-based companies, and then they scramble to understand what is bitcoin,” Indian Bitcoin startup Blockonomics founder Shiva Sitamraju told Bitcoin Magazine.

Why QE4 Is Inevitable

Why have global markets reacted so violently to Chinese developments over the last two weeks? 
There is a strong case to be made that it is neither the sell-off in Chinese stocks nor weakness in the currency that matters the most. 
Instead, it is what is happening to China’s FX reserves and what this means for global liquidity. Starting in 2003, China engaged in an unprecedented reserve-accumulation exercise buying almost 4trio of foreign assets, or more than all of the Fed’s QE program’s combined (chart 1). The global impact was indeed equivalent to QE: the PBoC printed domestic money and used the liquidity to buy foreign bonds. Treasury yields stayed low, curves were flat, and people called it the “bond conundrum”.
Fast forward to today and the market is re-assessing the outlook for China’s “QE”. The sudden shift in currency policy has prompted a big shift in RMB expectations towards further weakness and correspondingly a huge rise in China capital outflows, estimated by some to be as much as 200bn USD this month alone. In response, the PBoC has been defending the renminbi, selling FX reserves and reducing its ownership of global fixed income assets. The PBoC’s actions are equivalent to an unwind of QE, or in other words Quantitative Tightening (QT).
What are the implications? For global risk assets, they are clearly negative –global liquidity is falling. For fixed income, the impact on nominal yields is ambivalent because private safe-haven demand for bonds may offset central bank selling. But real yields should move higher, inflation expectations lower, and there should be steepening pressure on curves. This is indeed how markets have responded over the last two weeks: as if the Fed has announced it is unwinding its balance sheet!