Showing posts with label Rupee. Show all posts
Showing posts with label Rupee. Show all posts

Wednesday, November 7, 2018

Our Govt. is Bankrupt and wants 3.16 lakh crore from RBI Reserves.

I have stated this previously also. The govts. both at center and states are bankrupt. Running high deficits and about to enter a interest rate rising cycle with record high debt.


After the disastrous demonetization and a hastily done GST, Govt. is finally realizing that it is badly in the need of some money. Demonetization killed a large section of informal economy who provided jobs for people which were productive unlike the Govt. employees that netas create.

By the way Congress did many demonetizations before BJP. All were failures. Yet they keep repeating this insanity.

After relaxing deficit mandate last year, Govt. thought there will be a giant economic growth and their tax boom which didn't happen. What happened is that interest rates are rising on Govt. bonds. With stock market in correction phase, the plans to sell house silverwares aka disinvestment of PSU companies isn't going as planned. They have already milked ONGC and others of as much cash and dividend as possible. And still not getting close to budget figures. So now they want 3.16 lakh crores from RBI Reserves. 

As everyone knows this is a one time transfer as next year RBI won't have that money again but spending plans of netas won't reduce. So all this does is transfer the bankruptcy to next year.

From an investor point of view, I think it doesn't matter if Govt takes that money from RBI or not. We know they are bankrupt because.

1. Revenue isn't growing as much as spending.
2. Loan burden is already high by Indian standards of past sovereign debt crisis.
3. Interest rates are rising.
4. Monsoon wasn't that great. Ironically when it was better in 2016 farmers lost due to demonetization chaos.

and to top it, there are three large risks.

5. Economic downturn. I think last qtr GDP massaged figures were the peak.
6. Very sharp rise in US Dollar.
7. BJP's loss of absolute majority in coming election.

These are fairly assured outcomes and when that happens the stress will quickly transfer to Govt. Bonds and Rupee. Large rupee fall will help the stocks. So get ready for some wild swings. Foreign mutual funds are good options too, especially those investing in US markets as get dollar exposure.


The only question is when does this happen and I think we should see a glimpse of this in december state elections this year. Lets see. 


Wednesday, October 31, 2018

Oct 31st. Last day of Month.

I still see today as a buy and some strength seen. My month start prediction of sell on Nifty has come true. Nifty began at 10930 and will probably end today 102xx.

Rupee is weakening again and will give strength to stocks today.

1. TCS and Infy are a buy. Week started as a reaction buy but I wasn't sure but now it is. I do not see any collapse in them yet. Might see some 5-10% up. We have to see. Both of the month start sells have come true.

2. Coal India is still directionless but showing some sell, need more confirmation.

3. Hindustan Lever showing a short Buy but is still a loger term sell.

4. Godrej Consumer a trend change this week, lets see but may be up today.

5. TATA Motors reaching a localized high. No major buy yet.

6. Sugar stocks have reached a high and should fall now. Long term trend is still buy so fall a good time to buy it.

7. Deepindustries a good buy.

8. Yes Bank should show minor weakness.

9. Assamco and Starpaper a buy.

10. Navkarcorp small buy.

11. Vsttiller a sell for now.

12. Bajajfinance, Ashokleyland and Heromotors directionless.



Saturday, October 27, 2018

More Rupee devaluation coming

BofAML says RBI dollar reserves not enough to save Rupee

India’s foreign-exchange reserves are shrinking fast and may soon reach a level that could hamper the central bank’s ability to defend the rupee, according to Bank of America Merrill Lynch.

“You have sold so much that your ability to sell is becoming more and more constricted,” he said.

What will happen to Rupee if RBI is unable to defend as US dollar interest rates continue to rise..... 😨

If RBI defends Rupee by raising interest rates what happens to economy with defaults rising in banks NBFCs , bonds and real estate.... 😨