SUNDAY WEEKLY ISSUE #8

Good morning EveryFinions!

The stock markets continued their winning spell. The arrival of Pfizer's vaccine has given new hope to the oil markets too and the liquid gold saw swift price movements this week. While optimisim is all around, Royal Carribean cruises which set out to sail for the first time since the pandemic swiftly returned to shore after someone aboard tested positive for the virus - Reminding us once more, that we are still not fully out of this. The markets however are not listening.

IN TODAY'S NEWSLETTER

• Market update & news in brief
• When India left the party early
• Game : The price is right
• Another business idea - Potato farming?
• Cover story - Practical guide to picking equity mutual funds
• In case you missed it - Heard about negative interest rates?
• Thought for the day

QUIZ

How many ATMs are installed in all of India?

MARKET UPDATE

NEWS IN BRIEF

1. More economic stimulus has come our way – The finance minister announced additional spending of $120 Billion under Atmanirbhar Bharat 3.0 to revive the economy. RBI’s high frequency indicators suggest that the Indian economy declined in the quarter ending Sep'20, officially pushing the country into a recession.
2. A survey conducted by the Retailers Association of India has found that retailers suffered a 37% decline in sales in October 2020 as compared to a year ago period. While consumer durables and electronic goods have recovered in sales, the other categories have mostly been left behind. Walmart meanwhile said, “In India, Flipkart reopened in mid-May, after which we saw GMV (gross merchandise value sold to customers) exceeding pre-COVID-19 levels.”
3. Finance ministry this week approved a $20Bn package to lure global manufacturers to India. The government will offer production-linked incentives to 10-sectors including automotive, solar-panels, textile units, food processing units, and pharma companies over a 5-year period. Where are you Elon Musk?

4. In a sign of things getting worse in China-Australia relations, China banned timber imports from Australia's Victoria state this week. The relationship between the two countries has remained strained for some time now. Things got much worse when Australia demanded an investigation on the origin of Coronavirus. Really Australia? The whole world knows! Please stop asking.

5. The government released September IIP (Index of industrial production) figures this week. The headline IIP figure posted a sharp recovery from August  and an ever so slight improvement from Sep 2019. Across industries, production in textiles, apparel, recorded media and wood products were down by over 10%-15% while pharma, rubber and plastic products (think tyres and PVC pipes) and electrical equipment were up from Sep 2019 levels.

IN LESS THAN 200 WORDS (1/2)

When India left the party early

We are massive supporters of open borders and free-trade. The European Union single market is one of the most progressive ideas of our times. A continent that was only 70 years ago ravaged by wars and conflicts has come together to open up borders for the free movement of people, goods and capital. But beyond the socio-political aspects of a single market or even a customs union, there must exist strong economic motivations for the union to exist and thrive.

This weekend, 15 Asia pacific nations including China, Australia, New Zealand, Indonesia, Malaysia and Singapore are in the verge of signing a trade deal called the RCEP, Regional Comprehensive Economic Partnership. Covering over 2.2 Billion people living in these countries with a combined GDP ratio of $26.2 Trillion, this is touted to be the world’s biggest free-trade deal. And India is missing this party. Not because we weren’t invited, but because we left too early. The Indian government pulled out of the negotiations almost exactly a year ago. But why?

Take a look below for the list of countries involved in RCEP and the amount of trade we did with each of them.

We had trade surplus with just 4 of them and even that was tiny. Worst of all, the trade deficit with these 15 countries put together constituted to nearly 60% of India’s overall trade deficit in the last two financial years. And there is an argument to be made that should India throw its borders open for goods to flow in freely, this figure will only get worse. While the decision to pull out of the trade deal was possibly made for political and populist reasons, the economic rationale just happens to work out in our favour. What an idea, sir ji!

GAME : THE PRICE IS RIGHT!

This is the Saffola gold pro healthy lifestyle blended oil 5 litre can. Its retail MRP is Rs.850.

Who amongst the following e-commerce sellers, is selling it at the cheapest price and for how much?

1. Amazon
2. Bigbasket
3. Jiomart
4. Flipkart

IN LESS THAN 200 WORDS (2/2)

Another business idea - Potato farming?

CPI inflation figures were released this week. Rather worryingly, inflation was up 7.61% in October 2020 compared to the same time a year ago. Food price index was up even higher by 11%. CPI is baselined in the year 2012 (CPI - 100 in 2012). And here is a look at the price trend captured across several commodities since then. Price inflation in vegetables (10%) has been significantly above the average CPI (6%) increase per year.

And the RBI is probably losing sleep over this. A 2018-19 survey puts total expenditure on food and non-alcoholic beverages at about 25% of total household spend. Here is a look.

A significant price increase in a component which forms a significant part of household spend does not augur well for the country. Vegetable prices were the worst affected going up by over 22% in the last one year followed by egg (+21%), fish & meat (+19%) and pulses (18%). And if this trend continues, there is precious little that the central bank can do to stimulate the economy. It will be stuck between controlling inflation and maintaining its accommodative monetary policy stance. As for us, another great business idea to consider now is to start growing some potatoes in pots in the balcony 🙂

COVER STORY

Step by step guide to picking equity mutual funds

IN CASE YOU MISSED IT...

Heard about negative interest rates?

Bank of England last week announced a bigger than expected monetary stimulus to support the British economy struggling from BREXIT and the second lockdown driven by another wave of COVID-19. Curiously, they also announced that the bank is working on negative interest rates. But what exactly are negative interest rates and how does it even work?

IN OTHER NEWS

• For the first time since February, petrol demand increased on a year on year basis indicating revival in commuting.

• Maharashtra government indicated that a second wave of COVID-19 is likely in the state early next year.

• Kotak Mahindra bank advised this week that it sold a part of its holdings in Future Lifestyle at a 25% discount in the secondary market. Something smells funny?

ANSWER TO QUIZ

5.62 Lakhs

That is the number of ATMs and micro-ATMs installed in the country. On the other hand, the number of credit/debit/atm cards in circulation in India is about 92 crores! 

THOUGHT FOR THE DAY

Stray from the herd, be different!

READ/WATCH/LISTEN

• Cullen Roche is an ‘interesting’ investor. He called out this long period of low interest rates in 2017 and said, ‘Interest rates might go up. But within the next decade we will have another recession and the FED will have no choice but to cut rates down’. He was dead right! In this column, he argues that time is the ultimate form of wealth in modern society. Paragcap

ANSWER TO THE PRICE IS RIGHT!

Flipkart, ₹679

The place you need to go to in order to get the best price for Saffola gold pro 5L. If you are after Ariel top load detergent 2Kg, go to Bigbasket/Amazon and if you are after Aashirvaad superior 10Kg, go to Jiomart to get the best price. In summary, compare prices before you buy!

From the writer in me, to the reader in you ♥

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