Wed, 28th June 2017

Anirudh Sethi Report


Archives of “Analysis” Category

European Indices closed Mixed

European major stock indices are ending the day mixed with some up and some down.
  • German Dax is down -0.2%
  • France Cac is ending flat
  • UK FTSE is ending down -0.6%
  • Spain’s Ibex is up 0.7%
  • Italy’s FTSE MIB is up 1.2%
  • Portugal PSI20 is down -0.09%
In the 10 year debt sector in Europe today:
  • Germany 0.368%, unchanged
  • France 0.717%, -2 bp
  • UK 1.154%, +6 bp
  • Spain 1.429%, -7 bp
  • Italy 2.032%, -3 bp
  • Portugal 2.981%, -9bp
Yesterday, yields surged on the back of Draghi more hawkish comments. Today, some of those moves higher were retraced.

India’s war on cash: ATM network expansion has seen sharp drop since 2014

As the world marks the 50th year of the first Automated Teller Machine (ATM) rolled out by Barclays Bank at Enfield in London, India seems to be in the midst of a full-blown war against cash. Five phenomena capture the Modi administration’s attempts to restrict the use of cash and steer India towards a less cash economy

One indicates that the government is squeezing easy access to cash through ATMs which had grown exponentially during the erstwhile United Progressive Alliance (UPA) administration. Reserve Bank of India (RBI) data suggest that in the three years from the Modi administration taking over in May 2014 to April 2017, the increase in the number of on-site and off-site ATMs has been 26 per cent when compared to the previous three-year period. This is the lowest growth rate for ATM additions in decades. During the last three years of the UPA government — from April 2011 to April 2014 — the number of ATMs had increased 117 per cent over the preceding three-year period. So, the difference between the growth rates in the successive three-year periods has been a whopping 91 percentage points. 

While most public and scheduled commercial banks had shown double-digit growth in ATM additions across the country during the UPA regime, banks have been less eager to expand their ATM networks during the Modi administration, which is working to restrict the use of cash to make financial transactions more transparent.

While the number of people with debit cards has increased exponentially during the period, the number of ATMs hasn’t grown proportionally. This is where the second phenomena of a rise in the number of debit card machines (called point of sale terminals) further throws light on the kind of less cash economy unravelling under the Modi administration. During the Modi regime, the number of debit card machines have grown by 143%. In the comparable period during the UPA regime, the growth in these machines was just about 79%.

It’s not just that the number of ATMs are growing slower and card machines growing faster under the present government. While people’s access to ATMs isn’t as easy as before and with the proliferation of card machines, there has been a commensurate rise in the number of debit card transactions at such machines. While debit card swipes at machines grew 136% during the UPA regime, they have grown three times as much during the NDA administration. In effect, the number of times people swiped their debit cards for transacting rose 245% more during the present government than under the UPA government.
 More transactions on more debit card machines points to another peculiar phenomenon underway in India. The value of debit card transactions has grown close to 332% under the present government. During the UPA regime, the value of transactions had just about doubled during the comparable period.

This leads to the final phenomena. The number of ATM transactions seems to be growing at almost half the pace under the present government than it did during the previous one. While the amount of money transacted at ATMs grew almost 57% during the UPA government, it grew at just about 22% under the Modi administration. While millions of Indians still continue to rely on ATMs for cash, these phenomena signal that with the present government’s policy imperative, the 50-year-old ATM may well be losing steam in the world’s fastest growing and cash loving economy.

Indian bunker in Sikkim removed by China using bulldozer

China has removed an old bunker of the Indian Army located at the tri-junction of India, China and Bhutan in Sikkim by using a bulldozer after the Indian side refused to accede to its request, according to official sources.

The incident that broke out in the first week of June in Doka La general area in Sikkim had led to a face-off between the two forces, triggering tension in the Sikkim section of the India-China border, the sources said on Wednesday.

The forcible removal of the old bunker by using heavy machinery like a bulldozer came when the Indian side did not agree to a request by the Chinese authorities to dismantle it, the sources said.

China is believed to have not taken kindly to India building many new bunkers and upgrading older ones along the border in Sikkim in the recent past to augment its defences against the People’s Liberation Army (PLA), the sources said.

Of the 3,488-km-long India-China border from Jammu and Kashmir to Arunachal Pradesh, a 220-km section falls in Sikkim.

Beijing is also upset with New Delhi over the recent visit of the Dalai Lama to Arunachal Pradesh, the sources said, adding they were also trying to escalate tension in the forward areas, including in Sikkim, even though the border in the northeastern state is demarcated.

Mapping The World’s 20 Most Populous Cities By 2100

If you look at a modern map of the world’s most populous cities, you’ll notice that they are quite evenly distributed around the globe.

Metropolises like Moscow, New York, Tokyo, Cairo, or Rio de Janeiro are spread apart with very different geographic and cultural settings, and practically every continent today can claim at least one of the world’s 20 most populous cities.

However, as Visual Capitalist’s Jeff Desjardins notes, in the future, things will be very different, according to projections from the Global Cities Institute. In fact, over the next 80 years or so, some cities will literally 10x or 20x in size – turning into giant megacities that have comparable populations to entire countries like modern-day Germany, France, or the United Kingdom.

 The most interesting part? None of these cities will be in the Americas, Europe, China, or Australia.

ECB: The market misjudged yesterday’s speech from Draghi

Bloomberg is out with an ECB sources story that says the market misinterpreted Draghi’s remarks.

The speech “was intended to strike a balance between recognizing the currency bloc’s economic strength and warning that monetary support is still needed” Bloomberg reports, citing people familiar with the matter.

To be fair, the market read a lot into this line, which is fairly benign:

“While there are still factors that are weighing on the path of inflation, at present they are mainly temporary factors that typically the central bank can look through.”

The euro immediately tumbled to 1.1290 from 1.1376 on the headline.

About That Jesse Livermore Quote

“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”

The above-mentioned quote is probably one of the more frequently cited in trading and investing circles. Many forget that there is an important nuance to that quote. It is the holding of great stocks in a bull market that will make you money. Try staying with a great stock through the turbulence of a bear market and then tell me how your holding is making you a ton of money. There are several things to consider:

1. You will experience several bear markets in a 40-year investment career and much more >15% declines in the stock market. You need to have a plan how to deal with them. A bear market can lead to a 50% or even 90% drawdown in any stock regardless of how great its fundamentals and its growth prospects are.