Friday, October 30, 2015

Adventures of Tintin with the Gujarati Grandmom

Its a hot and humid summer in suburban Bombay (that's what it was called in the 1980s). Mrs Maniben Trivedi, was baby sitting her two and half year old grandson, while her pregnant daughter was working.
Times were tough, her son-in-law was struggling to manage documents to be able to get a home loan, for his apartment. Her daughter, already pregnant with a second child, was worried about how will money come to support two children, when they could barely support one despite both of them working.

Mrs Trivedi, already had five grandchildren from her two sons, and this sixth one was the most restless. Already bored of her stories, he refused to sleep at nap time listening to the folklore of the "bodio wagh" or the man eating tiger who had his tail cut off. He would complete all her lullabies, and short stories, and said he wanted something else.
On that hot, humid sweaty month of May, Mrs Maniben Trivedi, thought up an idea to keep this little child occupied.
She picked up a comic book belonging to her older grandsons - "Tintin and the Adventures of the Unicorn", and told her grandchild #6, lets read a new story.
Now the problem was, Maniben couldn't read English, (having studied till 2nd grade in Gujarati), and her two and a half year old grandson couldn't read.
But still, looking at Herge's artwork, they deciphered a story, which they made up themselves.
There was a dog, a young boy, but the main character of their story was the older bearded guy "Captain Haddock".
A few years later, when her grandson could read, and he read that comic again, he fondly remembered the stupid plot from his childhood, which he and his grandmum cooked up.  And laughed at her inability to read English.

Many such hot, humid, sweaty summers have passed, but her grandson still remembers those afternoons. He still refuses to believe Tintin is the main character of those comics, and not Captain Haddock. He drinks like a fish, and swears like a sailor ... and tries to draw cartoons whenever he can.

Mrs Maniben Trivedi passed away at the age of 92 yesterday.
She raised 3 children - a doctor, an engineer and a lawyer.
Helped raise 7 grandchildren, and saw 10 great grandchildren.

She got married as a teenager, and spent 77 years with her husband.
One year (to the date) after her husband passed away, she succumbed to her illnesses.

Her grandchild #6, the troublesome one with the short attention span, still tries to draw and create stories, which they made up thirty years ago.
When he is not drawing, he writes his random mumblings on this blog.
And he still thanks her, for teaching him how to picture read.

Wednesday, October 07, 2015

Bihar Elections - Why are they important for an Investor in India

Executive Summary
India will see the State Assembly elections in Bihar in late October with results announced on November 8th.
This election is crucial as allows the ruling party at the Center (BJP) gain seats in the Upper House 
of the Parliament "Rajya Sabha" , where they are lacking majority. 

A BJP win would ease passing of any new legislation, (key bills were blocked in the Rajya Sabha) and hence markets would view this as a positive event, and Indian Assets (Stocks, Rupee, Bonds - Government and Corporate) would rally.
Needless to say, if the opposite happens, markets would expect slower pace of reform, and it is negative for Indian Asset prices.

The elections are too close to call, given 3 other major parties (JDU, RJD, INC) have united to form a Grand Alliance ("GA" or "Maha Gathbandhan")
In the 2014 General Elections, though BJP (+allies) had around 35% vote share, they managed to win 31/40 seats in a 4 horse race.
Now that other groups have united, it remains to be seen if electoral math is like simple arithmetic.
Also in a 2 horse race, a small change in vote share will lead to a large change in number of seats (e.g. getting 51% votes in all constituencies, would lead to winning 100% of the seats, though the win is only by 2% in vote difference)

What would I do to hedge:
with the rally in markets, volatility is cheap, and there is good value in buying NIFTY options (OTM puts) or USDINR calls

In case of a BJP win, if INR strengthens, RBI most probably would intervene to prevent excessive strengthening. 
While Equity markets though wouldn't see any intervention, the reaction could be a lot more 

For those who want more detail on the subject

What is Bihar? 
Bihar is the 3rd largest Indian State by population (104 million people) and 13th largest by area. Also one of the most backward states, with the lowest levels of per capita income and literacy among the major Indian states.
Its importance can be gauged by the fact it sends 40 Members of the Parliament "MP"s to the Lower House ("Lok Sabha") and 16 MPs to the Upper House "Rajya Sabha"
(Disclaimer: the author hasnt ever been to Bihar nor has any plans of visiting in the immediate future)
Also among other things, it is where Buddha attained enlightenment. 

Then why is it important for an Investor? 
Bihar is up for elections (Oct to Nov 5th, with the results on Nov 8th).
This election is a litmus test for Prime Minister Modi's ruling party ("BJP"), against the Grand Alliance "Maha Sangathan" comprising all major opposition parties in the region (JDU, RJD and INC) which have united against BJP.
Bihar is crucial, as a victory in Bihar would allow BJP to gain crucial seats in the Rajya Sabha in 2016. (Rajya Sabha members are nominated on the basis of the percentage of seats won by the parties in the State elections)
At the moment the BJP lead ruling coalition ("NDA") has a majority in the lower house "Lok Sabha" of the parliament, but major bills being pushed by them like the Goods & Service Tax (GST) or the amendment to the Land Acquisition Bill, have been blocked by the Upper House.
If BJP wins Bihar, it would have a lot smoother time, without key legislation being blocked. 

If BJP loses Bihar, this would mark the end of "Modi wave" which saw BJP win 4/5 states post the General Election in 2014.
By losing Bihar, and no major elections in 2016, only hope of Modi gaining majority in Upper House would be in 2017, and thus limiting the ability of passing any difficult reforms.
In terms of markets this is a digital event. 

Modi wins -> boost to investor confidence and indian asset prices, 
Modi loses -> negative sentiment for indian asset prices. Probably BJP government turns a lot more populist. Then we see more stagflation. 

What does the Electoral Math look like? 
While in 2014 General Elections all the 4 groups contested separately, and while NDA (BJP lead coalition) had about 35% votes, in a 4 horse race, they managed 31/40 seats.

This time round given the 3 major opposition groups have combined forces, simple arithmetic would suggest a win for them. (Ignoring other fringe groups)

Though given the fact that one of the three (Indian National Congress) is a non entity, and hasnt won an election in Bihar since 1990, the other two (Rashtriya Janata Dal or "RJD") and Janata Dal (United), "JDU" have been bitter rivals in the last decade, and were hurling insults at each other. 

"Will voters see this as opportunism or pragmatism."
Thats the 2 trillion dollar question (size of India's GDP)

Getting into caste, religion, and other local agenda is beyond the scope of this blog, hence I leave you with a few links if you want to expand your reading 

Wikipedia isnt a bad place to start,_2015

Milan Vaishnav of Carnegie Endowment has a comprehensive piece

Karthik Shashidhar in Livemint - why Bihar elections are too close to call

Sunday, August 16, 2015

India - some facts and charts about the last year

My Friend Pranav Kumar put up a post on Facebook about the negativity in India about the current year.

Pasting his post Verbatim

Tired of some of the fact-free negativity around India. So putting it out there (I put this as comment on FT):

Some big picture facts on Modi's 1st Year (Using nos for Apr 14-Mar 15):

1. Real GDP growth - 7.3% (vs 6.9% year earlier)

2. Inflation - 3.8% at end of July'15 (vs 7.73% in Aug'14)

3. Net accrual in Foreign Reserves - $61 bn (vs $16 bn last year).

4. Net FDI flows - $33 bn (vs $22 bn last year)

5. Current account deficit - $ -28 bn (down from -$32 bn last year). Much lower as % GDP

6. Fiscal deficit (% of GDP) - 3.99% (vs 4.5% last year)

7. Rupee - one of the best performers among all EMs.

8. Financial inclusion - 175 million households enrolled into banking system - this is more than what UPA achieved in last 3 years as per CMIE. Similar scale difference on toilets in schools.

9. Resource auctions - Rs 3 Lac Crores income - that's 18% of annual central budget - for government from Coal and Telecom auctions which were done transparently (as opposed to Congress which gave them to cronies and now the ministers are being probed/jailed). Govt is tracking on goals of 24/7 electricity.

10. Foreign policy - Modi's performance is by far way ahead of any other prime minister.

(Source: RBI, CSO)
Sounds like a fantastic year to me. However much Modi's critics want him to fail, his own excellence plus the oil windfall has led to great results in year 1. Happy independence day!


I decided to do put up charts (Note the change in trajectory for the last one year versus previous 5)

All data is from Bloomberg, and tried to use it from 30-Jun-2009 where available (since thats post Great Financial Crisis - which distorted lot of data in 2007, 2008 and some part of 2009)

Some places where data series has changed (e.g. CPI or GDP) I have used old and new series for what ever time line is available. 

India GDP
White - New Series (not enough data); Yellow - Old Series

India Inflation
Yellow - Wholesale Price Inflation; White - Consumer Price Inflation (new series, no history) 

India FX Reserves (USD trillion) 

India Current Account Balance (USD billion per quarter) 

India Fiscal Deficit (% of GDP) 
EM Currencies Performance - 2009-14
(Total Return = Interest + Currency Performance) 

EM Currencies Performance - 2015 


While in the previous 5 years India was getting worse, some of the remedial measures have been taken by RBI governor and then Finance Minister in 2013, but now from 2014, India is surely on a firm footing.

Wednesday, August 12, 2015

Thoughts on Singapore

Singapore recently celebrated 50 years of being an independent nation, and there was a huge amount of celebration, and rightly so. (I though used the holidays to get out of Singapore and get a cheap holiday)

I have spent the last 5 years here, and despite my love hate relationship with Singapore, this city has given me a lot.
From a directionless and choppy career in banking, atleast this place has let me firm up my goals and career interests.

Thanks to my regular pub quiz nights (Tuesday Trivia), I do have friends from various nationalities and backgrounds, while earlier in London and Dubai, all my friends were either Indians or Bankers ... and then the conversation gets extremely boring.

Singapore is one of the few truly global cities, where no matter where you are from, it can be like home.

Though my own assimilation in Singapore remains incomplete. I scored 4/5 on this test of Singlish

Some more links about Singapore (thanks to social media)
50 reasons why Singapore is the best City - CNN
50 pictures of old Singapore you might not have seen before
Kishore Mahubani on Why Singapore is the worlds most successful society

Tyler Cowen (blogger at Marginal Revolution and Prof at George Washington University) has a few great posts on Singapore. At times it takes an independent outsider to be able to get an accurate view

Why is Singapore Special - Great Leadership, efficient bureaucracy, great food.
A Simple Theory of Singapore Complaints - Many Singapore residents would be better off if in some regards the country were not so nice. That is a hard problem to solve, but in some ways a nice problem to have.
Singapore as a Financial Corporation - this is the best one, its basically a mega hedge fund with some citizens.

Some of the recent success, (especially financial) has come with the twin tail winds -
1. Easy US monetary policy (US Federal Reserve printing money, and this easy money leaking into emerging markets)
2. Breakneck Chinese Growth (and probably a lot of it debt fuelled)
These two phenomenons are now reversing, and thus the tailwinds would turn to headwinds.
Though given the strong institutions built in Singapore, it should be robust enough to withstand the turning tide.

While the last 5 years have been enjoyable roller coaster ride for me, looking forward for 5 more.

Mahjula Singapura! (Onward Singapore)

P.S. - For the Trivia Nerds some #SG50 questions from the great Caleb Liu (picked from his FB wall)

1. There are two other countries that gained their independence in 1965, both former British colonies like Singapore. The first is the smallest country in mainland Africa by area, the second is an island nation and archipelago. Can you name them?

2. Buildings in Singapore have a maximum height restriction due to aircraft overflight restrictions - what is the maximum height in metres? Also, three buildings share the honour of being the tallest in Singapore as they are all built to this maximum height. What are the three buildings?

3. Which seafood restaurant, which still has a prominent outlet near the East Coast Park lagoon, is famous for inventing pepper crab (Note NOT Chillli Crab which is disputed)?

4. Singapore's MRT system was first opened in 1987 with a stretch of 5 stations running between which two stations? Name both of them.

5. Which area of Singapore has a name that originates from Kampong Shan Ting or literally "pavilions on the green" which accounts for the colourful roofs of its HDB flats. It also formerly contained a canal known as "dead chicken river" because people used to throw dead animal carcasses into it?