Author: shyam

Weekly Recap: *This* Much

weekly nifty performance heatmap

The euphoria of anti-Congress soon gave way to the reality of stagflation: Nifty ended the week -1.46% (-2.19% in USD terms)

Index Performance

Risk off… Infra and Banks took it on the chin.

weekly index performance chart

Top Winners and Losers

HCLTECH +4.84%
SSLT +5.27%
INDHOTEL +6.97%
BHEL -9.80%
PFC -9.72%
ADANIENT -9.47%
High beta, industrial and power stocks got thrashed…

ETFs

GOLDBEES -1.00%
NIFTYBEES -1.71%
JUNIORBEES -2.20%
BANKBEES -2.92%
INFRABEES -3.98%
PSUBNKBEES -4.50%
I think this is the first time I’m seeing ALL ETFs in the red… there really was no place to hide except for IT.

Advancers and Decliners

advancers and decliners

Yield Curve

Rate hike priced in. The only silver lining is that it has a positive slope…

india yield curve

Investment Theme Performance

*Contributed Themes

Sector Performance

weekly sector performance

Thought for the Weekend

One forecast that is almost certain to be correct is that market forecasts are almost certain to be wrong. As a species, you humans are terrible about making predictions. Forget forecasting big events that are not in your control, such as the economy or the market, you cannot even forecast your own behavior. If you could, the fitness and diet industries would be bankrupt.

Source: Why Do Forecasters Keep Forecasting?
Related: Forecasting is a Sham – Prepare – Don’t Predict!

Apollo Tyres: Buyer’s Remorse, Part Deux

We had written about Apollo Tyre’s acquisition of US based Cooper Tyre & Rubber here. It looks like the delay is causing Cooper to shit the bed…

Cooper Tire says in a new court filing that Apollo Tyres still doesn’t have an agreement in place with the United Steel Workers. The company also says it doesn’t know for sure when its Q3 financials will be finished due to issues it can’t control. (SA)

cooper tire chart

While the market seem to like Apollo Tyer’s trying to back out of the deal…

APOLLOTYRE chart

Stay tuned!

Morgan Stanley’s Heads or Tails Portfolio

Morgan Stanley has created two sets of investment portfolios to “play” the poll results (MoneyControl)

Heads

The first is if there is a strong election result. Is basically a basket of high-beta, high-leverage, cyclical, strong short momentum stocks likely to outperform as the market gains conviction in a strong poll result.

Theme: Morgan Stanley’s Strong Election Picks Dec-2013

This portfolio’s beta is around 1.14. But if you are going to be bullish, why hold yourself back? The Market Fliers Theme does a better job of pushing the pedal to the metal, so to speak, with a beta of 1.84. High beta has been flying lately, the theme is +14.89% since inception, vs. the Nifty’s +4.31%

Tails

And the second is if there is a fragmented election result. Basically a good quality GARP basket, low PEG, high ROE, low beta and strong long-term momentum.

Theme: Morgan Stanley’s Fragmented Election Picks Dec-2013

This portfolio’s beta is around 0.54. But if you are going to play defense, commit! The Market Elephants Theme, with a beta of 0.27, barely has a pulse but beats the Morgan Stanley portfolio on both Sharpe and Information Ratio.

So, dood ka dood, paani ka paani!

Sunday Long Reads: Choose Happiness

Losing your religion – EMH Edition

The efficient-markets debate is really a competition between two theories. The efficient marketeers, led by Eugene Fama and Kenneth French, see the market as rational and calculating. Value investors, exemplified by Benjamin Graham and Warren Buffett, see it as a bipolar creature, either ecstatic or depressed.

Losing My Religion: How I Unlearned Efficient Markets Folly

The Finance brain-drain

Based on a sample of 13 countries observed over the period 1980-2005, financial liberalization is associated with skill-upgrading in the financial sector. Also, financial liberalization decreases labour productivity, total factor productivity and value added growth disproportionally in industries which rely strongly on skilled labour. This is consistent with the idea that financial liberalization hurts non-financial sectors via a brain-drain effect.

Finance as a Magnet for the Best and Brightest: Implications for the Real Economy

Natural prices and marginal costs

The marginal cost of a good is the cost of producing one more of the good in question. Thus, in the case of the iPhone, for example, the marginal cost is how much it costs to produce one more iPhone, which, according to iSuppli, is $199 for the iPhone 5S. The floor for price cutting is called the “natural price,” and is equal to the marginal cost of the good.

What makes the software market so fascinating from an economic perspective is that the marginal cost of software is $0.

Open Source Apps

The link between an original mind and a troubled one

Creativity and mental illness share a process called “cognitive disinhibition.” Essentially cognitive disinhibition describes a failure to keep useless data, images, or ideas out of conscious awareness. This failure may make schizotypal personalities more prone to delusional thoughts or mental confusion; on the flipside, it could make creative minds more fertile.

What Neuroscience Says About The Link Between Creativity And Madness

The Only Way to Grow Huge

All companies that grow really big do so in only one way: people recommend the product or service to other people. The only way to generate sustained exponential growth is to make whatever you’re making sufficiently good.

The Only Way to Grow Huge

5 most common regrets of the dying

When you are on your deathbed, what others think of you is a long way from your mind. Life is a choice. It is YOUR life. Choose consciously, choose wisely, choose honestly. Choose happiness.

Regrets of the dying

Because four heads are better than three

We introduced a couple of 3rd party themes last month, Velocity and Long Term Equity. Today, we are proud to introduce the latest theme created by our newest contributor.

Consistent 10

The Consistent 10 is a portfolio of stocks that have provided consistent returns in the past five years and are reasonably valued now.

You can follow each of themes by clicking on the “Follow” button under each of these themes.