Author: shyam

Chinese Fried Rise

Chinese wall

Image by rvw via Flickr

I am sick and tired of hearing about how China is “awesome” and India “sucks” when it comes to infrastructure. Sure, we have our bureaucracy and corruption, but its nothing compared to the scale at which it occurs in China. For us, a down day is when farmers refuse to pay back SKS. Compare that with Chinese bank loans that stood at $6,500 per capita in 2010 compared to gross domestic product (GDP) per capita of $4,400.

And their much envied high speed trains? It is a $330 billion scam where railway bridges were constructed by untrained unskilled migrant workers and rocks and gravel were tossed into pier foundations instead of concrete. Take this: when two bullet trains collided in July 2011, bulldozers buried the rubble even as bodies fell out of the windows of the carriages.

So what about the growth miracle? Sure, China is to manufacturing as India is to IT & BPO. But they seem to have lost their way when their “planned” economy allowed property construction to take up 13% of their GDP (from 3% in 1999) compared to 5% in India.

Yes, we flushed $7.82 billion down the NREGA. But we have nothing on the 18,000 officials who have fled the country taking a combined $126 billion dollars with them.

So the next time you wish for the Chinese miracle in India, keep in mind that our bottom-up economy, for all its messiness, is still better than one that is centrally planned and top-down.

Related articles
Categories Tags

Correlation in the NSE

Meet the worst nightmare of stock-pickers and the best friend of technical traders: Correlation.

This year has been unkind to stock-pickers as markets have tended to move in unison, with price moves increasingly driven by the ebb and flow of investors’ fears (risk-on/risk-off) over the economic environment. We setup a correlation matrix between the NIFTY50 stocks and the index itself to see how we faired this year.

clip_image002

The vertical axis here is the correlation between individual stocks (dots) with the index.

Now lets do a quick gut-check. The top 3 stocks with the highest correlations with the index were:

RELCAPITAL, ICICIBANK and STER. A quick look at their charts show that it is indeed so. The ones that were closer to zero are: GRASIM, SIEMENS and RANBAXY. They may have been highly volatile, but we are only looking at correlation for now.For stocks that went the other way, we have: HEROMOTOCO, BAJAJ-AUTO and HINDUNILVR.

There’s really no actionable information here, except that instead of tracking close to 30 stocks in the index, you are better off just buying the NIFTYBEES and saving yourself a lot of effort.

For the more inquisitive, the data can be found on google docs.

Related articles
Categories Tags

Sell in December and go away?

Seasonality affects stocks. It’s a fact that a number of pundits have tried to answer the ‘why?’ and the ‘how?’ of it. But first, lets look at the numbers in this handy chart:

image

Now carefully look at December and January. Its almost a guaranty that the market melts up in December and goes down in January.

If you are in the market, enjoy the rally till Christmas and get out! If you are not getting paid to be a hero, then why try to be a superman?

In fact, it looks like you can stay out of the market till April, or maybe comeback only in July? Something to think about…

As to the “why” and the “how”? Well, the US markets enjoy a Santa Claus rally (most of the time) and it does have affect other markets. Also, portfolio managers looking to do some window dressing might be tempted to play high-beta emerging market stocks, so India might be benefiting from that. But who cares? With the global market teetering on the European experiment gone bad, why take changes? Book profits instead!

Related articles
Categories Tags