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Zeal to Read

Weekly Newsletter

Zeal to Read

Weekly Newsletter | by 2 | on 2021-01-17 05:00

At Zebu we spend a lot of time reading news and articles that cover a wide range of topics, including investment analysis, psychology, technology, etc. We have been sharing our favorite reads with clients under our weekly ‘ Zeal to read ’.

News you must use

Avenue Supermarts put in a strong show in December quarter after two quarters of decline in Revenue and Net Profit

Banks’ non-performing assets could nearly double to as high as 14.8% in one year from 7.5% in September 2020 in case of a severe stress scenario, as per the latest Financial Stability Report of the Reserve Bank of India

Calendar year 2020 (CY20) saw most inflows to banking & financials and FMCG sector, while the most outflows were seen in telecom and power

December 2020 trade deficit reaches 25-month high of $15.4 b. Imports surge for the First time since March, exports show marginal growth

Emerging market scenario – India is the only EM saw net FPI inflow in 2020

Fifteen months low – Retail inflation is at 4.6 % during December 2020 – Fall in food prices helps

GAIL announces ₹1,046-cr share buyback, announces interim dividend

Highways (National Highways) construction till December 2020 (29 km a day) surpassed the corresponding period for 2019 (26 km a day) while the pace of bid out projects more than doubled.

Income tax returns went up nearly 5 % to 5.95 crore on the last date of filing for fiscal year 2019-20 (other than companies /those with tax audit)

Just pursuing low valuation metrics can lead you to so-called “value traps”: things that look cheap on the numbers but aren’t, because they have operating weaknesses or because the sales and earnings creating those valuations can’t be replicated in the future wrote Howard Marks in his latest memo dated January 11, 2021

Key is the sustainability of the demand, and extrapolating some of the recent growth trends may lead to disappointment,” as it comes on top of a low base – Saion Mukherjee, a Mumbai-based analyst at Nomura, said

Lasting damage likely from the pandemic – Fitch Ratings projected India’s medium-term growth to slow down to 6.5% from FY23 onward, after the initial rebound to 11% in FY22

Multi Commodity Exchange of India (MCX), BSE and Central Depository Services (CDSL) share prices have gained between 95 per cent and 190 per cent since the last week of March 2020

Non-banking finance companies (NBFCs) aggregate bad loan ratio being projected to rise to 8.4% in a year even under extreme stress as per the latest Financial Stability Report of the Reserve Bank of India

Oil hits 11-month high near $ 57 on January 12, 2020

Passenger vehicle (PV) retail sales in December 2020 witnessed a year-on-year (YoY) increase of 23.99 per cent to 271,249 units on the back of pent-up demand continuing from the festive season according to Automobile dealers´ body Federation of Automobile Dealers Associations (FADA)

Q3 may bring some cheer to NBFCs as loan offtake recovers

RBI governor warned that there is a growing disconnect between certain segments of financial markets and the real economy, and stretched valuations pose a risk to financial stability

State owned Indian Railway Finance Corporation’s initial public offering (IPO) worth about ₹4,600 crore will hit the market on 18 January

The number of new registrations for SIP investments increased sharply to 14.22 lakh in December from 10.63 lakh in November, while the number of discontinued SIP investments and those whose tenure was completed rose marginally to 7.76 lakh from 7.24 lakh and collections from SIPs in December rose to ₹8,418 crore, the highest for a month after March 2020 according to data from the Association of Mutual Funds in India

Union cabinet consents to raft of reforms in mineral industry

Valuation of Nifty hits all time high of 40x on January 12, 2021

Wipro, Infosys see best QoQ growth in 9 years in December Quarter -2020

Xiaomi (smartphone manufacturer) and CNOOC (China   National   Offshore Oil (CNOOC)- deep-water explorer)- US blacklists in Trump’s late anti-China push

Year 2020 marked a 45 % decline in Domestic air passenger traffic due to covid-induced curbs. However, it stayed on the recovery path in December 2020, growing 12% sequentially, according to rating agency ICRA

Zebu’ Bull sculpture unveiled at Worli to celebrate spirit of Mumbai by IndusInd Bank

Views may be of use

Favourite holding period is forever. Conditions apply

Author: Anand Sridharan
Source: Blog (https://buggyhuman.substack.com/p/favourite-holding-period-is-forever)

“When we own portions of outstanding businesses with outstanding managements, our favourite holding period is forever.” – Warren Buffett, Berkshire Hathaway’s 1989 Annual Letter

No matter how outstanding a business, valuation correction will be an inevitable headwind to returns.  To have higher magnitude of growth outstanding business must have trustworthy focused prudent people, analysable attractive industry, well placed company gaining within its domain, wide moat, high return on capital, no distractions or big M&A, disciplined capital allocation. Without ‘outstanding’ part, ‘forever’ part is void ab initio. Favourite holding period is forever if taken literally, this whole spiel appears impractical, if not utopian. Interpret forever as indefinite, not infinite. Conditionally indefinite. Own forever mindset is about not interrupting compounding in good businesses for an extended period without getting too hung up about valuation at every point.

Warning Signals: Most economic data points and indicators show that Indian stock markets are overheated

Source: (https://www.businesstoday.in/magazine/economy/warning-signals/story/427157.html)

Very often, headline numbers do not divulge too many details. To let the numbers, do the talking, it is important to dive deeper. Also, it is difficult to accurately estimate any measure without studying its long-term trend and comparing it with other relevant indicators. Business Today looks at some such indicators such as price-to-earnings (P-E) ratio, market cap-to-GDP ratio and corporate fundraising to gauge market sentiment and portray the state of the economy.

Economy is not growing, it’s only recovering

Source: (https://www.rediff.com/business/interview/economy-is-not-growing-its-only-recovering/20210112.htm)

Why Do Some People Succeed after Failing, While Others Continue to Flounder?

Based on Research of: Yian Yin, Yang Wang, James Evans, Dashun Wang
Source: (https://insight.kellogg.northwestern.edu/article/some-people-succeed-after-failing-others-flounder)

Many notable success stories began in failure: Henry Ford went bankrupt before starting the Ford Motor Company; Thomas Edison and his colleagues tested thousands of materials before creating the carbon-filament lightbulb; J. K. Rowling received twelve rejections before the first Harry Potter book was published.

The Risks You Can’t Foresee

What to do when there’s no playbook by Robert S. Kaplan, Herman B. Leonard, and Anette Mikes
Source: (https://hbr.org/2020/11/the-risks-you-cant-foresee)

What Makes Risks Novel? Unlike the more familiar and routine risks a company faces, novel risks are difficult to quantify in terms of likelihood or impact. They arise in one of three situations:

  1. The triggering event is outside the risk bearer’s realm of imagination or experience or happens somewhere far away.
  2. Multiple routine breakdowns combine to trigger a major failure.
  3. The risk materializes very rapidly and on an enormous scale.


Data Table

Total Returns Index
Source: (https://www.nseindia.com/products-services/indices-total-returns-index)

Nifty family of indices are price index and hence reflects the returns one would earn if investment is made in the index portfolio. However, a price index does not consider the returns arising from dividend receipts. Only capital gains arising due to price movements of constituent stocks are indicated in a price index. Therefore, to get a true picture of returns, the dividends received from the constituent stocks also need to be factored in the index values. Such an index, which includes the dividends received, is called the Total Returns Index.

Date NIFTY – Total Returns Index NIFTY – Close
11-Jan-21 20,546.74 14,484.75
12-Jan-21 20,658.34 14,563.45
13-Jan-21 20,660.35 14,564.85
14-Jan-21 20,706.07 14,595.60
15-Jan-21 20,476.38 14,433.70

Total Returns Index reflects the returns on the index arising from (a) constituent stock price movements and (b) dividend receipts from constituent index stocks.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections than has been lost in corrections themselves.” – Peter Lynch.

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