Follow up - Developments on earlier posts

Thought I'd do a quick follow-up on the various posts posted earlier to gauge if the analysis and thought process was at least in the right direction...and also to make note of further developments on some of the topics covered. This post also introduces a video on this blog and a really interesting document, via embedded "Scribd". We'll also take a look at some other improvements that I've made to this blog. Hope you'll enjoy this read...

Ref: Post on Nano's Nano Sales (Random Walk Section, Dec 05, 2010)

Tatas seem to have taken the shock of just over 500 Nano sales in Nov well. They're pulling all stops to boost the sales figures...including (as I had mentioned in my post as well), innovative ways of financing and targeting internal employees as well (Tata motors has over 24,000 employees). The positioning is also being modified from stress on just "cheap" to "key to happiness". Check out this video of the latest ad in Nano.

With Ratan Tata himself posing with the car, even driving the car for the media, complimented with the kind of brand image that Tata group holds for most Indians,  it looks like they are getting back on the right track, but like I've emphasized in this post, Quality has to be given top priority for this trend to sustain. Otherwise, all Nano will witness is macro sales for a couple of quarters before going back to its nano sales !

Ref: Post on Uncertainty (Dec 15, 2010)

Inflation is still a worry in both China and India...despite several measures being taken to contain it. After China tightened its real estate lending, as per the expectations in the post, India too took some steps to discourage banks from going all out on Realty loans, wherein, RBI has made it mandatory for customers to make a down payment of at least 20% on all properties above INR 75 lakhs (about USD 167k) and the rest can be taken as a loan. This will severely push up costs of speculators and will result in lesser number of deals as well. 

RBI has also increased the risk weight on loans above INR 75 lakhs...which means that when calculating the risk on this loans, the risk, according to the new guidelines has to be multiplied with 1.25. Since there is anyways a cap on the risk being taken for each sector, this policy will further result in reducing more risky (> 75 lakhs) loans.

Despite these measures, inflation is still stubbornly up, partially due to increase in crude oil prices (hovering above $ 90 / barrel) and also due to food inflation (onion prices have shot up around 200% in the last 1 month, and the rest of the veggies are also shooting up). This, along with the advance tax payments by corporates to the government has kept the liquidity really tight. So much so that RBI has had to release almost about INR 48,000 crore (nearly USD 10 billion) by purchasing Government bonds from them. However, even this is not enough it seems...! The daily demand of overnight call money is apparently over INR 1,45,000 crore (nearly USD 30 bn)!

In all, RBI has tightened funds going to realty sector, increased interest rates, reduced SLR (Statutory Liquidity Ratio - 25% of capital all banks are supposed to hold in Government bonds)...by 1% to 24%, but the inflation is still not budging. I think some more rate hikes are in pipeline sometime in the first / second week of Jan.

Also, in the same post,to the existing list of troubled / near bankruptcy states in the US, (like Detroit, Chicago, LA, Oakland California, Miami) a few more have joined...Alabama, (HT: Mish), for the first time ever, did not send pension checks to its retired citizens...it has basically defaulted on Pension payments ! Now, a state is not supposed to default...so this is a first of its kind in the US (I think). While markets may be moving up, both in US, and Europe, things are not getting any better at the ground for thousands of people....and how long can the markets operate in isolation from state issues, bankruptcy and unemployment risks is something that we need to keep a look-out for.

Ref: Nifty Trading Strategy (Nov 25, 2010)

A quick follow-up on the Nifty trading strategy that I'd suggested earlier, and then followed with another post as well. Its' gone as per the plan...resulting in a net profit of around 4365 / lot of nifty, which will go to 4500 in the next couple of days (as the option, which has a value of 2.7 will go to 0). Take a look at how the strategy's P&L has moved from the time it went live till date...

(Click for a larger image)

Notice how the opportunity presented itself once more in between, when the price of the put option (blue line) went up, sending the P&L line down sharply (long red line). But then Nifty found support and moved up again, bringing the put price down again.

Improvements in this Blog

To enable a quick feedback on all the posts, I've added something called "Reactions", which will be seen at the end of each and every post. There are three reactions in all:

• More posts like this - If you liked a post and want more posts like that, either for its writing style and depth, or the specific topic.
• Interesting - If you found a post interesting enough, and just that.
• Ok - Something lesser than interesting.

Please provide your reactions as per these in as many posts as possible, it'll help me a great deal about knowing what to write more about and also what NOT to write a lot about ;). Of course, detailed comments are most welcome.

I've also introduced another section called "Most Popular Posts", wherein the top 5 most read posts are shown...

Hope you'll like these changes.

End Note

As an end note, here's another really interesting report from IceCap Asset Management, on their outlook for 2011 (HT: Zero hedge). Do read it, its not too large, insightful and really well written.

IceCap Asset Management Limited Global Markets December 2010