75 bps was broadly expected & hence priced in by the markets & there was no surprise here, which was a positive. But along with this, it was more about what Fed guided on ‘neutral interest rates’, which led the rally. (2/5)
Powel said, we are now broadly in line with our estimates of neutral rates & going forward, we are now going to be data dependent. What does that even mean you may ask? (3/5)
Neutral rate means the existing rates r neither fueling the economy by being very low nor r they restricting the growth by being very high. So if they r nt fueling, fed is almost there in terms of their hiking cycle & if growth hampers which it is, they will go slow from now on.
This probably means that the aggressive rate hiking cycle will most likely come to an end and we might see a 50 bps hike in Sep and not a 75 bps, which the market is taking as a positive (End)
P.S. - Time to start lapping onto growth stocks & duration? a thread on it soon :)
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(Q) Lets start with the basic, y does the rupee generally keep falling against $?
(Ans) Interest rate parity. Let me explain,
US interest rates r at 3% & India is at 7.5%. Isn’t it easy to borrow in the US at 3% & invest in India at 7.5% & make 4.5% risk free?
Nope ☺ (2/13)
Lets assume you borrow $100 at 3% from US to invest in India & are expected to pay back $103 at the year-end. In India, $1 is 75 & hence you first convert $100 * 75 to Rs. 7,500 which is invested at 7.5% giving you 8062.5 at the year end. (3/13)
Why when loan rates are going up, FD rates are not? (Quick 🧵)
Repo rate linked home loan rates like the name suggests are directly linked to repo rates. When repo goes up, lending rates go up & vice versa (1/5)
As per RBI, banks have a maximum of 3 months to reset the repo rate linked 'new' home loan rate. Banks may use this in their favour to reset 3 months later in a falling repo rate senerio & immediately in a rising rate senerio (2/5)
But for us as 'existing' loan borrowers, our reset of interest rate date is pre decided on the date of taking the loan (3/5)
My new 🧵 on ‘How India is fighting against inflation’. This thread will answer most of your questions around macro-economics.
Please ‘re-tweet’ / share it in your Whatsapp groups & help us educate more investors. Happy #investing! (1/n)
(Q1) Why does inflation take place?
(1a) Like most of us believe, Inflation happens bcoz of the gap between demand & supply. When demand is more than supply, prices rise & boom u have inflation
But the question here is, y does the demand rise?
Ans - Liquidity! Let me explain
(1b) Imagine 10 of you’ll want to buy a laptop & there is only 1 laptop, we presume the price will go up right?
But in the same situation if I tell you that none of you’ll have the monies (liquidity) to buy the laptop; will the price of the laptop go up? Probably not! (3/n)
There are 2 most talked about reasons for the current IT sector under performance,
(A) Increasing interest rates & hence reset of valuations
(B) Operating margins shrinking because of the ‘Great Resignation’ (2/14)
(A) Lets talk about valuation reset first,
One way of valuing stock is using the DCF method.
(a) You project the future cash flows of the business for the coming 3-5 years & discount it at a particular rate to arrive at today’s value of the business (3/14)
This is the Axis mutual fund front running story the way I see.
Do 're-tweet' this 🧵 & help us educate retail investors (1/n)
(Q1) What is it all about?
There are allegations on Axis Mutual Fund that their chief dealer (Viresh Joshi) & one of the fund manager (Deepak Agarwal) managing 7 schemes were front running (2/n)
(Q2) What does front running even mean?
When the fund manager decides to buy a stock in the scheme, the manager lets the chief of dealer know about it and the dealer then works with multiple stock brokers to get the buy trade executed (3/n)
A investor called me & wanted to switch from his advisor to me as he was unhappy with the performance of the investments with his current advisor (1/6)
Next thing i do is ask him to forward me the portfolio. As i start looking at the portfolio, i realise he has only been investing for the last 8 month. Over that, the schemes looked okay to me, infact in the 8 months there was out performance to top it up (2/6)
Spent half an hour educating him that he had some irrational expectations and what was that realistic expectation to have and that he should continue with his current advisor (3/6)