Category: Value Investing

Essays, Markets

After QE, could AI be the next trigger for the Bull Market ?

This post is not buy/sell/hold advice. Please see the disclaimer at the end before reading further

I came across an interesting Accenture study

Artificial Intelligence is expected to drive a new wave of rising productivity, similar to what happened during the Industrial Revolution. In numerous economies, especially developed countries, increases in capital and labor are no longer able to drive decent levels of growth. Artificial Intelligence is seen as a new factor of production that can change the situation by transforming the basis of economic growth.

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Continue reading “After QE, could AI be the next trigger for the Bull Market ?” →

Essays, Value Investing

Digitization & Demonetization: Has Microfinance Lending in India changed forever?

This is follow up on my previous post on how rural financing and lending in India have changed irrevocably due to Demonetization and Digitization.

Unfortunately in India, loans are expensive for the poor. The Public Sector Banks will not lend to the poorest outside of the agricultural loans and political sops. At the same time all other goods are subsidized for the poor because they are funded by public taxes. Continue reading “Digitization & Demonetization: Has Microfinance Lending in India changed forever?” →

Essays, Value Investing

Investor behavior in India: Are stocks bought like insurance or as lottery tickets?

In 2016 I bought a health insurance policy.

Cover: 7 lakh; Premium: 7k.

I was already covered under group insurance offered by my employer. This health insurance was (and is) free, i.e. premiums are paid by my employer and not deducted from my salary.

I am relatively young, with no history of premature heart disease, diabetes or cancer in the family.

So why did I buy choose to buy more health insurance and pay 7k?

Enter Prospect theory to argue my stupidity.

Prospect theory states that losing a million dollars shrinks your heart more than making a million dollars swells your heart with happy feelings. In other words, our emotional brain sucks at math. Continue reading “Investor behavior in India: Are stocks bought like insurance or as lottery tickets?” →

Essays, Value Investing

Microfinance : Demonetization. Budget. Beyond

The last few months have been testing for NBFCs in general. Demonetization was a black swan event that brought fears of a repeat of the AP Crisis in 2010 that served a near death blow to Microfinance in India.

On paper, Microfinance remains a fragile business model when compared to banks and depository institutions.

Microcredit:

Borrow -> Lend at spread of 10-15%

Banks:

Deposits + Borrowings (RBI, Bonds etc.) -> Lend at net interest margins of 2-5%

Without the cushion of deposits, an MFI must disburse what it borrows, and borrow more to grow its loan book. The cost of customer acquisition for MFIs is also higher than banks.

Continue reading “Microfinance : Demonetization. Budget. Beyond” →

Essays, Markets, Value Investing

Cinderella at the Ball – Are Airlines still a Value Trap?

Once dismissed as a “death trap” by Warren Buffet, Airlines saw frenzied buying in 2016. In third quarter Buffet’s Berkshire was seen accumulating stocks of not one but multiple airlines. In India, airlines listed on the exchanges saw buying by marquee institutions and funds. In 2016 the much maligned Airlines business caught the fancy of the investment community. What changed? Continue reading “Cinderella at the Ball – Are Airlines still a Value Trap?” →