Why We Are in a Celebratory Mood...

Apr 5, 2016

In this issue:
» FY16 sees a record number of credit downgrades
» Our view on today's rate cut...
» ...and more!
Devanshu Sampat, Research analyst

The Stock Market YearbookThis is what started it all..."The Stock Market Yearbook by Ajit Dayal".

At the time of its launch, in late 80s, it was the only source of information on Indian companies that you could trust.

It brought to you information that was scarce and, often misleading.

Cut to 1996...and there were stirrings in the world of the geeks...

The internet was arriving...So far confined to college campuses, the internet was finally arriving at the doorsteps of the early adopters.

VSNL (yes, remember?) was selling internet access at Rs 15,000 for 250 hours of access at 9.6kbps.

It was at that point in time Ajit took the decision to post all the information that we had collated over the years on a website.

This initiative by Ajit Dayal, founder of Equitymaster, was the beginning of a long journey. A journey of empowering retail investors with honest, credible, and reliable views on investing.

This desire to provide honest and credible information...to be 'the investor's best friend'...led us to launch a slew of services over time. StockSelect focused on investing on safe large caps. Hidden Treasure became our small-cap recommendation service. Microcap Millionaires took a deep-value, Grahamian approach to micro-cap stocks. The India Letter targeted high-quality, high-growth plays. And ValuePro offered subscribers Buffett-style portfolios.

We also developed platforms for presenting our big picture views, including The 5 Minute WrapUp, The Honest Truth, and Vivek Kaul's Diary.

Not to mention the tools and resources such as the Advanced Stock Screener, company fact sheets, and the Portfolio Tracker.

Then we decided to broaden our approach to wealth creation beyond fundamental investing. We brought in more resources and dove into trading using technical analysis and derivatives. We also focused on wealth-building techniques that do not require financial instruments. This were the origins of Daily Profit Hunter and Common Sense Living.

The Daily Profit Hunter team's mission is to empower retail traders. For too long, retail traders couldn't compete with professionals simply because they lacked access to the professional's resources. So the team aimed to provide retail investors with not only a level playing field but an edge over the established players.

Common Sense Living, on the other hand, brings readers a host of ideas on building wealth outside of equities. It encourages individuals to lead richer, fuller lives by tapping into their own resources and a bit of 'common sense'.

This is what Mr. Krishna Kumar, a reader and subscriber since 2003 has to say about his experience with Equitymaster and its affiliates:

  • Krishna KumarCongratulations to Equitymaster and the team for completing two decades of service. I have been fortunate to be part of this journey. I remember the days when it started the website in the late nineties. At that time, I was confused about the right strategy to invest in equity markets. Different people use different methods to pick stocks and fulfil investing goals. There are many ways to be successful and no one strategy is inherently better than the other. The key was to find my style and Equitymaster helped me to find it.
  • The "Aha" moment didn't come easily. I was convinced that long term investment/value investment is the best way for me. But that conviction wasn't strong to keep me disciplined in difficult markets. When I was trying to overcome deep disappointment and self-doubt, I stumbled upon Equitymaster. A financial website daring to be different, focused on long term investing, associated with Ajit Dayal and I was hooked on.
  • The 5-minute wrap up, The Honest truth, Recommended reading, Timeless reading, Views on news and the premium services like Stock select, Midcap select (Now The India letter), Hidden treasure, Value pro-have helped me immensely. No, I don't follow their recommendation blindly. One shouldn't indulge in value investing if one is not prepared to spend quality time in analyzing and deciding on parameters for evaluation and monitoring.
  • Equity master helped me immensely to do that. Idea generation, data analysis, reasons for recommending a stock - this is where Equitymaster is at its best and is unique. And the timely reminders to stay disciplined when everything is going down. And they were always there to answer my specific queries. They don't let the mood swings of the market to affect their analysis. To sum up- a financial website I can trust for a life time.
  • Going forward, there are several areas which needs improvement. Continuous evaluation and monitoring is key for a long term investor. The brilliance and the unique perspectives in idea generations are not always reflected in the subsequent updates. Many times it become mechanical and monotonous and miss the key changes. I have seen attempts to improve in the last couple of years and I hope the process continues. Database can be expanded, hope research master would address this issue.
  • Equitymaster has been a dynamic website, constantly trying to improve and add more value. Be it the learning forums or the services (Alpha trader, Swing Trader, Income Alert) catering to short term traders - there is a constant effort to improve and expand. For me Equitymaster is the perfect partner to have along our side as the India growth story unfolds.

April 2016 is a very special month for us at Equitymaster. We complete 20 years of service to millions of readers and subscribers.

That's why we're in a celebratory mood.

Not only are we celebrating the success of The Equitymaster Way but also our success in earning the trust of subscribers who've been with us throughout this two-decade journey.

And let us tell you: We are not done yet!

Over the coming months and years, we will continue to plug the gaps of wealth creation. Expect announcements from us in this regard...

But for now, as the countdown to our anniversary begins, we would like to invite you to share some of your experiences with us over the years. Let us know your comments or share your views in the Equitymaster Club.

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The markets may be disappointed that the RBI did not cut interest rates by more than 0.25%. But this reaction is too simplistic in our view. It is clear to us that banks are struggling to pass on the rate cuts to borrowers. A major reason is deposit growth which is at a 53-year low.

There's also the problem of bad debt. A recent report by rating agency Crisil has painted a dismal picture on this front. The agency has reportedly downgraded a record Rs 380 billion of debt in FY16! There were 265 defaults. Even worse, the outlook is not too good according to Crisil.

We tend to agree with this assessment. However, it's important to understand that credit assessments made by rating agencies are lagging indicators of economic health. Thus, the worst may be behind us. It may be too early to expect a broad based economic recovery right now. But we believe, the economy is well on the road to recovery. We have the RBI to thank for that.

3.50 Chart of the day

We were running a poll recently. Ajit Dayal or Vivek Kaul? We asked you to choose between the two! We were not surprised by the results of the poll.

And sure enough, the RBI Governor Raghuram Rajan chose prudence over aggression today. Thankfully, the RBI does not believe in the easy money policies of western central banks. It is clear to us that the RBI prefers savers to borrowers.

Here's what Tanushree Banerjee (Co-Head of Research at Equitymaster) had to say.

  • "...if the real interest rates (rates adjusted for inflation) are to become negative, it would put the bank depositor in a crisis of sorts. And we may see households hoarding cash without investing or spending. Certainly not good symptoms for an economy aiming to grow at one of the fastest rates in the world.
  • The RBI's action seems to suggest that unlike its peers it is in no mood to penalize savers for the sake of borrowers. The cumulative cut to the benchmark repo rate has been about 1.5% since the start of 2015. The rate itself is currently at its lowest level in the last six years. It is unlikely that the RBI will drop rates any further until the inflation rate drops below 5%, so that real interest rates stay firmly in the positive. A good monsoon could certainly help the RBI do that."

Indeed. Today's chart clearly shows that there is no reason to worry about either the direction or the quantum of interest rate cuts. Now it's over to the banks to pass it on.

Repo Rate is Trending Down


The Indian markets were trading weak at the time of writing, despite the RBI cutting repo rates as per market expectations. The BSE Sensex was trading lower by about 330 points or 1.5%. Losses were seen across the board with stocks from the banking and telecom being the key losers. Midcap and smallcaps were impacted as well as their respective indices traded lower by about 0.8% each.

4:50 Today's Investing Mantra

"When forced to choose, I will not trade even a night's sleep for the chance of extra profits." - Warren Buffett

This edition of The 5 Minute WrapUp is authored by Devanshu Sampat (Research Analyst).

Today's Premium Edition.

How Important is the RBI Rate Cut?

Does today's rate cut signal a more accommodative stance from India's central bank in the future?
Read On...Get Access

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1 Responses to "Why We Are in a Celebratory Mood..."

Sunil Godse

Apr 5, 2016

I am Equity Master's member for more then a decade. What I like about Equitymaster is: Ethical representation of the facts and article from Ajit Dayal and Vivek Kaul.


Equitymaster requests your view! Post a comment on "Why We Are in a Celebratory Mood...". Click here!
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