Caveat – Views are personal and only for knowledge sharing. No commercial interest involved in bringing this on wordpress platform. Only idea is to consolidate daily content on one platform and no liability on part of mig if these inputs are applied for making investment decisions without carrying out your own due diligence
- RBI’s dividend to government at INR 2.11 trln is talk of the day. A number that one should say is not a surprise but a (positive) shock as the government had budgeted an estimated dividend of INR 1.00 – 1.10 trln
- How should this be read as – overall PSU dividend going upto INR 2.50 trln for FY 25 will give the government a chance to contain deficit, reduce the borrowings therefore a supply in a year where the demand is expected to set in from foreign investors given the inclusion in global bond index
- One can also say that this gives government a chance to increase the expenditure but with most of the populist events, the elections being behind us what is the need to go all out for expenditure but having said that some part of this big dividend can go in for spending thus giving a boost to growth
- The direct impact was evident on govies and finally the 10y slipped below 7.00% mark to close at 6.9919% and I’m referring to the new 10y. There was a pick up in volumes as well given that market clocked the total volumes of INR 924.00 bn
- Reminds me of the early Y2k era when the 10y used to be trading below the trendline and it’s exactly the same now. Even the 3y, the 5y or long dated ones, all are still trading above 7.00%. This is not an exception but precursor of things to come. Cut or not cut, in India the yields on govies are going to come off soon. Same may not happen with deposit or other saving product rates
- There is a euphoria in stock market as well, w.r.t this development and one view emerging is that this is positive for Bank Nifty. I differ as this is positive for entire market and not the bank nifty alone because per se there is no direct correlation between RBI dividend and bank nifty though it exhibits the financial strength of the banking regulator
- Bank nifty is moving because the banking sector, more particularly the PSU bank space, has been rerated generating a profit of over INR 3.00 trln and this is one factor that has actually acted as a catalyst for the rise in bank nifty
- There was a time when the private sector banks, HDFC was at p/bv of 4 times, ICICI Bank over 3 times and Kotak and Axis were somewhere around 2.5 times and most of the public sector banks were trading at discount to book value or at the most at par. Only SBI was an exception trading at around 1.5x and this is the gap that is now narrowing down. Not that private banks are coming off but PSU ones are rising faster
- Overall nifty closed with a 70 pts gain just a tad short of 22600 and while the market has momentum and there are a series of positive news coming in, no harm in taking a breather at this point in time because neither the global events are looking favorable nor there is clarity emerging on election outcome except for fact that it’s going to be the return of Prime Minister Modi
- The insider story as emerged out of my discussions with a few people in discussion with people working in policy framework arena – now that Modi 3.0 is certain though the suspense around number of seats continuing there is a feeling that this term may unveil a series of economic reforms to give a big boost to India’s progress to world’s 3rd largest economy behind US and China. You never know this term may also initiate the process of ending the direct tax replacing the same with banking transaction tax and a long shot at politically suicidal move of ruffling the reservation feather, needless to say POK
- Closing remarks – off the cuff – owners’ curse comes to play once more and one can say – next year is the best year. RCB failed to make it to final one more year and not being able to manage to lift the trophy for 17th year on the trot. Seeing the kids heart broken for once I felt sad but frankly despite being a Virat fan I can never back the RCB team
- I think I’d played it a little early when I’d said which is the first team to have been eliminated from IPL 2024 and answered it RCB, but then the way they managed to stage a comeback winning 6 on the trot making it to the play offs a hope was rekindled that this time the team may finally get to lift the trophy but that was not to happen – looks like despite a great fan following they are paying the price of their first owner who’s deeds are an open secret. That’s why I say keep your conscience clear because your good deeds go with you
Stay safe, stay healthy, God bless you all, have a great day !!
To get regular updates on your mobile subscribe to my telegram channel
Ebook edition of my books Rewards of a Shortchanged Life and When Life shortchanged Me is given below. Kindle subscribers can read it for free. Follow the link
Vikas Miglani writes 