MoneyVedam

Last week the Turkish lira fell by 20%, inflation spiking to 15.9% and spooking stocks & currency markets worldwide. Subsequently, all emerging market currencies came under pressure, leading to a fall in stock indices as well. This blog explores what lies underneath the recent currency market rout. Background - Trade war leading to Currency war? The US has imposed sanctions on Iran (missile test) & Russia (annexing Crimea). First, the US started pressurizing major oil importers (Germany, China & India) to switch out oil from Iran & Russia. Next, it imposed tariffs on Chinese exports, with China too imposing retaliatory tariffs on the US. And now, it initiated a political row on Turkey by asking Turkey to release Andrew Brunson, a pastor, arrested by Turkey for a planned coup against Erdogan, the Turkish PM. All this has resulted in carnage in the emerging market currencies. As evident from the above table, the Lira, Rial & Ruble have all been directly h...

On 9 Aug 18, Nifty hit its new peak 11,470 from the recent low of 10,200 on 2 Apr 18, a 12% return in just 4 months. This blog examines the reasons behind this sharp rally. SEBI Re-categorization churning? Of the Rs.23.4 Lac crore mutual fund assets, about Rs.7 Lac crores (30%) are equity based assets. Between April & July, the fund managers churned their fund portfolios to comply with SEBI's new norms. As part of this churning, many managers had to cleanse their large-cap and diversified funds by selling the disproportionate mid & small cap stock holdings - this led to a possible correction in mid and small cap indices. Additionally they had to re-invest the proceeds in large-cap stocks in order to rightly qualify as a large-cap fund. The total sale by DIIs (Domestic Instituitional Investors) during apr-july 2018 was Rs.2Lacs crores, compared to Rs.1.7Lac crores sale in the same period in 2017, an 18% rise. Nifty rose by 5% during this period (10200 - 10700), in c...