Tit - bits

#I've taken some shares of Indiabulls Housing Finance Ltd (Rs.112.15) on last Friday, for some of my clients/friends whose accounts I manage; basically on the premise that, when a transition happens from low interest rate regime to moderately high interest rate regime, the well known or well established NBFCs tend to perform better than Public Sector Banks (PSBs) due to their aggressive marketing policies.

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Indiabulls Housing Finance Ltd (Rs.112.15) is an established name in the house loan segment.

Financials:

The Net profit rose by 11.23% to Rs.307 crore for the fourth quarter ended March 2022 (Q4FY22) from Rs.276 crore in Q4FY21. 

However, for FY22 its Net profit remained flat at Rs.1,178 crore Vs Rs.1,202 crore in FY21.

The company posted reasonably good results, inspite of Covid - 19 related bottlenecks. Photo: www.nwishop.com

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Those who have a minimum portfolio size of Rs.1 lakh (Rs.50,000 offer has expired) can join my profit sharing arrangement. For this they should send me a mail at: suman2005s@rediffmail.com. 

They need to compulsorily open a Demat Account in my associate brokerage house. The earlier system of trading through any brokerage house has been withdrawn, due to foul play of some of the participants.

The money will be invested in delivery based safe calls and the risk will be minimum.

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#Equities benefit from higher inflation in the medium to long run

While theoretically inflation may be negative for bonds and equities, we must not forget a positive aspect of rising inflation. Normally, rising inflation is synonymous with improved growth in GDP. If you look at the last 1 year from the beginning of 2017, inflation has been on an uptick. During the same period, the GDP growth has shown signs of bottoming out, the corporate results have shown green shoots of recovery and the stock market indices are up by over 20% during the year. 

The positive takeaway from inflation is that it is an indicator of GDP growth. 

Even in the US and Japan, the big economic battle is all about reviving inflation back to the 2% level. That is supposed to be the cut-off level which will spur growth. In fact, if you look at world growth and even at India’s growth in the last 20 years, GDP has never grown substantially when the inflation was low. While obscenely high inflation can play havoc with purchasing power, certain threshold inflation is required to incentivize producers and businesses.

So inflation, beyond an acceptable limit is the real problem. Rising inflation has certain downside risks but it is also essential for growth. It is this balance that holds the macroeconomic key.

Source: Motilal Oswal Securities.

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#Consumer inflation in the United States reached its highest level in more than four decades in May, as rising energy and food prices pushed up prices.

According to the Labor Department, the consumer-price index increased 8.6 percent in May compared to the same month a year ago, the highest reading since December 1981.

The Wall Street Journal polled economists, who predicted an 8.3 percent increase in the consumer price index in May.

Stocks in the United States plummeted. In 4 p.m. trading, the Dow Jones Industrial Average fell about 2.70% or about 880 points. Technology stocks fell along with banks and consumer stocks, causing the S&P 500 to fall 2.90% and the Nasdaq Composite to fall 3.50%.

The narrative in most financial portals is: Inflationary pressures are likely to put pressure on the Fed to raise interest rates quickly in order to temper rising prices.

But this approach is totally wrong, as the inflation figures are for the month of May and not June, the current month. In anticipation of escalating inflation the US Fed had already raised rates. We need to look at June, 2022, Inflation figures to witness the impact of monetary tightening policy of the US Fed.

Besides, the US is taking measures to ease the supply bottlenecks. Hence, we might see the inflation getting capped in the coming weeks.

#The government of India should seriously think of slowly removing or reducing the Long Term Capital Gains Tax, to bring cheers in the market.