Reliance Industries seems to be headed out in the wild – seems to be heading on the road less traveled. Again comparing the movement of the stock in relation to the Sensex, here is the chart of the same.
Along with 99.99% of Indian investors, I too have invested in this stock. In God and Mukesh Ambani we trust. Is it a concern for worry yet? Let’s wait and see.
Every now and then, there is a particular sector in the market which finds fancy with investors – retail and institutional alike. Share prices of companies in that sector rises unidirectionally – and most, if not all, companies ride on the back of the industry leaders to see their market cap increase. Stocks goes up based on momentum more than on actual fundamentals. Investors make huge amounts of money if invested in these companies at the right time. And when the market gets its share of enjoyment from these stocks, the mood shifts to another sector and another set of companies. The performance of that particular sector is no longer the kind that was seen in the past.
A couple of years ago it was the Power sector which was in the limelight. Then came the telecom sector. After the spectacular rise and fall of Telecom stocks, there is a new sector which is now making rapid progress in the last couple of months. This is the Banking sector. Both public and private sector banks have seen their share prices rise like wildfire recently. This was further strengthened with SBI’s good results in the first quarter of 2010.
If we see the chart of Nifty and the Bank Nifty index for the last month, the difference is clearly seen. Given below are the 3-month and 1-month comparison of the Nifty vs Bank Nifty. Although the Bank Nifty has started its rise only in the last month, I’ve put the 3-month chart to show how much attractive it was a couple of months ago. That would have been the ideal time to enter the Bank Nifty (of course, this is all in hindsight)
As with telecom, I’m kind of late to catch on to the trend. It may be too late to enter good stocks in this sector – Bank of Baroda, HDFC Bank, UCO Bank and Yes Bank look good to me, but they are already trading above my buy price. So let’s wait until things cool down or we get a stronger recovery signal in the economy when it will be time to slowly get in to the market in bits and pieces.
PS. With this post, I’ve also created a new category called Financial Farziwada. Let me first explain the meaning of this word for all those not faimiliar with Hindi. The meaning of “farzi” is non-genuine in Urdu. So farziwada, means activities which are not genuine. The idea for the name of this category comes from a classmate of mine in IIT Madras, who was known for his investing skills. Even though he was from the industry, he knew that most of the so-called analysts and brokers are out to make their own money rather than genuinely advising retail investor. Moreover, finance is only playing with numbers, which in local parlance, translates to farziwada. This also means that you should not blindly believe what any financial analyst tells you even if “it is for your own good.”
From the book the Black Swan…
Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests,” as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.
Hypothesis: An unequivocal statement by a manager is an oxymoron.
Proof: I am a manager. I just made an unequivocal statement. So there is an apparent paradox. So putting aside the possibility of why the world didn’t disappear in a big flash of light due to this contradiction (which I would not have liked), there are two possibilities. Either the above hypothesis is not true, or I am not a manager.
Revised Hypothesis: An unequivocal statement by a manager may or may not be an oxymoron.
Optimism levels in a project
This graph shows how different teams in a company feel that a particular project will be delivered successfully i.e. within schedule, scope and cost.
Disclaimer: This project is entirely fictional and any resemblance to any project – live or abandoned is entirely coincidental
Water cuts are a way of life in Mumbai. Each year that the met department predicts a normal monsoon, we have water shortages. And BMC cuts or limits supply of water. A water cut has been implemented in our area as well.
The society has given the residents an option of limited timings of water supply or private water tankers. The latter options costs money. And the residents of the society have voted for that option.
So an important question to be asked is how should the payment be distributed? Should it be a flat amount for all flats or should it vary according to the number of residents in each flat? The justification of the latter option is a no-brainer. Larger families are likely to use more water than a family of two individuals.
Now comes the interesting game theory aspect into this problem. People with larger families would oppose the proportionate fee structure while smaller families would oppose a flat fee structure. In each case one of the parties would feel that they have been given a raw deal.
Now assume that the flat fee structure is adopted. This means that the smaller families will be disgruntled since they are paying a per capita higher rate than the larger families. Thus they will indulge in wasteful water usage to compensate for the higher fee. The larger families will use at least an amount minimum to their needs. However its more likely that they would be a little careless in using water as they are being subsidised by the smaller families. Overall this leads to wasteful water usage for the entire society.
Now let’s assume that the variable fee structure is imposed based on the number of residents in each flat. Here the reverse would happen. The larger families would be disgruntled and would spend water in a wasteful manner while the smaller families would use at least the minimum share of the water. Overall this option too leads to a wasteful usage of water.
Both these options seem to result in wastage of water. So what then is the optimal distribution of payment? Is there a better way of distributing water? The best option which comes to my mind is to implement a water meter system which tracks the actual usage of water (which may be of course more cumbersome and expensive to implement)
Let’s see what the society management comes up with. Till then out with the buckets and drums to store all the water.
Posted from my mobile: Please excuse grammar and typos.
UPDATE: Well, my society decided not to get into the nitty-gritties of Game Theory and adopted the first option instead! Limited water supply from now on. So much for trying to explain Game Theory to them.
Unless you’ve been living under a rock, you must have heard about the SEC case against Goldman Sachs, and in India, about the IPL debacle. I’m reading a book which is a collection of small articles/quotes/sayings about Peter Drucker. And this small paragraph reiterates why he is considered one of the better management thinkers in history. Note: I purposely do not use the superlative “the greatest management thinker”.
Recently Micromax mobile brought out an ad starring Akshay Kumar as a chef playing in the kitchen with his Micromax mobile. While doing so, he becomes so involved that he messes up the kitchen real bad. All the time he keeps laughing this “Rahul Mahajan” (btw where is he?) laugh. The ad was terribly irritating. Would give that ad around 1.5 out of 5. Ad link.
But recently they came out with a self-parody of the previous ad. Two cleaners are cleaning the kitchen which was messed up by Akshay Kumar while another cook picks up the phone and starts playing with it. When the cleaner sees this, he gets frustrated at all the work and taunts the cook in the same laughing tone.
This ad is much clever and full credits to the ad agency of Micromax for bringing out this self-parodying ad. Would this one 4 out of 5. (Can’t find the link of this ad online)
An interesting piece of news: Micromax leads the pack of local mobile manufacturers (who collectively now constitute around 17% of the Indian mobile market share). Micromax’s share of the Indian mobile phone market is 4.8%
If you’ve watched any of the cricket matches during the ongoing IPL3 season, you must have seen the Adidas ads. There are three ads – one from the point of view of a batsman, a fielder and a bowler. Adidas is well-known for its inspiring ads, and this one doesn’t disappoint at all.
“Sometimes I can fly.” Wish I could write copy like that. Here’s the Youtube link for the ads.