BC FINANCE
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Does increase in Inflation & hence interest rates lead to a fall in equity? While theoretically yes, practically the last 20 years of data shows otherwise

Please ‘re-tweet’ 🧵& help us educate more retail investors

#Investing

 Lets start with basic, y does inflation ⬆️?
Most feel bcoz of higher demand & lower supply but that’s nt the only factor. Imagine there is a shortage of laptops wrt the demand, but there is no liquidity in the market (people don’t have monies) will the price of laptop ⬆️? No
So, Inflation takes place because the demand supply situation is accompanied by high liquidity, people have the monies to spend and hence the price goes up. Inflation does not take place only because of the demand supply gap (3/n)
Its RBI’s job to keep inflation under check. What role does RBI play? RBI is comfortable keeping Inflation between 2-6% currently. So if Inflation is increasing, how can RBI control it? Can RBI do anything to demand & supply? Nothing (4/n)
So the only tool available with RBI to control inflation is controlling liquidity. If RBI is able to reduce liquidity in the market, less money will chase the goods and hence Inflation can be expected to stabilize. (5/n)
What does RBI do? As liquidity is provided to the market by banks as loans, RBI tries controlling banks by increasing interest rates (Repo Rate). It expects that if Repo Rate goes up, the spiraling effect will reduce liquidity in the market. (6/n)
How?

Repo rate is the rate @ which banks borrow 4m RBI. If Repo⬆️, the cost at which banks borrow is expected to ⬆️. Also the MCLR/Base rate 4 banks includes the repo rate 4 calculation & hence it is expected that if Repo ⬆️, banks will ⬆️ their lending rates. (7/n)
So, if inflation goes up, efforts are made to increase interest rates by which expectation is that individuals will take lesser loans and hence demand for products will reduce and hence inflation will stabilise. (8/n)
So increasing inflation & rate is theoretically negative for equities. You take lesser loans, -ve for banking & NBFC; Expensive loans reduce demand for Real Estate, Auto & hence ancillary products like steel, cement, tyre etc. (9/n)
Expensive loans ⬆️ cost for debt heavy sector like Infra, Power, etc. which many nt b able 2 pass the cost 2 the consumer & hence ⬆️ rates r generally considered negative 4 many sectors apart from the technical reason of future cash flow getting discounted at higher rate (10/n)
So is currently inflation going up? Yes but any growth focused central bank like RBI understands the same and hence makes efforts to not increase rates in a way that it creates panic in the markets. Fed also is talking about increasing rates only in the end of 2023 (11/n)
Central banks may not increase rates but markets know rates have to go up and hence they start factoring that in which is reflected in yields of the 10 years g-sec (more on this in some other thread) So yields are a good proxy to increase in rates to judge the sentiments (12/n)
So now, if yields go up (proxy to interest rates going up), equity should fall right? But the last 20 years of data shows otherwise. I looked at all periods where yields had bottomed out & started rising (Like today) & compared it with equities & found 4 such instances (13/n)
(a) 04-08, rates went up but equity also generated 23% CAGR
(b) 08-11, rates went up, equity generates 21% CAGR
(c) 2013, too small a time frame but the same reading
(d) 16-18, rates went up, equity generated 16% CAGR

#investing (14/n)
Now ofcourse the question will be the fundamental logic
(a) In lower interest rate scenarios, corporates can raise loans at considerably low rates and redeploy it to generate higher ROCE’s till rates actually start rising much later (15/n)
(b) Higher disposable investor income which is not going to fixed income investing because of lower rates is also invested in growth assets like Equity & commodities (16/n)
Ofcourse this will lead to reversal some time in the future but the transition does not happen over night. Markets see knee jerk reactions in the near term but till the time inflation is held under control, this phase can be navigated (17/n)

#investing
This is not an investment advice because you also have to look at other data points to invest or sell from the market. I am writing another thread later covering all points included to judge market movements (18/n)
This is my 37th thread, 'do re-tweet',
Have earlier written on,
Sector Analysis - Banking, Paints, Logistic, REIT, InvIT, Sugar, Steel
- Macro
- Debt Markets
- Equity
- Gold
- Personal Finance etc.
You can find them all in the link below, https://t.co/UrRt87OLLF…… (**END**)

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Is US going to default on its debt?

This 🧵 will surely help you understand. Do ‘re-tweet’ & help us educated investors (1/13)


How does a country run?

Assume a country to be like a company, which has income & expenses. Income source can be tax collections & expense can be government employee salaries, defence sending’s, social security schemes etc. (2/13)

Generally, most economies are running a deficit; their income is less than expense. So if your income is 100 and expense is 105, where do you get the 5? You borrow!

Similarly US has been borrowing & the total debt today roughly stands at a whooping $28.5T. (3/13)

Deficit in the last 2 years has gone up significantly because of COVID + the government wants to spend more; a $3.5T spending package is what they are trying to get an approval for + older debt is coming up for maturity (4/13)


Okay, so I am saying they will raise more debt for the deficit of COVID, the new package & paying older debt off?

Ideally a yes but they are not allowed to borrow more! (5/13)
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I still everyday meet investors who think Bitcoin & Blockchain are the same & this thread is specifically for them

Do re-tweet & help us educate more invetsors ☺

#Investing #Cryptos #Bitcoin (1/n)

(Q1) Lets start with what was historically used as a method of payment?

- Barter system, you give me a cow and I give you 100 kgs of rice (2/n)

(Q2) So why dint we continue with the barter system?

- It was difficult to transact in fractions
- What if I want only 50 kgs of rice? I cant give you half a cow right?
- This is the prime reason for the introduction of smaller units of payment method we now call as coins (3/n)

(Q3) How did Gold coins get shortlisted for the job?
- It was malleable & portable
- It was non corrosive, could be stored for a long time
- It was a perfect combination of abundance & rare
- Plus it was eye catching & visually appealing (4/n)

(Q4) What about paper currencies?
a) When paper currencies were introduced, it was decided that a country could only print as much currency as the gold reserves they have but this was withdrawn in 1971 bcoz of which the central banks could then print as much money as they wanted
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With the listing of Indigo paints, JSW entering the paint sector & now Grasim announcing to invest 5,000 cr in the sector, lets explore,
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-Industry
-Company

Do hit the ‘re-tweet’ and help us educate more investors (1/n)

Lets start with PRODUCTS

India paint industry is broadly divided into two,
(1) Decorative Paints (used mainly in residential & office infrastructure)–75% of the total paints market
(2) Industrial Paints (used in Auto & other industrial uses)-25% of the total paints market (2/n)

Decorative Paints is further classified as
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c. Emulsion Paint – Water based premium range paint mainly used in metros & large cities
d. Enamel Paint- Oil based medium range paint for smaller cities
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(f) Wood Coating – Used to protect furniture against moisture (5/n)
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Kirtan A Shah
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@KirtanShahCFP
A basic premier on the banking sector, demystifying commonly used terms,
CASA
Wholesale Banking
Net Interest Income (NII)
Cost of Liability
Advances Growth
Gross v/s Net NPA
Provisions
SLR/CRR
Capital Adequacy Ratio
Net Interest Margin (NIM)

Do hit the 're-tweet' (1/n)

Banking, as a business is simple to understand, you borrow money (liability for the bank as the bank needs to pay back) and lend (asset for the bank as the bank is expected to receive it bank), the difference between the borrowings & lending is banks income (2/n)

Where all can they borrow from?

(a) Savings Account (SA)
(b) Current Account (CA)
(c) Fixed Deposit (FD)
(d) Recurring Deposit (RD)
(e) Certificate of Deposits (CD)
(f) Bonds etc. (3/n)

Whom do they lend?
(a) Retail - Housing loan, auto loan, personal loan etc.
(b) Wholesale (Institutional Lending) – Commercial Papers (CP) & other Corporate Loans

P.S. – “HDFC Bank is now increasing focus on wholesale lending”, hope you now understand what that means (4/n)

How does the bank profit?

So lets say the average borrowing cost of the bank (also know as the cost of liabilities) is 4.54% & average lending cost is 8.54%, the difference 8.54% - 4.54% = 4% is called the Net Interest Income (NII). HDFC Banks Cost of Liability is 4.54% (5/n)
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Kirtan A Shah
Kirtan A Shah
@kirtan0810
In this #IPO frenzy market, lets talk (Thread) about some basics around
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-Allotment process
-IPO Funding
-Grey Market

Hit the ‘re-tweet’ & help us educated more investors (1/n)

Why do companies come out with an IPO?

(a) Funding needs
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- Debt payoff

(b) Non-Funding requirement
- Enhancing corporate stature
- Exit options to large investors like the VCs & PEs (2/n)

While most of us believe IPOs are for funding requirements, you deep dive and understand it’s more of an exit channel for large investors (VC/PE). Let me explain the same concept from a start-up's perspective (3/n)

If u r starting off ur entrepreneurial journey & need capital, how do u raise funds?
-Self Funding
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-Angel Investor
Angel investors r the 1s who invest @ the idea stage & PE/VC who invest in the growth phase of the company.(4/n)

- Self funding can be the best option but everyone’s not prepared
- F&R I wish helped
- Bank loans need collateral and
- Angel investors invest only when they see scalability in the business and hence a belief that they will get their investments back. (5/n)
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Thread: Central Pivot Range (CPR)

CPR is another popular tool. Three lines are plotted on the chart when we plot CPR.

The three lines are: CPR, TC and BC.

Let’s understand the calculation.


You may recall that I explained the calculation of Pivot levels in an earlier thread. CPR stands for Central Pivot Range. It is always a center line of the three lines that gets plotted in the chart.

CPR is a Pivot price. Pivot is average of HLC as explained in the prev thread.


We also discussed about Mid-range of the session. Mid-range is average of High and low price of the session.

The mid-range of the bar is known as BC in the CPR calculation. BC stands for Bottom central pivot.


Pivot level captures the relationship of the closing price to the range of the session.

Pivot price above mid-price = bullish pivot
Pivot price below mid-price = bearish pivot


So, CPR line is Pivot and BC line is Mid-range.

What is the difference between both?
Mid-range is average of High and Low.

Pivot is average of High, Low and Close.
What will make the difference between the two?

Close.
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10-K Diver
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@10kdiver
1/

Get a cup of coffee.

In this thread, we'll cover *State Quantities* and *Flow Quantities*.

This mental model can help us analyze many different entities -- from complex engineering systems to publicly traded companies.


2/

A "State Quantity" is something that's associated with a *specific point in time*.

For example, the number of followers a Twitter account has is a state quantity. This number can go up and down over time. But at any one *specific* time point, it's fixed.

3/

Similarly, the amount of cash a company has is a state quantity.

This cash balance can also rise and fall over time.

But pick any one *specific* time point -- and the company can only have one *specific* cash balance at that time point.

4/

By contrast, a "Flow Quantity" is something that's associated with a time *interval* rather than a time *point*.

For example, the number of followers gained by a Twitter account is a flow quantity. It's meaningful only when we specify a time interval (eg, the last 30 days).

5/

A simple analogy is that a State Quantity is like a photo -- a snapshot at a particular *point* in time.

But a Flow Quantity is like a video -- a record of events that take place during a particular time *interval*.
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Here are all the threads posted by @AdityaTodmal and @niki_poojary in January: 🧵

• 8 powerful ways to use Twitter
• Power of Stocks
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All the Top 10 tweets threads I have ever posted to date:


Basics of Derivatives Part 1:


8 powerful ways to use Twitter:


Basics of Derivatives Part 2:
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Shuchi Nahar
@shuchi_nahar
To understand Financial Shenanigans & detect accounting manipulations from Annual Reports with checklist
In detail and lucid terms

Financial Shenanigans
(Part-1)
https://t.co/wa6HSElug0

(Part-2)
https://t.co/Vrva17GvgP

(Part-3)
https://t.co/XuziOCDHL2

@dmuthuk @ms89_meet
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@VIBHU_Tweet
हिमालय पर्वत की एक बड़ी पवित्र गुफा थी।उस गुफा के निकट ही गंगा जी बहती थी।एक बार देवर्षि नारद विचरण करते हुए वहां आ पहुंचे।वह परम पवित्र गुफा नारद जी को अत्यंत सुहावनी लगी।वहां का मनोरम प्राकृतिक दृश्य,पर्वत,नदी और वन देख उनके हृदय में श्रीहरि विष्णु की भक्ति अत्यंत बलवती हो उठी।


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जैसे ही नारद ने अपनी आंखें खोली, उसी क्षण कामदेव ने उनसे क्षमा मांगी।नारद मुनि को तनिक भी क्रोध नहीं आया और उन्होने शीघ्र ही कामदेव को क्षमा कर दिया।कामदेव प्रसन्न होकर वहां से चले गए।कामदेव के चले जाने पर देवर्षि के मन में अहंकार आ गया कि मैने कामदेव को हरा दिया।

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जैसे ही नारद ने अपनी आंखें खोली, उसी क्षण कामदेव ने उनसे क्षमा मांगी।नारद मुनि को तनिक भी क्रोध नहीं आया और उन्होने शीघ्र ही कामदेव को क्षमा कर दिया।कामदेव प्रसन्न होकर वहां से चले गए।कामदेव के चले जाने पर देवर्षि के मन में अहंकार आ गया कि मैने कामदेव को हरा दिया।

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