NSE – Falling Volumes

25-Jun-12 Leave a comment

I fiddled around with the historical trading data on NSE and plotted the following graphs. The first chart (red line chart)shows the average daily turnover rising in recent months.

So while the turnover is increasing, this is accompanied by a very secular decrease in the average trade size. I am confused by the second chart really (brown line). According to this plot, the average trade size has been falling continuously since 2001 and is today around Rs 20,000. Does that mean more retail participation in the cash segment? But anecdotes point otherwise.

The 3rd chart I prepared shows the number of individual trades per month (blue line) and that finally shows a story which seems consistent with the times. The number of trades per month have definitely trended down in last 2 years.  In fact, in Indian stock markets, the daily number of transactions may be a better proxy of information than the total number of shares traded or the total value of shares traded. This also seems to be consistent with the view that is expressed in this research paper which concludes that in emerging markets, “the state of development of the market does not allow instantaneuous information dissemination”.

I am sure all that means lower revenues for institutions whose earnings are proportional to trading activity. Is that the reason why the BSE website shows ads via the google banner? To make up via “other income”, what they might not by transaction fees? I seriously doubt if any other noted stock exchange in the world shows banner ads. Also, how does one look at the fact that some of the products that may be getting peddled on the bse website billboard may actually belong to companies listed on the exchange itself! I am not a legal expert, but curious to know if that may be interpreted as a breach of impartiality?

 

 

 

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Value of Employees

22-Jun-12 Leave a comment

How macro economic business cycles influence how some companies regard their employees:

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Is the Golden Age Over?

19-Jun-12 Leave a comment

Finally Pranab Mukherjee said it. He is trying to discourage ‘educated middle class’ investors in India from buying this ‘dead asset’ considering that collectively, Indians now throw $60-62 bn worth of good money on the yellow metal!

While nothing has abated about the nervousness we read in financial journals the world over, I do think that the entry point in Gold for handsome returns has certainly passed us many years back. Yes, in the short term there might be volatility and the metal may climb up even more (as this article from The Economic Times points out) but a parabola is a parabola. To sustain Y = A .X^2 kind of a move, continuous energy needs to be supplied – it does snap one day or the other.

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Return on Assets: Vizag Promenade

16-Jun-12 Leave a comment

Have not been posting my thoughts at all as I have been travelling – this time to a new city: Vizag! I clicked this picture near the beach where I was staying and couldn’t but help connect this to the fact that Indian companies have one of the highest asset return ratios around. Squeezing the last milliliter of juice from already drained and hopeless lemons is a trick that comes naturally to a land that has many mouths but limited spigots to feed them and a ruling government thats unable to solve for the supply side of the inflation causality.

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