india after covid-19 - interactive brokers · 2020-06-17 · hindunilvr hindustan unilever ltd....

India After Covid-19Update for Offshore Investors Into The World’s Largest Democracyby Tariq Dennison, +852 9476 2868

© 2020 GFM Group Limited, https://gfmasset.comImage credit: https://indianexpress.com/article/delhi/old-delhi-renovation-jama-masjid-red-fort-dariyaganj-chandni-chowk-2-0-5915700/

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Disclaimer

This presentation is for educational and discussion purposes only. Nothing in this presentation is to be taken as investment advice, nor as any recommendation to buy or sell any security or investment property or product. Please consult with GFM or your own investment advisors 1-on-1 before making any investment decisions.

GFM does NOT provide any tax or legal advice. Tax strategies in this presentation are based on our experience and believed to be current, but please consult with your own tax advisor for tax advice specific to your situation. GFM Group Limited is an SFC Type 9 Licensed Asset Management firm and is not affiliated with any exchange, brokerage firm, or custodian, including the co-presenters of this seminar. GFM Asset Management LLC, an affiliated company, is a US SEC Registered Investment Advisor.

Investing involves risks, including the risk that you may lose some or all the money you invest.

GFM is not affiliated with Interactive Brokers LLC, or any other FINRA broker-dealer

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Disclaimer by SGXThis document/presentation has not been prepared by Singapore Exchange Limited (“SGX”) or any of its affiliates (SGX and its affiliates collectively, the “SGX Group Companies”) and the information in this document/presentation has not been verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the contents of this document/presentation.

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Statements or information disseminated by presenters at the seminar represent the views of the particular presenter and not of any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties, including any content of information at the seminar. Use of and/or reliance on such information is entirely at the reader’s and/or audience’s own risk.

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About Tariq Dennison TEP CFPCM

Hong Kong & US Advisor on the IBKR platform US Advisor: GFM Asset Management LLC HK Advisor: GFM Group Limited

In the market since 1998 Commerzbank (NY, London, Frankfurt) Bear Stearns (NY) J.P. Morgan (NY) Canadian Imperial Bank of Commerce Societe Generale (HK)

Masters in Financial Engineering University of California at Berkeley

Lecturer at ESSEC Singapore Fixed Income Alternative Assets

Focus on US-Asia corridor Author “Invest Outside the Box”

© 2020 GFM Group 5

Fundamentals

• India’s “Corona Test”

• Key stats on “Why India?”

• Understanding the Indian Rupee and Economy

• Understanding the Indian Equity Market

• INR Currency Futures

• India Equity Index Futures

• Comparison vs ETFs

• Directional and Long/Short Strategies

• Risks

Futures and Strategies

© 2020 GFM Group 6

First, India and COVID-19…

© 2020 GFM Group 7

Since the lockdown in late March…So

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© 2020 GFM Group 8

Log Chart of Coronavirus Deaths Per Day

© 2020 GFM Group 9

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© 2020 GFM Group 10

Longer term history and statistics…

A Brief Post-WWII History…


India now has 29 states + 7 UT’s, since Telangana (2014)

Trucial States, now UAE

Leaps in Market Development


Nehru: “Profit is a dirty word”

4 decades of <3% growth

PV N Rao (1991): End of “Licence Raj”

Reforms and Liberalization

Modi (2014): GDP growth

surpasses China’s first time in 2015

Demonetization 2016Tax Reform 2017

(Also first PM born post-Raj)


Statistic #1: India Now Growing Faster Than China

Source: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/CHN/IND/USA

https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/CHN/IND/USA


2020

-202

1 O

f Cou

rse

An E

xcep

tiona

l Ye

ar F

or G

DP


Observation #1: India Now Growing Faster Than China

Source: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/CHN/IND/USA

Taki

ng a

ste

p ba

ck: 6

0 ye

ars

of G

DP

stat

istic

s…

https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/CHN/IND/USA


Statistic #2: Highest Population by 2027

Source: https://ourworldindata.org/india-will-soon-overtake-china-to-become-the-most-populous-country-in-the-world

https://ourworldindata.org/india-will-soon-overtake-china-to-become-the-most-populous-country-in-the-world


Statistic #3: Indian economy > US by 2050

Source: https://www.pwc.com/gx/en/issues/the-economy/assets/world-in-2050-february-2015.pdf

https://www.pwc.com/gx/en/issues/the-economy/assets/world-in-2050-february-2015.pdf


Statistic #4: Healthy demographics…




Statistic #5: … % gains in standards of living


Average Indian US$2,000/year US$22,000/year



Statistic #6: Services sector(s)

Source: http://planningcommission.nic.in/data/datatable/0306/table%203.pdfhttps://commons.wikimedia.org/wiki/File:1951_to_2013_Trend_Chart_of_Sector_Share_of_Total_GDP_for_each_year,_India.png

http://planningcommission.nic.in/data/datatable/0306/table%203.pdf

https://commons.wikimedia.org/wiki/File:1951_to_2013_Trend_Chart_of_Sector_Share_of_Total_GDP_for_each_year,_India.png

© 2020 GFM Group 21Stat

istic

#7:

Bon

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Moving on to the currency….


Rupee not too unlike RMB or other EM currencies…

Source: Bank of International Settlements (BIS)

0

20

40

60

80

100

120

140

160

180Chinese Yuan Renminbi Indian Rupee


Going back to 1957…

Source: Bank of International Settlements (BIS)


So trading the rupee with futures…


Source: Bank of International Settlements (BIS)Source Interactive Brokers


Next, the equity index….


Some top Indian names / stocks / brands:


What’s in the Nifty 50…

Source: NSE


Performance since 1996…

Source: NSE


Of top 50 Indian Names, only 7 have US ADRs (+2 London GDRs), but almost all have SGX SSFs

Ticker NameMSCI India

Weight Sector SGX SSF? ADR / GDRRELIANCE RELIANCE INDUSTRIES LTD 11.9Energy Yes RIGD (UK)

HDFCHOUSING DEVELOPMENT FINANCE CORPOR 10.19Financials Yes HDB

INFY INFOSYS LTD 6.37Information Technology Yes INFYTCS TATA CONSULTANCY SERVICES LTD 5.44Information Technology YesAXISBANK AXIS BANK LTD 4.29Financials Yes AXB (UK)HINDUNILVR HINDUSTAN UNILEVER LTD 4.02Consumer Staples YesICICIBANK ICICI BANK LTD 3.15Financials Yes IBNITC ITC LTD 2.48Consumer Staples YesMARUTI MARUTI SUZUKI INDIA LTD 2.27Consumer Discretionary YesBHARTIARTL BHARTI AIRTEL LTD 2.22Communication Yes

…SBIN STATE BANK OF INDIA 1.36Financials Yes

…

POWERGRIDPOWER GRID CORPORATION OF INDIA LT 1.09Utilities Yes

SUNPHARMASUN PHARMACEUTICAL INDUSTRIES LTD 0.99Health Care Yes

NESTLEIND NESTLE INDIA LTD 0.99Consumer Staples NoTECHM TECH MAHINDRA LTD 0.97Information Technology YesBPCL BHARAT PETROLEUM LTD 0.97Energy YesDRREDDY DR REDDYS LABORATORIES LTD 0.94Health Care Yes RDY

…WIPRO WIPRO LTD 0.83Information Technology Yes WITEICHERMOT EICHER MOTORS LTD 0.82Consumer Discretionary YesVEDL VEDANTA LTD 0.79Materials Yes VEDL


Earnings Growth of 4 Top Nifty Names

Source: YCharts


… but with volatile valuations…

Source: YCharts

Nifty 50: Cape Valuation

Source: Siblis Reseach

35


Nifty futures…


Stock / ADR / P-Note

• Buy with cash

• Borrow to short

• Hold as long as you wish

• INR FX risk

• Dividend / tax issues?

• Small margin requirement

• Short w/ no borrow

• Must roll monthly/quarterly

• Quanto “hedged” exposure

• Priced in

Futures


• Select individual names expected to outperform or underperform

• Custody, dividend etcbuilt into futures contract

• Key risk is currency risk (can use INR future) and beta mismatch

Risks

• Name selection

• Liquidity / time zone mismatch

• INR collapse stock spike?

• Risk management of shorts

• Margin management

Strat #1 ADR/ETF vs Future

GFM Group Limited7th Floor, Grand Millennium Plaza181 Queen’s Road CentralHong Kong

https://gfmasset.comOn Seeking Alpha: TARIQ [email protected]: @QuantOfAsiaM +852 9476 2868

india after covid-19 - interactive brokers · 2020-06-17 · hindunilvr hindustan unilever ltd....

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