Monetrix

RBI hiked interest rates in a new fashion this time. Some refreshers: Banks are the bridge between people who have excess money and people who are need of one. A bank typically takes deposits from customers and lends them to the borrowers. But a bank can’t just play around with other people’s money. It has to have some skin in the game to be trusted, right? So, as mandated by RBI, each bank has to set aside some percentage of its own money or capital for each penny they lend. This is to make sure there remains an ownership and it’s not just depositors’ hard-earned rupees that’s at stake. And here comes the concept of “Capital Adequacy Ratio” CAR as bankers normally say. Let’s say that percentage is 10, which means for ₹100 bank lends they need to have atleast a ₹10 capital coverage. Now here is where it gets interesting, each loan has a different risk factor. For instance, if the bank gives out a home loan, it can always repossess the home if there’s a default. There is a col...

  "Simon Kuznets, who won the Nobel prize in economics in 1971 for his work on growth, put it best: there are four types of economies in the world—developed, undeveloped, Japan and Argentina." In the late nineteenth century, Argentina was among the top five countries in income per capita, richer than all European countries except Britain, and on par with other rich settler societies such as the United States, Canada, and Australia. Its largely high-end agricultural economy at the time benefited from the inflow of capital in Europe and America and was able to modernize the industry. These nations were also Argentina’s biggest customers. And by the early 1900s, they were facing the industrial boom. This factor led to Argentina becoming one of the top ten wealthiest nations in the world. However, the economy was not without its problems, there was rampant corruption in the government and unequal distribution of wealth among the population. These problems would not have matte...

  On 4 th December 2023, the NIFTY 50 Index opened 300+ points above the previous close and closed 2.07% above the previous day, a move not seen in a long time. This violent rally was majorly fueled by the BJP’s victory in three of the four Assembly elections, boosting market sentiments. These results have raised optimism among the investor community that the incumbent party will be re-elected at the Centre in the 2024 Lok Sabha Elections, resulting in policy continuity and long-term growth. Such a rally is not a one-off event witnessed in the Indian markets. In the 2014 General Elections, when the Narendra Modi-led BJP won in a landmark victory(successfully ending Congress regime), the stock market reacted positively as the victory was seen as a sign of political stability and the emergence of pro-business policies. A similar momentum was seen in 2019 when the BJP was re-elected to power. WHAT DOES HISTORY TELL US? Data suggests that in the year preceding a presidential ele...