India - A super power soon

Indians speak a lot saying “Is desh ka kuch nehi ho sakta (Nothing can happen about the nation)”. But, I think it just requires three simple steps to develop the nation. A developing nation can be a developed nation in less than a month. All Indians will be happy and it would be the most developed nation on its own. “A SUPER POWER” to be specific. The three steps are as follows:

1. Get Rs. 3,000 trillion (Approx.) back to India

The corrupted money in different parts of the world can be brought back to India. Leave about a comman man like us. Even most of the politicians don’t even know how many zeros are there in 3,000 trillion. This money can make India a super power. Today a dollar costs around Rs.45. Later a Rupee would cost $45. An unimaginable infrastructure, rich people, No divestment, Great technology, Best research and education, Tax free income, etc can be seen in India.

2. Remove Rs. 100, 500 and 1000 notes from the market (remove corruption)

The bigger notes are responsible for the corruption in India. If I have 1crore rupees as black money with me, a bag of Rs.1000 notes could do. But If I have to store the same Rs. 1crore in denominations of Rs.10 at home, A room would not be sufficient. Carrying the same would itself be a problem. So, the only option that would be left to me would be to keep it in bank. It is really difficult to put a lot of black money into the bank. A traffic police could ask for Rs.100 from 200 people, it would be 2000 notes of Rs.10 each. So, his pocket might not be sufficient.

3. Replace the existing currency notes by new one. All bank transactions are free of cost

The best way of removing the duplicate notes would be to use new technology and develop the new notes. Replace the existing currency from the market. The proper money would be in the market. The existing duplicate notes can be removed. To avoid the printing of the new notes, Govt. can take serious legal actions. Also, printing Rs.10 notes would cost them more than Rs.10.

The implementation of these three steps could develop the nation in no time making it the world’s super power. It will be done by some or the other political party one day and we hope the day is not far.

Company’s failure can’t make you poor.

People invest a lot in products like life insurance, medical insurance, equity of the company that he/she is working, etc. But leading a life without a job is the most difficult part of it. Your job depends on the company. If company is closed or is not performing, you get unemployed. In both the cases, its stock price falls to its all time low price. So, buying deep out of the money long term put option is always better. Let us assume the income of an employee is Rs.5lac per annum. If he invests Rs.5000 and buy a Rs. 0.05 worth 100,000 put options, the day the company closes, the price of the stock would become negligible. The profit that we get is much higher and the unemployment makes us rich.

Who says markets are efficient: Lots of free lunch in the market

Efficient market hypothesis states that markets are efficient. Market price reflects the true price of a share. There is no information asymmetry and there is no free lunch available for any investor in the market. But it is not true. You always find a free lunch in markets. Just need to understand and grab it.

Indian Govt. is continuously coming out with several IPOs and FPOs with a 5% discount for the retail investors. We have the free lunch in it being a retail investor.

FPOs: All the companies come out with an FPO at a discount compared to the current market price. Otherwise people would prefer buying from the market than from the FPO. So, to raise money, the company has to give discount on current market price. Govt. FPOs also give a discount of 5% for the retail investors. The best strategy to grab the free lunch is to buy an ATM put options that costs approx. 3-5% of the market price. Apply for an FPO that is priced at a discount of more than 5%. The minimum profit that we get at any cost is (Market price – FPO price – Put option premium – all transactions costs). If the price on the day of listing is more than the strike price of the FPO, you earn more and if it is less, you get your minimum profit.

Eg: Power grid FPO with price band of 85 to 90 and trading at 100 with ATM (strike = 100) put costing 3 to 5 rupees and 5% discount for retail investor. So, if we pay Rs.4 as premium for 100 – Put option, minimum profit for retail investor = 100 – (90-4.5) – 4 – transaction cost = approx. Rs.10/share (Free lunch in efficient market). If, on the day of listing, price is above 100, we have lot more than Rs.10/share. It is clearly an arbitrage opportunity.

IPOs: Govt. sells the shares at a discount than its valuation for an IPO so as to attract the investor for the IPO. Retailers also get a discount of 5% in the IPO. So, the obvious thing that can happen is to get a min. of 5% benefit in an IPO for an investor. The best example is the latest IPO by Coal India. But efficient market hypothesis may work here.

India still a golden eagle (sone ki chidiya)

India has been ruled by several kings followed by East India Company and now the famous Indian politicians who took/stole a lot of wealth from the nation. A nation called to be an independent nation after 1947 is independent for its name and now it is ruled by the famous Gandhi family. After stealing so much of wealth by several kings and kingdoms, India is rich and has a lot more to feed its people (a common man). What does it mean? It clearly depicts how rich India is in terms of its wealth. After a loss of so much of wealth, India is capable of feeding its 1.1 billion citizens.