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11th January 2022
Good Morning! 

Have you guys seen any of the episodes of Indian Shark Tank??
We just got around to seeing an episode or 2 over the weekend and it was quite enjoyable tbh. Hopefully, it gets super popular and helps improve the appreciation of entrepreneurship in Indian households.
  MARKETS
 

SENSEX

60,395.63

+ 1.09%

NIFTY

18,003.30

+ 1.07%

US$

74.03

- 0.36%

GOLD

47,416

- 0.08%

10-YR

6.59%

+ 4.9 bps

OIL

5,796

- 0.86%

*As of market close

  • Markets: Alright so the stock market is at a 2-month high, despite the Omicron negativity and also the sell-off in crypto and tech stocks in the US. Gains across sectors, led by financial, auto, metal and consumer stocks, pushed the Sensex and Nifty50 higher yesterday.

Corporate

Interest Rates Rising
Soaring Eagle

So while there are talks of raising interest rates in the US and other developed economies, our own bond yields seem to be on the way up.
In fact, they're already at a 2-year high, with the 10-year government bond trading at a yield to maturity of 6.59% at yesterdays close. 
This level was last seen in Jan 2020, just before the pandemic hit and interest rates were cut aggressively by the RBI to try and help the economy cope with the impact of the pandemic. The RBI had earlier been buying bonds from the market in order to keep demand high and thus interest rates lower.

However, since November the central bank has been increasing the speed of withdrawing this extra money from the markets and has also been a net seller of the government of India bonds in the secondary market.

And the trajectory of government bond yields shows this quite clearly:
India 10 year gov bond yield
Source: Trading Economics

The RBI stopped bond purchases after its October policy meeting after buying Rs 2.2 lakh crores worth of debt via its support program from April to September.

This is not particularly great news for you, me, the economy or even the government for that matter.

The gov is the largest borrower and they raise money from the bond market by selling bonds at the market interest rate. 
In the last government bond auction held on December 31st, they sold only 30% of the issuance, after the RBI decided not to give in to investor demand of higher rates on the bond.

If you're finding this confusing, think of it in this way - if supply is greater than demand, the buyers will look for prices to fall, correct?

In the case of bonds, the interest on a bond has an inverse relationship with the price of the bond. So if everything else is equal, a bond that offers a higher interest can be said to be cheaper. 

So in the Dec 31 auction, the gov was selling some bonds to raise money. However, Investors felt the supply was high and were looking for a better price to buy these bonds. As a result, the RBI decided to lower the supply, selling only 30% of the issuance,  hoping to keep the interest rates from rising too much.

Mutual Funds

Let It Flow
Let it flow!

Not great news from the bond market, but equities are still doing pretty well. 

Mutual funds ended the year on a strong note with over Rs 25,000 crores of net inflows in December 2021. The total for the calendar year 2021 is just under Rs 97k crores.

Retail investors seem to be sticking around as inflows through the systematic investment plan (SIP) route for December were slightly higher than November at Rs 11,300 crores. 

Last month several fund houses launched six new equity-oriented mutual fund schemes which collected Rs 12,446 crore, contributing to the healthy year-end number.

Interestingly, debt-oriented mutual fund schemes saw net outflows of around Rs 49k crores in December, led by low-duration funds. Several debt categories like liquid funds, ultra-short-duration funds, corporate bond funds, and floater funds, among others, witnessed a sharp net outflow.

Looks like the rise in interest rates and thus lower price of bonds has put investors off debt schemes for now.

Tech
Flying Taxis, No Really!!
Money gun

How many of you remember the flying cars from Jetsons?
While we are stuck at home nowadays, in normal times we joke about how we need them with the traffic we see in India's metros.

But its always just seemed like a very distant reality especially here in India.
However, a startup that just got funded here is looking to make those dreams of ours something come true, possible in the near future!

The ePlane Company has raised $5 million.

ePlane is working on eVTOL's.

Electric Vertical Take-off and Landing aka eVTOL's (cause who will say something so big) refers to an aircraft that can take off, hover, and land vertically.

VTOL technology means an aircraft can theoretically take off and land almost anywhere, making them far more flexible. We hope there'll still be designated landing spots for them. We don't want to keep looking up to figure out if an eVTOL is landing.

Also, the fact that they use electric motors makes them more energy-efficient than those using jet engines.

But if you have plans to buy a car, don't put them off yet. This could still take some time. The ePlane Company has built a proof-of-concept device that so far has a carrying capacity of 6kg only. So yeah about the weight we've been hoping to lose for the past few years.

Anyway, we are glad to see an Indian startup working on such a project, and we're also a bit shocked they haven't run into regulatory issues yet.

And on that note ...

The RBI has said it will not put together a separate fintech department.
The purpose of this department is to facilitate innovation but also identify the challenges and opportunities associated with fintech and address them in a timely manner.
Hmm, we just hope this actually ends up doing that and not the opposite.

On a Lighter Note

Campus Ambassador Program

If you are a college student do check out our campus ambassador program. 
For more deets check this out.

If you have more time ...

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