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STOCK MARKETS will fall due to weak rupee? (and how to save wealth!) - YouTube
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so if i have to pick which banks to
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invest in i will invest in indian banks
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over the american bank hi everyone
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welcome to today's video so first and
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foremost take a look at this particular
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chart and this will scare you you will
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see that inr in comparison to us dollars
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has been constantly losing value
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according to few of the forecasted
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estimates it is estimated that inr will
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continue to lose four percent of its
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value every single year compared to us
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dollar at least till 2026. this is a
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very worrying sign many of you will
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think that hey inr is going to go to
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zero it's time to sell everything and go
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to foreign markets you will further get
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scared if i show you this data so this
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data tells us fi selling in crores and
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this is the month data for the month of
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march so fis have sold roughly 44 000
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crore of equities from the indian market
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and if you look at previous months data
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also recently again it paints a very
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gloomy picture so february roughly 45
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000 crore of fia selling happened then
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in january 41 000 december 35 000
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november 40 000 october 25 000. so
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you'll say okay enough i'm just going to
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sell everything in the indian stock
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market and move to some other foreign
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markets so should you be doing that and
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should you be worried about the
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situation what is the sensible move that
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you must be making this is precise
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discussion that we are going to have
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today so on this video i am going to
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explain in very easy to understand
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language what dollarization of the world
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means and how india is getting impacted
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through dolarization of the world highly
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complicated macroeconomic video from
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that perspective but i will keep the
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language very easy and beginner friendly
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so please press the like button it will
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help with the youtube algorithm and i
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will deeply appreciate it it would
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motivate me further to put in even more
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work and study in terms of making my
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videos second we will understand whether
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or not you should be going outside the
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indian market to invest especially in
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this macroeconomic environment and how
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you should go about developing that
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portfolio so i will pick one lakh rupee
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as a sample portfolio size and i will
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tell you how you can go and design that
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portfolio and why so let us get the
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discussion started point number one let
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us understand the story in the u.s
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because that will help us understand the
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concept of dollarization so take a look
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at this particular chart this shows the
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return in the decade from 2010 roughly
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to 2019 what you will see is different
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asset classes across the world have
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given different different returns for
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example you can see that global equity
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that if you consider all the equity
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investments in the world they on an
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average have given 6.75 returns emerging
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market equity on the other hand have
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given negative returns over the decade
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so india will fall in that emerging
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market but indian stock market returns
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have been generally positive
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the entire emerging economies in total
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have given negative returns in the stock
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market because many emerging economies
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have somewhat failed especially from a
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macro viewpoint but if you consider this
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bucket this is super interesting right
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you will see u.s mid cap equities have
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given 11 percent large cap have given
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11.22 dividend-paying equities 11.81
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small cap have given 11.87 these are all
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us-based equities so the point is that
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u.s markets compared to other parts of
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the world have given very high returns
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in the last decade now this data becomes
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extremely insightful from the point of
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view that if you think about what was
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happening in that period of 2010 to
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2018-19
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u.s and the world was in a rebuilding
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phase because 2008 financial crisis
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where it happened it happened in the u.s
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and u.s had to undertake a lot of debt
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how by printing a lot of money so that
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entire quantitative easing of printing
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of more u.s dollars started happening
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very very aggressively in 2008 and that
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2008 financial crisis where did it
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originate it originated in the u.s
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economy and from 2008 onwards u.s has
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been on a printing spree so this is a
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chart for you which encapsulates that
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how much the public did this blue line
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has gone up by you can see a sudden
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spike here in this particular part that
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means that us kept on printing more and
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more money but their stock markets also
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kept on going up and gave us stock
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markets the best returns out there in
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the world so which is like really crazy
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and you will scratch your head that you
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know what if a government gets the power
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to print like infinite money it can just
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skyrocket its own stock market when the
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other stock markets are falling so this
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is the summary that we can draw so far
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based on the data that i have shown you
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now comes the interesting question as to
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why this phenomena played out this is
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very very important for us to understand
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because if we understand this core
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concept our knowledge of economic stock
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market just goes to another whole new
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level so the concept lies in the
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dollarization of the world now what do i
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mean by dollarization of the world so
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dollarization in simple terms means that
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if the entire world starts using dollar
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and dollar becomes the apex or the prime
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currency then that means that the world
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is getting more and more dollarized so
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there will be occasions in the world
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when more countries are using us dollar
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and the strength of us dollar is growing
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and that will lead to more positive
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dollarization of the world and there
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will be circumstances when the
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dollarization of the world gets weakened
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so i hope this basic concept about what
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dollarization means is clear so with
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that viewpoint let us understand the
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current circumstance
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as to where the world stands in terms of
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dollarization of the world so this is a
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data that will help you understand this
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point in a slightly more intuitive
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manner so this is the current data and
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it categorically talks about the concept
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of reserve currency so reserve currency
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simply means the world currency that
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what is it that the world is banking on
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which currency are they trading on so
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the strength of u.s dollar is somewhat
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around 60 that if the world uses one
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unit of currency then 60 of it is used
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in us dollar this is very very big
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figure because the next is euros it's
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only 21 the third is japanese yen it is
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used at six percent so the u.s dollar
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right now is super strong there is no
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problem with the us dollar and it would
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be okay to say that the world even now
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is heavily dollarized now you might say
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that okay us dollar very strong good for
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joe biden good for donald trump good for
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elon musk all these people why do i
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bother i live in india how does it
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matter to me okay i will do india
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specific discussion also but there are
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few key very important financial
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advantages that you have if your
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nation's currency is very very strong
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right so let me explain that point in a
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very easy to understand language so
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first and foremost the primary advantage
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of your currency being the best currency
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or the apex currency is the concept of
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trust because we work on a system called
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as the fiat money system fiat money
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system simply means that governments
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have the power to print infinite amount
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of currency so every time the government
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prints currency it is essentially giving
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a loan to itself so it is giving more
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and more capital to itself now when the
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trust gets eroded when people think that
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you know what government has just done
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too much money printing and probably it
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will go bankrupt so people will move
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away from that currency there have been
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instances in countries like zimbabwe
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which completely went haywire in terms
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of printing money it printed so much
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currency so much currency and there was
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no trust on the zimbabwean government so
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the entire economy got bankrupt but if
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you are the apex currency which is the
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us dollar then this trust factor is very
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very very very very very high you
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essentially de facto so the word of the
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day today is de facto let me know what
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does that mean so de facto the u.s
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government can print a lot of money and
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give itself a lot of loan without taking
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a massive hit on the trust now this is a
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debatable point and i'm simplifying this
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explanation for you but this is what is
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happening from a practicality viewpoint
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why i can again show you the data that
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hey from 2008 onwards quantitative
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easing or money printing it just
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increased in number to a very large
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extent but despite that the world did
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not lose trust on the us dollar and we
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are sitting in 2022 and still u.s is the
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dominant currency the second key
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advantage that an apex currency has is
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very simple that under panic situations
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for example right now there is a panic
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situation that is playing out due to
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russia ukraine crisis in 2020 again
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there was a panic situation so whenever
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these type of fanuc situations happen in
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the world the money flows to safe havens
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and safe currencies so a lot of money
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from emerging economies like india have
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been pulled out i showed you the fi data
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earlier so a lot of money has been
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pulled out by fis and where is it now it
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is either invested in stable economies
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or it has simply been converted into us
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dollar and it's probably being simply
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kept in us dollars why because again the
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trust factor that under panic
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circumstances these stable economies
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will be the last one to go out and apex
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currency will be the last one to fall
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this again can be understood from the
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fact that when 2020 covet crisis hit u.s
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printed money like crazy but did india
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do that no because the trust on the
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indian government from a world level and
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please don't bring like nationalistic
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pride into it from a world level the
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trust on india is less compared to trust
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on the u.s u.s is a safer heaven and
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whenever panic situation happens the
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money will flow to the u.s and other
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stable economies now you might say okay
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fine you have taught us so much
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macroeconomics but tell me how does it
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impact me as an indian stock investor
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can you just simplify that okay so two
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graphs i will show you first and
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foremost take a look at this particular
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chart which we started the discussion
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with and what does this mean so
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essentially whenever you see this type
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of chart that hey inr is going down it
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means two things one is that there is an
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impact on fis for an institutional
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investor it simply tells fi or foreign
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institutional investors these are big
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fat investors sitting outside india it
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tells them that you know what inr is
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weaker it's cheaper you can invest your
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u.s dollar at a cheaper rate in india so
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a lot of fis money should technically
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flow into it so whenever the inr weakens
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it's an opportunity for fi players to
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invest more of their us dollars into
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indian equities so let's imagine this
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that in 2010 one us dollar was 50 rupees
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so with one us dollar you could buy 50
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rupees very very easily or invest 50
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rupees so for an institutional investor
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if they invest in the indian market they
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will just simply convert one of their
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usd into 50 rupees now by 2022 if this
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one usd becomes 75 indian rupees then
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can these foreign institutional
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investors invest more in the indian
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equities the answer is yes because the
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inr here has weakened it has become
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cheaper so anytime you see such a graph
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it simply means that foreign
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institutional investors has more
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incentive to invest in the indian
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economy because they are getting things
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for cheap so this is the first key point
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now you will say that you know what i am
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not a big fat player sitting in
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switzerland or u.s and all these
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countries i am a humble domestic
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investor so how does this falling rupee
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impacts me okay so no good news there if
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you are a domestic institutional
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investor or a normal retail investor who
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is earning an inr then unfortunately you
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are losing your money at a global scale
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for example by next year inr will fall
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by four more percent that is what
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predictions tells us so if you are
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investing in indian companies your inr
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gets stuck with those companies and
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technically you are losing four percent
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of its value every year because inr is
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getting cheaper and cheaper if you would
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have simply put that money in the u.s
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market you get invested in us dollar so
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that does not fall that rather
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strengthens compared to inr so you
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benefit from it so this is the first key
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implication that you must understand but
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that is not the only impact of a falling
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rupee there is another impact and take a
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look at this particular chart and there
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are two key impacts that will come out
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of it so you can clearly see from this
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chart that india is a net importer
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country because our total exports are
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this and our total imports are this
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right and a very large segment of this
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import happens in oil and oil is traded
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in u.s dollars so every time india has
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to undertake oil import it has to buy us
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dollars and then pay other countries in
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terms of importing oil so if u.s dollar
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is getting more and more strengthened
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and we have to buy a lot of oil it
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becomes a problem for us as an economy
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and this is the current crisis that we
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are also facing because oil prices are
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very high and inr is also falling so
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it's a double whammy or double problem
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for us but just to help you simplify
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this there are two key things that you
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must understand that whenever the inr
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falls and if you are an exporter of
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indian goods and services you will
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benefit so if you are an exporter
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running an export shop you are making
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sarees in india and sending it to u.s
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china russia wherever then you are a net
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benefiter in case the inr falls on the
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flip side if you are a company that is a
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net importer in india of things it
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becomes a headache for you if you depend
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a lot on external supply chain it
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becomes a headache for you and net net
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everything will become costly for you
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now estimating the impact of a falling
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rupee and discussing all its scenarios
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is a highly complicated task and i
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cannot do it with one single video but
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the point that i want to outline is this
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that number one whenever you see charts
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like these following indian rupee it
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does not mean the end of the indian
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economy or the inr is going to go to
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zero that is not the correct
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representation because there are a lot
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of parties that will benefit for example
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fis will benefit diis will not benefit
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similarly exporters will benefit
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importers will not benefit so it's a pro
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and con game it's not as if that
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following indian rupee is a bad
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situation for the indian economy yes it
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should stabilize in a particular range
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that's the goal and that is where the
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rbi and the indian government comes into
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the equation and they balance it out so
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we need to leave that decision to them
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but what is it that we should be
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thinking about in terms of being a stock
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investor so there are two key points
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that we need to remember as investors
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one from a long long-term point of view
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that if the inr is falling and inr's
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value is falling then a lot of fis have
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more incentive to come to the indian
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market but this will only happen if the
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indian economy is strong so the major
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part is that the indian economy should
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be strong whether the inr falls or
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whether it rises that's a secondary
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issue but yes if the inr falls plus the
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indian economy is very very strong then
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fis will enter the indian market and
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your money that is invested in the
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indian equities will grow exponentially
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so this is the first key major point
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that you and i as retail investors
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should remember
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second is the short term perspective so
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in the short term it is almost
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guaranteed that inr is going to lose 4
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percent of its value so if you are stuck
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only in indian equities it will be a
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problem area for you because you have
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invested everything in the indian market
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indian economy is not growing plus the
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currency in which you have invested in
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it is also falling so it becomes a
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nightmare situation for indian investors
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from that perspective from a short-term
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viewpoint so this brings us to the final
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question that okay what is it that i
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should be doing so there are four
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specific points that i will leave you
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with so first and foremost should you be
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investing outside india in the short
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term the answer is yes you should
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definitely be investing outside india
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because that short-term risk in india is
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very very high and that is one of the
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primary reasons also why if i sold so
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much stuff i am not trying to paint a
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negative picture about india i am
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bullish about india majority of my
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investments are also in india but having
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said this i also invest in cryptos and i
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also invest in u.s stocks why because i
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need to balance that inr deflation and
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any sensible investor should be doing
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the same it does not mean that i am not
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bullish about the indian economy i am
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very very bullish about the indian
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economy but at the same time i need to
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hedge my portfolio by being diversified
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so this is the first key point second
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key point that okay where is it that you
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should be investing in so you should be
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investing in strong economies or
[880]
economies that can become strong with
[882]
time for example if for some reason you
[884]
are invested in russia please pull out
[886]
your money please don't be an investor
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there it might not be very useful as of
[890]
now
[890]
if you are invested in india it's a
[892]
great economy there are no fundamental
[894]
problems in india there is short-term
[895]
pain no doubt about that but long term
[897]
the bullish perspective isn't in the us
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the economy is very very strong still
[902]
the quantitative easing high debt
[904]
nothing matters as long as the us is the
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reserve currency of the world so us is a
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very good market to invest as long as
[910]
you can understand the businesses
[912]
fundamentally in the u.s please go and
[913]
invest no problem there number three you
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must understand that if you are
[917]
investing outside india what type of
[918]
companies to invest in
[920]
so let me paint a picture for you and
[922]
this is a chart how russia moved to
[924]
alternate payment systems where they do
[926]
not have to use the us dollar and you
[928]
can see a sudden dip from 2018 onwards
[931]
because yes the war blew out in 2022 but
[934]
russia has been moving away from using
[936]
us dollar from 2018 onwards and you can
[938]
clearly see that the share of american
[940]
dollars in terms of russian purchases
[943]
has gone down considerably now if other
[945]
countries also start doing the same this
[947]
is a major change in the dollarization
[949]
of the world economy this is important
[951]
now you might assume that you know what
[953]
almost all the countries are going to
[954]
move away from the us dollar no that is
[956]
not going to happen so soon russia is
[958]
trying to do it china is trying to do it
[960]
but the rest of the world depends quite
[961]
heavily on the u.s and u.s dollars so it
[964]
is not going away anytime soon but there
[966]
will be short-term implications on the
[968]
type of u.s companies that you should be
[970]
purchasing for example i am not an
[972]
investor in u.s based banking system as
[975]
of now i have not purchased one single
[976]
stock in u.s based banks why because
[979]
this short term moving away from u.s
[981]
dollar is going to impact the u.s banks
[983]
first because they have a lot of
[985]
positions in terms of buying derivatives
[987]
investing in the russian economy they
[989]
will have to pull out their investment
[990]
so there might be a lot of short-term
[992]
pain for u.s equities which are banking
[994]
based so i'm not investing my money in
[996]
those so if i'm bullish about the
[998]
banking system i would rather invest my
[1000]
money in indian banking system because
[1002]
think about it this way that if russia
[1003]
moves away from dollars will it impact
[1005]
indian bank is there any direct impact
[1007]
the answer is no so if i have to pick
[1009]
which banks to invest in i will invest
[1011]
in indian banks over the american banks
[1013]
so which brings me to the final point of
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our conversation for today which is that
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if i have to invest 1 lakh rupee
[1019]
outside india what type of companies
[1021]
will i pick why will i pick them and how
[1023]
will i do the asset allocation so asset
[1025]
allocation i have created a specific
[1027]
west on wested so you can go and check
[1029]
it out i will not speak about the
[1030]
numbers here i will simply speak about
[1032]
the companies so i will not invest quite
[1034]
heavily in cash flow or fmcg based
[1036]
businesses in the us because i would
[1038]
rather invest that money in the indian
[1040]
market because indian market is domestic
[1042]
consumption led make in india is very
[1044]
easy to do in the fmcg space so if i am
[1046]
taking some positions in companies like
[1048]
walmart i would not do it in the us i
[1050]
would rather invest that money in indian
[1052]
fmcg companies even if they are global
[1054]
but doing businesses in india so that is
[1057]
the first key point i would invest in
[1059]
the us in something like global tech why
[1061]
is that there are multiple reasons for
[1063]
it first and foremost if you consider
[1066]
examples of something like amazon they
[1068]
do not face supply chain disruption just
[1070]
because russia is doing something they
[1072]
can move their servers very easily i am
[1074]
not saying that they will have zero
[1075]
impact but the impact on their supply
[1076]
chain is going to be very very limited
[1078]
it is not as if their business will get
[1080]
ruined they will go start new products
[1082]
in american economy bunch of other
[1084]
different countries it's not as if they
[1086]
are importing a lot of stuff all that
[1087]
stuff
[1088]
more importantly companies like amazon
[1090]
google they are sitting on massive cash
[1093]
massive massive cash and guess in which
[1094]
currency do they keep that cash they
[1096]
keep that cash and us dollars so if you
[1098]
have to take advantage of us being the
[1100]
apex currency you can go and invest in
[1102]
these type of companies because they are
[1104]
cash rich businesses if the businesses
[1106]
grow if their investment grows if they
[1108]
are handling their money well then
[1110]
automatically there are multiple
[1111]
benefits to be reaped by the
[1113]
dollarization of the world by investing
[1115]
in such businesses so i will invest
[1117]
almost 50 000 or 50 percent of my amount
[1119]
in companies like amazon or google
[1121]
that's point one because they have very
[1123]
very limited exposure to dedolorization
[1126]
of the world plus they benefit a lot by
[1128]
the dollarization of the world second
[1130]
key point fifty percent of my money i
[1132]
will invest in emerging tax these will
[1134]
be companies like uipath shopify and
[1136]
bunch of other different emerging techs
[1138]
that can become market leaders why
[1140]
because they become like a great
[1141]
acquisition target by companies like
[1143]
amazon or google whenever these type of
[1145]
acquisitions take place they mostly go
[1147]
for a premium so you get a lot of
[1149]
returns as stock investors and all these
[1151]
major tech companies amazon google they
[1153]
are on aggressive spree to acquire these
[1155]
type of companies so these are the two
[1157]
broad investment categories that i will
[1159]
pick right now in terms of making
[1161]
investment in the us they are not
[1162]
exposed to supply chain disruptions they
[1164]
benefit from dollarization of the world
[1167]
and they are not impacted by
[1168]
de-dolerization of the world i will keep
[1170]
on updating this quest in case i am
[1172]
buying new stuff so check out the links
[1173]
in the description box i hope you
[1175]
enjoyed the video please give it a
[1176]
thumbs up and i will see you tomorrow
[1197]
you
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