Investment Valuation in India

India has been able to withstand some of the biggest global financial meltdowns in recent times. This was attributed to a very strong regulatory environment (particular credits to the Reserve bank of India) and the Great Indian Consumption story.  These two factors have led to the world expecting a lot from us. The last couple of years have shown that we have under delivered, badly. The global investors are shying away from investing in India given the government indifference to the industry requirements.  Who's responsible for the mess around? The opposition succeeding in keeping the government's attention away from more core issues by highlighting one issue or the other (read 2G and then Coalgate). They worsened this themselves by trying to override the Supreme Court's judgment on Vodafone case. Unnecessary!  Consequently, the world has been able to blame the government for policy paralysis and lack of judiciary relevance. Only the government is responsible for...

India is in a rising interest rate environment. We have already seen the RBI raising interest rates five times since March 2010. Last week, in its policy review, the central bank left rates unchanged, merely reducing the SLR to 24% from 25%. However, this is certainly not the end of the story. With the inflation showing no signs of easing in the medium term, raising interest rates is one of the most important tools in the hands of the government/central bank. Rising interest rates are generally not taken well by the investors at large. Firstly because it directly hurts the pockets of the individuals. The interest rates are increased to suck money out of the system and to curb the inflation. As rates increase, banks pass on the increase in rates to its customers and consequently home loans become more expensive. People having loans have less disposable income as their monthly payments increase. Let's see how this impacts the businesses. Companies need funds to operate and ...

With just 10 working days for the year 2010 to complete, here is a small analysis of the sectors that have consistently outperformed the Sensex over the last 6 years. Average Yearly Return of the Sensex over from 2005 - 2010 = 29.0% [Max return in Yr 2009 - 77.3%] Sectors that have outperformed the Sensex in terms of Average Yearly Returns: Realty ........................ 98.6%  [Max return in Yr 2006 - 469.0%] (Realty Index introduced in 2006) Consumer Goods ..... 51.5%  [Max return in Yr 2007 - 114.8%] Metals ........................ 50.9%  [Max return in Yr 2009 - 220.4%] Consumer Durables .49.1%  [Max return in Yr 2005 - 110.6%] Auto ........................... 42.7%  [Max return in Yr 2009 - 200.5%] Power ........................ 35.8%  [Max return in Yr 2007 - 125.0%] Oil & Gas ................... 35.0%  [Max return in Yr 2007 - 112.8%] Banks ......................... 32.5%  [Max return in Yr 2009 - 81.0%] On a ...

Please take a look at the Budget Highlights 2010 Omnifin Budget Highlights 2010

"India, with its strong internal drivers for growth, may escape the worst consequences of the global financial crisis. Indian banks have very limited exposure to the US mortgage market, directly or through derivatives, and to the failed and stressed financial institutions. The equity and the forex markets provide the channels through which the global crisis can spread to the Indian system. The other three segments of the financial markets - money, debt and credit markets could be impacted indirectly. Risk aversion, deleveraging and frozen money markets have not only raised the cost of funds for Indian corporates but also its availability in the international markets. This will mean additional demand for domestic bank credit in the near term. Reduced investor interest in emerging economies could impact capital flows significantly. The impending recession will also impact on Indian exports. Even EMEs which do not have direct or significant exposure to stressed financial instrumen...

The statements issued by the Prime Minister, Finance Minister, RBI Chief and Bank chairmen have at least some truth in it. This is seconded by the recent Crisil report. But again, there are two sides of a coin. The report says that the global crisis is not responsible for the challenges faced by the Indian Banks; but at the same time, there are a lot of internal factors that are responsible for the same. Contrary to the stance taken by authorities, ratings major Crisil has said domestic, not global factors are responsible for the current challenges facing the banking sector. In a statement issued on Tuesday, the ratings agency has said: “ Crisil believes that the Indian banking system is relatively insulated from factors leading to the turmoil in the global banking industry .” The statement goes on to add that the recent tight liquidity in the Indian market is also qualitatively different from the global liquidity crunch, which was caused by a crisis of confidence in banks lending t...

Well I know thats a similar title as the previous post.... but just didnt want the previous one to get lengthier. We have a come a long way from 130's to 13000's from the 80's till date. That's a 1300 times increase in 20 years. Thats a 26% CAGR in-spite of the fall from 20,873 (8th jan'08) to 13,635 (18th July'08). Mr Amitabh Chakraborty 's (President, Equities, Religare Securities; CFA; FRM) views on the markets are as follows (extracts): Limited downside from now. Sensex to be in the range of 10500 to 14500 this year There is a slow down of growth but not de-growth Estimate sales grwoth is 29% while estimated PAT growth is 18% Capital Goods sector looks good . the Banks look sluggish but may still come out surprisingly well. RBI should ease the rates by the year end. Oil should trade in the range of $100-110 per barrel. FED should hike rates by december leading to money flow from commodities to Equities. Political condition should be OK and the Government...

Hi guys, This saturday (19th July '08), I attended the All India Conference on Capital markets organised by the ICAI at the Taj Bengal, Kolkata where dignatories of the Capital markets arrived and presentade their views on the markets and the road ahead. I was pleasantly surprised to note that almost all the speakers (trust me, they are the big shots in the industry) are positive on the marekets ahead. I am keen to highlight some of the points Mr Nilesh Shah (Deputy Managing Director, ICICI Prudential AMC, managing close to US$14bn, a CA Gold Medalist and a Cost accountant) came up wth. What went wrong with the markets? High Oil Price (India has the highest Oil import to GDP ratio) Higher Trade Deficit (weaker Rupee) Higher Inflation (backed by higher subsidy burden) High Fiscal Deficit High Interest rate Slowing Growth Traders are short and investors are sitting on cash Rising oil prices (India currently pays $50bn for oil annually) Clearly nothing has been going good for the ec...

We all know and are worried about the weakening Rupee against Dollar. But RBI may let Rupee weaken against Dollar even if its inflationary in the short term. Besides, weakening Rupee is expected to reduce volatility on the external front. India is witnessing a High Current Account Deficit. this means that on a trade weight basis, there is a downward pressure on Rupee. Some (including the new Govt supporter the Samajwadi party) are asking the Govt to appreciate Rupee using Forex Reserves. But if Rupee is kept artificially high, it will widen the deficit by encouraging imports although it will make oil imports cheaper. This would lead to instability in the economy. Globally, economies are expected to follow tight monetary policy and the there are still signs of the US getting into a recession. This has led to a great uncertainty on the flows of funds globally. China was expected to appreciate Yuan and this led to hot flows of money in China. Consequently, this has led to instability in C...

Economic Analysis No person can work and live in isolation. External forces are constantly influencing an individual's actions and affecting him. Similarly, no industry or company can exist in isolation. It may have splendid managers and a tremendous product. However, its sales and its costs are affected by factors, some of which are beyond its control - the world economy, price inflation, taxes and a host of others. It is important, therefore, to have an appreciation of the politicoeconomic factors that affect an industry and a company. A stable political environment is necessary for steady, balanced growth. It is imperative for investment managers and analysts to carry out an industry analysis from time to time in order to be aware of the polito-economic environment and their effects on the investments. Let us analyse a few important factors in Economis Analysis or rather an Industrt Analysis. Foreign Exchange Reserves A country needs foreign exchange reserves to meet its commitm...