The P/E (price / earnings) ratio is one of the key measures of market sentiment towards a stock. It measures the relationship between market price and current profits (earnings) and can be calculated as follows;
Where EPS = Earnings per share
For example if a stock trades at 20Rs and current Earnings Per Share (EPS) is 2Rs, the stock has a P/E ratio of 20/2 = 10. This could also be calculated by dividing market capitalisation by total profits.
The P/E ratio expresses the cost of purchasing the right to one unit of profit. For example, a P/E ratio of 10 means that based on the current levels of profitability an investor must pay 10 units in order to acquire the rights to 1 unit of profit. A higher P/E ratio means investors pay more per unit of profit than a lower P/E ratio.
“Hedging” or opening up a “hedge position” is the process of establishing an exposure to a particular risk in order to offset an existing but opposite exposure. The term originates from the game of roulette where the lines between betting squares are called hedges. A bet place on the “hedge” wins if the ball lands on one of the numbers either side of it but the payout is lower than for betting on the number itself. The phrase “hedging you bets” became common parlance in English and over time has become established finance terminology. (more…)
It can sometimes appeear as if the universe of investment strategies is characterised by linear dimension and polar opposites. You’ either go long or you go short, you’re a day trade or a long term investor, you’re a risk taker or a risk avoider. Some would add to this collection your either a value investor or a growth investor. Even the professionals seem keen to pigeon-hole themselves as one or the other. Scratch the surface however and you’ll find very similar principles at the heart of both. (more…)
Efficient-market theory (or Efficient Market Hypothesis EMH) argues that in the long run it is impossible to “beat the market” because the current price of a stock always factors in all available information.
According to the theory, stocks always trade at fair value and it is impossible to buy undervalued stocks or sell stocks for inflated prices. Therefore it is impossible to outperform the market by stock picking or market timing; the only way to earn higher returns is to buy riskier investments.The theory gained prominence in the mid-1960s and in 1970 Eugene Fama refined it into three distinct forms: weak, semi-strong and strong. (more…)
The (MACD) Indicator is a technical analysis method first developed in the 1960s by Gerald Appel, a prominent author in investment and trading strategy. MACD stands for Moving Average Convergence-Divergence and is based on the comparison of fast and slow exponential moving average prices. Proponents of MACD Indicator methodology argue it can be used to identify trend changes in stocks and indices.
As with most sectors, Indian pharmaceutical companies have had a tough year. Rising raw material and energy costs squeezed margins for everyone but this was accentuated in the pharmaceutical sector as China halted production of intermediate drugs in the run up to the Olympics. The depreciation of the Rupee also hit many of the bigger players who booked large mark-to-market losses on FX hedges and saw their interest outgoings on foreign currency loans rocket.
The net outcome of these factors was an aggregate 7% reduction in PBT for domestic pharma companies, despite a respectable 24% increase in top line revenue, resulting unsurprisingly in significant market sell-offs. The BSE Healthcare Index is 29% down over the last 12 months with some of the larger pharma stocks such as Ranbaxy and Dr Reddy’s Laboratories being heavily sold (50% and 35% respective YTD fall in share price). However, despite this backdrop the future outlook gives some cause for optimism.
Its not really news when I say that we’re in a bear market (the widely accepted definition for western equity markets is a sustained 20% drop is much smaller than the 50% drop of the Nifty from our January high of 6357). But the question on everybody’s mind is - where are we in this bear market? The beginning, the middle, or at the end (the bottom)? Let’s have a look at the past three Indian bear markets and see if we can get some clues (data below sourced from Morgan Stanley Report, “India Strategy: How to Cope with a Bear Market”, published on 13 March 2008):
First: 2 April 1992 (top) - 26 April 1993 (bottom)
12 months trailing PE at the Bull market peak: 33.9
At the Bear market bottom: 13.6
Decline of 60%
Time taken in days to cross the previous high: 1425 (4 years)
6 months return from the bottom: 34%
From the above data we can see that:
A bear market leads to an average decline of 51% of the index, and upto 60% decline in PE ratios
If you managed to invest at the bottom, 6 months down the line you’d have made an average of 35% return (although spotting the bottom is near impossible - so this is rather misleading)
It lasts anywhere between 1-2 years
It takes anywhere between 2.5 to 5 years for the market to ‘recover fully’ to its previous peak - therefore the bear market is accompanied by a considerable ‘horizontal’ market
The bull market peak is over 32x earnings (PE ratio), and tends to more than halve at the bottom.
Now lets compare the above learnings from above to the ‘Bear Market’ of 2008:
Tipping point: Subprime leading to FII exit
If October 27 low, was the bottom then it has only lasted about 9 months
Sensex peak at 21,207
Sensex October 27 low at 7697
Decline of 64%
Nifty peak at 6357
Nifty October 27 low at 2253
Decline of 65%
12 months trailing Nifty PE at the Bull market peak: 28.3
At October 27 low: 10.7
Decline of 62%
Clearly we have overshot the average index decline of 51% that we have seen in previous bear markets, by a significant 13 percentage points. We have also seen large declines in index PE ratios - 4 percentage points more than the last bear market. Moreover, the PE on October 27 was an astoundingly low 10.7 - the lowest ever for the data since January 99, as I talk about in my post here.
This begs the questions - how much longer do we have to suffer such a market?
History tells us that there seems to be 3 ‘phases’ of a bear market:
First phase: A sharp initial fall - ‘capitulation’
Middle phase: A bear market rally on low volumes, where some investors a lulled into the false sense that the bear market is over
Final phase: Long slow downward grind in price where market valuations hit rock bottom
Clues that the bear market is coming to an end:
Indiscriminate selling leading to sharp falls
A major potential corporate or political crisis
Highly negative but irrational rumours about financially sound companies
Very low PE ratios for blue chip companies - often in single digits.
Based on history and what we’ve seen above, I’d wager that we’re at the beginning of the final phases of the bear market. We have seen a lot of volatility, and quite a significant rally over the last week, from 7967 to over 10,000 - a rally which seems to be coming to an end as I write this.
Globally, we have already seen unprecendented collapses in the banking and insurance sector - AIG, Lehman, Bear Stearns, HBOS etc. just to name a few. We haven’t seen an bankruptcies / defaults in India at such a significant scale, although rumours of ICICI bank collapsing, and then Unitech defaulting were rife. As far as PE ratios are concerned the Nifty’s trailing PE was at its lowest in a decade last week. All these point to us having crossed the bottom.
Do note however, that the 7697 low was not lower than the previous bull market’s peak, something that seems to be a pattern. Moroever, as I reported here, FIIs have only pulled out 20% of their investment in India, and I expect that this is not the end. Whether they like it or not, they may be forced to pull more out of our market even at these attractive valuations, in order to meet liabilities or liquidity pressures due to redemptions.
Well, the interest rate cycle has already turned, indeed quite aggressively with the Congress government trying do do everything it can before the elections in March next year, including leaning on banks to cut rates (which has worked). Inflation is on its way down, so that’s also pretty good news. Corporate earnings results have been really bad this quarter and we might see another couple of quarters of bad results before they start to improve. Therefore I think there is a lower bottom down the line. When will we see it? After another round of FII money getting pulled out, optimistically, I think we’ll probably see it over the next 6 months, pessimistically - given the grave global scenario - 12 months. That would make the bear market period 15-21 months.
As far as recovery is concerned, ’strong economic fundamentals’ can be cited in favour of the arguement for a shorter horizontal period. Fundamentals, however, doesn’t really seem to help when the global economy is in the toilet, and there’s no foreign money to push the market back up to the levels that it saw in this bull run.
The crash of the Indian Stock Market since January 2008 has been widely attributed to FIIs pulling their money out to meet liabilities and redemptions. According to this article, however, FIIs have only pulled out $12.7bn and still have another $53.7bn, or almost Rs. 270,000 Cr. left in the market.
A lot of market experts are talking about the market being near the bottom (”Valuations just cannot get any cheaper! The Indian growth story is sound, even at 7%!”) Let’s be clear on this: these falling prices are not about fundamentals - its simply about lack of liquidity. FIIs are not exiting the market because they want to, but because they are being forced to - nobody wants to book such massive losses, and nobody would argue against the fact that as an emerging market India is looking pretty cheap.
The fact that there’s so much FII money still in the market - 80% - is quite scary (more…)
One of the most elegant applications of mathematics to finance has been in the field of portfolio theory. Active portfolio management requires investors to not only select risky securities, but also decide the appropriate weightage to ascribe to each security in the portfolio.
Developed by Markowitz and Sharpe in the early 1960’s, modern portfolio theory defines portfolio risk and return in precise terms: portfolio return is the weighted average of the expected return of individual securities while portfolio risk, is the weighted sum of individual asset covariances. This simple insight allows us to determine the condition for the efficient frontier – a set of portfolios that combine various risky assets in proportions that yield maximum return for a given level of risk.
Applying the fundamental intuition behind the Markowitz / Sharpe framework, PortfolioEdge has been built keeping in mind the practical investment behaviour of traders, investors and portfolio managers. It is a rebalancing tool for equity portfolios, but can be used for any risky asset-class, provided that it is possible to specify the returns on an NAV basis. By risky, it is meant that the asset class should have a positive standard deviation and it should thus be possible to estimate a distinct higher and lower value for its Upside potential and Downside risk, respectively.
The PortfolioEdge algorithm uses an innovative methodology to estimate the model weightage of stocks in your portfolio. The fundamental intuition behind the allocation mechanism is the Reward-to-Risk ratio (R2R), which is analogous to the Sharpe Ratio under modern portfolio theory. However, unlike the Sharpe Ratio, the measure of risk is not volatility (standard deviation), but expected capital loss.
Salient Features:
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Allows you to perform various kinds of portfolio analytics and generate customized report
There’s been so much change in the global banking landscape, with banks going bankrupt, being nationalised, and being bought over by others that its become quite difficult to keep track.
Check out this excellent interactive by FT that takes you though a 10,000 feet chronological walk though a Global ‘Bank Street’, telling you which banks have been nationalized, bought over, expanding, or have a new business model. Sigh I still cannot get over the fact that we’ll soon be able to get a Goldman Sachs Debit Card.
There has been a lot of discussion / panic in the markets with regards to ICICI bank.
Nobody really knows what’s going on, but everybody is worried (see this article, which was a result of the response I got from ICICI bank for this article). What we do know is that there were intial reports in January, and then in March we were told that ICICI bank had declared over $260mn in credit derivative losses, on a total exposure of $2.2bn. In mid September there were rumours floating around about ICICI bank going under. These were put to rest by assurance by Kamath, SEBI and the RBI. Then there were more rumours a couple of days ago, and it almost seemed like there was a bit of a run on the bank, with people in Hyderabad, amongst other places, lining up at ATMs to pull out their cash.
While my view is that there isn’t smoke without a fire, and even Bear Stearns denied initially that there wasn’t anything wrong. While I think that ICICI bank shareholders might see a further deterioration in share price, I don’t think that people holding accounts at the retail bank really have much to worry about.
ICICI bank’s business, like any conglomorate bank, can be broadly categorized into - the wholesale/ investment banking arm, which would bear the exposure to the credit derivative instruments, and the retail banking side, which takes deposits from individuals and small businesses. I couldn’t manage to get a hold of the corporate structure or of ICICI Bank, but these businesses should be structurally separate even if they are owned by the same holding company, ICICI Bank.
If this is the case, it would mean that while the shareholders are exposed to both businesses, the customers of the retail bank are relatively safer from the effects of the losses of the wholesale banking / investment banking arm.
Also, as ICICI sets out above, it is mandatory for all Indian Scheduled Commercial Banks to retain 34% of the deposit base in the form of Government Securities (SLR) and cash with RBI (CRR).
Retail depositors are also protected to a limited extent (Rs. 100,000) by depositor insurance (check an article about depositor insurance here: www.rbi.org.in/Scripts/FAQView.aspx?Id=64).
I also believe that like the Fed could not let AIG, an institution that is far to large and far too embedded in the livelihoods of the American population, fail, similarly, the RBI would never let India’s largest private bank fail.
So if I was an ICICI bank retail depositor. I wouldn’t go running to ATMs to pull my cash out, just yet.
Disclaimer: This blog or any other content on this blog should not be construed as financial or investment advice. All views presented here are solely the opinion of the author’s.
Disclosure: I don’t hold any positions in ICICI Bank.
The biggest carry trade currency is the Austrailan Dollay/ Yen… The trade which took 6 yrs to move up, took less than a one month to fall… Massive unwinding seen from 104 level to 65 currently…
Although I mentioned in my last post that the world was coming to an end, I strongly believe that there is plenty of opportunity in the Indian markets. That being said, the US markets will be and have been a drag for India. However, I don’t believe the effects of the US and UK downturn will be recession inducing. In fact, I think India will actually come out stronger.
Of course, I would still err to the side of caution, especially because the markets have just been acting wild. Thus it makes sense to look at a large, steadily growing, but misvalued company such as Mahanagar Telephone Nigam Limited.
Lets start with the negatives: This is the company that I get my broadband connection from and boy has it made a bad impression on me! The government tie to MTNL certainly does not help its case either. And as you would assume the land-line growth, more than 80% of the business, is decreasing.
On the other hand it has Rs. 53.63 in cash/cash equivalents (incl short term investments) per share, with no long term debt. That is more than half of its current stock price (Rs 83.80) in cash! Backing out the cash makes the PE look amusing! Then taking into account the unprecedented credit crisis, it places MTNL in an powerful position.
Meanwhile on a segment basis, the growth in both the cellular and broadband businesses should partially offset the decline in revenues from fixed-lines. Furthermore, the soon to be launched 3G network should accelerate growth in the cellular business, although margins will decrease with the license fees for the spectrum allocation.
So this is what happened in the US. Banks started giving mortgages to people who had a poor credit record (sub-prime), and clearly couldn’t afford to pay back the loans. They knew this but thought that since house prices would always go up, borrowers could always refinance their loans against the additional equity due to appreciated house prices. Alternatively, banks thought that they could take over the defaulter’s home and sell it for higher than the original loan amount. Of course, what brought the house of cards down was the fact that of course house prices didn’t continue to go up: borrowers defaulted en masse so banks were stuck with a ton of houses (increase in supply of houses), and since they now stopped lending to people who couldn’t afford to pay, demand for houses fell. Falling house prices lead to more defaulting, which lead to a further fall in house prices and so on.
Why wouldn’ this happen in India? Two words: Black money. Property in India is purchased using both declared income, on which taxes have been paid (white money) and undeclared income, on which taxes haven’t been paid (black money). When a borrower takes out a mortgage in India, he’ll obviously only get the loan for the amount paid in ‘white’. However, if he defaults, the bank will take possession of the entire house, which is probably much higher in value because of the ‘black’ component. Only if there is an extremely aggressively fall in real estate prices - so much so that the black component is wiped out (which given our fairly strong domestic economy, is unlikely), do we have something to worry about.
So black money serves as a protective cushion - who would have though it?
First of all let me clarify that in my opinion, there is *absolutely no chance* that ICICI Bank can collapse. Its too well capitalized, its too big and its too important to the Indian financial system for that to happen.
I posted a small article this morning, which has been getting a lot of pageviews. I never expected, however that I’d get a response from ICICI themselves. This is what they left in the comments section of my post:
September 30, 2008
Dear Sir/ Madam,
We greatly value your relationship with us. In the context of the developments in the international financial markets, we thought it pertinent to bring to you our perspective of the prevailing situation.
We would like to bring to your attention that the Indian banking system is well regulated and significantly insulated from global developments. This is because it is mandatory for all Indian Scheduled Commercial Banks to retain 34% of the deposit base in the form of Government Securities (SLR) and cash with RBI (CRR). Besides, sound policies of RBI have ensured prudent credit practices in the Indian Banking system.
ICICI Bank is already compliant with the BASLE II requirement in respect of risk management practices and capital adequacy. At 13.4%, ICICI Bank has one of the highest capital adequacy ratios in the Indian banking industry. Last year, ICICI Bank raised Rs. 20,000 crores (US $ 5 billion) of equity capital, which almost doubled our equity capital base. We have a net worth of over Rs. 47,000 crores (US$ 10 billion), again one of the highest in the banking industry in India We have consolidated total assets of over Rs. 4,84,000 crores (over US $ 105 billion), which is diversified across a wide range of asset classes across retail, wholesale and rural banking.
ICICI Bank is amongst the most profitable banks in India. In FY 08, ICICI Bank made a profit of Rs. 4,158 crores (US$ 900 million).
ICICI Bank has the highest credit ratings in the Indian financial sector. We have AAA ratings for our instruments, such as senior bonds, subordinated bonds, and deposits. We have the highest foreign currency bond ratings assigned to any Indian bank from Moodys and S&P.
We continue to invest in growth, indicating our confidence in the opportunities in the Indian market. In 07-08, ICICI Bank added 650 new branches, taking the total strength to over 1400 branches.
We thank you for reposing trust in us over the years. We look forward to setting new benchmarks in service levels in India and to create a bank that you will continue to be proud of.
As a testimony to the above, please find below the clarification given by Reserve Bank of India.
Date : 30 Sep 2008
RBI Statement on ICICI Bank’s Financial Position
There are reports in some sections of the media that based on rumours regarding the financial strength of ICICI Bank, depositors are withdrawing cash at its ATMs and branches in some locations.
It is clarified that the ICICI Bank has sufficient liquidity, including in its current account with the Reserve Bank of India, to meet the requirements of its depositors. The Reserve Bank of India is monitoring the developments and has arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at its branches/ ATMs.
The ICICI Bank and its subsidiary banks abroad are well capitalised.
Alpana Killawala
Chief General Manager
Press Release : 2008-2009/412
Sincerely,
Nazia Sayeed
Office of Head Service Quality
ICICI Bank Ltd.
It was nice of the folks at ICICI to respond to my humble blog, albeit with a standardized message. I’d like to clarify that I don’t think that ICICI is going to collapse, but at the same time I do feel that it is relatively more at risk in terms of Subprime exposure than other Indian banks. I certainly do not think that given the level of depostitory requirements that Indian banks must comply with - that there’s any reason reason to start pulling out your money from ATMs. Just as the US government protect retail deposits, so would the Indian government.
At the same time, there is the possibility that ICICI will face larger than expected losses from its exposures. Make no mistake - ICICI has already earmaked $260mn+ (Rs. 1000 Cr.+) for losses due to exposure to Credit Derivatives. This was way back in January, and then was talked about again in March. A *lot* of time has passed since March, and alot of negative developments have also taken place.
My worry is that in light of the recent events (Lehman, HBOS, AIG collapse etc.) that there may be further losses. That’s the scary thing about the Subprime mess. When on entity falls over - other firms it owes fall over. Those other firms also owe somebody, who owe somebody else and so on. Suddenly, before you know it, you thought that a counterparty that was good for its promise to pay you what they owe you, no longer is in a position to do so.
According to this article in the Business Standard, its UK arm has 89% of its non indian investments book - estimated at $3.5bn - has an S&P rating of A- or above. ‘Only’ 18%, or $700mn has exposure to the US. I think that an ‘A-’ isn’t a fabulous rating, mind you. The highest rating given by S&P is AAA, after which we have AA, A, BBB, BB etc. to until D. Note that BB and below is rated as ‘Non investment grade’ or ‘junk’. And remember, these are the same ratings agencies that gave AAA ratings to those Subprime backed assets that are actually at the root of this entire mess.
The article goes on to say that ICICI bank asserts that the UK subsidiary has ‘no exposure’ to US subprime. Surely they do have some exposure, albeit indirectly, otherwise they wouldn’t have had that $264mn mark to market loss in the first place?
In fact, according to this article in the Financial Express, ICICI bank has a total of $2.2bn worth of expsosure to credit derivatives. What the underlying for these credit derivatives are, we don’t know. To an extent that is not even that important. I wonder, has ICICI booked all of those losses? Did it close out those derivative positions? Hopeful they did.
Thus, while a ‘collapse’ of ICICI bank, in my opinion, is highly unlikely, we may learn of larger than expected MTM losses on the back of credit derivatives. If this does happen, while the depositor doesn’t have anything to be worried about, it wouldn’t exactly be good news for the ICICI bank shareholder.
Disclaimer: This is not investment advice nor should be construed as such. Do *not* make any investment decisions based on what you read in this article, or anything else on this blog. All views presented here are solely the opinion of the author’s.
Somebody called me early this morning telling me that they had heard fresh rumours that ICICI bank was going to collapse in the wake of the credit crisis. Clearly, a number of people in Hyderabada also heard this rumour, and panicked. According to this TOI story, people were lining up at ATMs to pull their money out.
On September 17, ICICI bank’s management strongly denied rumours that the management was offloading ICICI shares. Share prices dropped from Rs. 720 on September 8 to Rs. 560 on September 17. They rose again to Rs. 634 on September 22, and are currently trading at Rs. 493, marginally down from yesterday’s close.
In my opinion, while ICICI may have not insignificant Mark to Market (MTM) losses from its exposure to credit derivatives, there is *no way* that ICICI bank would collapse. It’s India’s AIG, for all practical purposes. As the second largest bank in India, the regulator would never let such a thing happen. Moreover, even if it did face large MTM losses, given the fact that it recently raised $5bn in equity capital - I imagine that this is more than enough to tide it over in uncertain times.
If you don’t believe these rumours, then ICICI is looking pretty attractive, trading at a PE of 15, and almost a third of its yearly high in January of Rs. 1440.
Disclaimer: This post or any other content advice is not investment advice and should not be construed as such. All views presented here are solely the opinion of the author’s.
Disclosure: I don’t hold any shares of ICICI Bank.
Even those who were smart enough to recognize that the independent investment bank model was no longer viable thought that Goldman would get acquired.
There were whispers that the ~ GBP 103 Billion HSBC (the only mega cap bank stock to actually give investors a positive return year to date), would be the one to pick up the franchise. I for one, was one of the people who liked this story – it made sense right? There really didn’t seem to be anybody else who had the firepower at least liquidity-wise to pull off that kind of trade.
I was naive. I forgot about Goldman.
Firepower clearly has nothing to do with liquidity. The kind of lobby that Goldman commands is undeniable. How else do you explain the fact that Bear, Merrill, and Lehman were allowed to fail (more…)
Many are loudly criticizing Paulson’s mega bailout fund. $700bn is not a small amount considering the fact that the global GDP as of 2007 is estimated at around $55 trn (1% of global GDP), and the size of the US economy is around $14 trn (therefore around 5% of US GDP).
People are saying that the US taxpayer is getting squeezed from every which angle to make up for the irresponsibility of mega ‘sophisticated’ financial institutions. Not only is he having to deal with a fall in the prices of his real estate assets, costlier credit, job insecurity and business uncertainty, he’s now having to subsidize something that he doesn’t even understand. This is not entirely true however (more…)
I did a stint at AIG about a year back, helping them with restructuring their UK business into a consolidated entity. They were speaking to Standard & Poors to get a credit rating for the consolidated entity. They got the rating that they were looking for. I wasn’t surprised, the amount I heard about AIG’s gold standard risk management infrastructure and the highly risk averse investment mandate.
Of course this didn’t help much when the $440bn worth of Credit Default Swaps (CDS) that they issued to everybody and their uncle (more…)
A lot of people were criticizing BoA for overpaying for the third largest investment bank in the world at $50bn. Only time will tell, of course, but my feeling is that they did quite well to time the acquisition just days before the secretary of the US Treasury, ex-CEO of Goldman Sachs, Hank Paulson unveiled his plans to save the world through his $700bn US government fund.
After this announcement, most banking stocks that had been so badly beaten down over the last rallied 30% on Friday, and the UK FTSE closed a record 8% up. Such movements are unheard of in mature markets such as the US and the UK. If BoA had waited around, chances are that they would have had to pay more than the $50bn. (more…)
If you’ve been watching the market, even if not very closely, you’ll agree with me that it’s been – at the risk of sounding facetious – surreal.
Monday felt like a train wreck – Paulson’s refusal to bailout Lehman over the weekend and its subsequent bankruptcy announcement, and Merrill’s overnight sale to Bank of America (BoA) had my head spinning. If the Monday wasn’t black enough with news of Lehman and Merrill, we quickly learned that AIG was going around with a begging bowl trying to raise capital in the tens of billions to escape bankruptcy. Monday closed with the Dow 500 points down – that’s almost 5% - in contrast to the less that 1% movements that we’re used to seeing for that index.
In a discussion with a friend we realised that two global and highly esteemed (although Lehman had a more patchy 160 year history than Merrill Lynch) had within days just *poof!* ceased to exist. While BoA will probably retain the Merrill brand, its unlikely that my kids will ever hear the word ‘Lehman’. Indeed Lehman Brothers will probably be relegated to a notch in Barclay’s timeline on their website’s ‘About Us’ page.
I attended my first Startup Saturday Mumbai event today at the SP Jain Management Institute. I must say that overall I was quite pleased by the entire event. By the end of the event (in our true Indian style, people including the speakers and myself arrived late), 35 odd people showed up. This was a good mix of entrepreneurs, would-be entrepreneurs, bloggers and (unfortunately only) one person from the VC community – Hemir Doshi from IDG VC India. Both speakers were good, but I enjoyed listening to Rang De’s founders’ story more than the talk on the ‘importance of monitoring competition’. (more…)
In this meltdown of stock market, realty sector is bleeding the most. It is down 65% from its peak. The sector is under performing due to hardening interest rates and rising commodity prices. Many of the realty are now available at attractive valuations as a result of re-rating in this sector.
One of the growth pick in this segment is HCC. HCC is an integrated group with eight decades of experience and has interests in construction, real estate, and infrastructure development. HCC specializes in technical complex, new age construction in infrastructure projects, as well as EPC, BOT, integrated projects and townships. (more…)
The fact is that I was terrified of even stepping out from the aircraft. I had been warned by virtually everyone who had traveled to South Africa, “dude, be careful”. One person even went to the extent of suggesting that I carry along a gun (seriously!).
However, now that I have spent a few weeks here, I feel that the dangers of visiting this rather beautiful country have been grossly exaggerated. Sure, there is crime! But people here are so neurotically pre-occupied with the subject that our poor ol’ bandit hardly stands a chance: electric fences, motion activated alarm systems, laser security, steel barges and if that isn’t enough, there is a good chance that the “victim” will own a personal weapon.
Leaving aside the local “culture” however, I find South Africa to be a rather attractive investment destination (more…)
Analysts blame the high interest rate environment on the poor results. Some 70% of car sales are financed, and high interest rates make it more expensive to take out loans to pay for their car purchases. The small car segment is thought to be more sensitive to interest rate fluctuations, as the middle class families that buy from this segment cannot afford to make outright purchases.
I largely agree with the rationale presented above. However, the high interest rate environment should have had an equally damaging effect on Hyundai’s sales as well. Even if you take into account that Hyundai’s August 2007 base of 16,000 cars was lower than Maruti’s base of 60,000 cars – you cannot explain away such a dramatic a dramatic difference in results.
The reason for Maruti’s poor performance goes beyond the interest rate environment. Since the Swift Maruti hasn’t had any new launches of note. Moreover, its marketing has been limited and unfocussed. Its strategy of driving sales through schemes in the rural and semi-urban segment – although intuitively appealing (tap into less served segments) – failed to provide results. The likely reason is that households in these regions, who have fewer financing options, are even more interest rate (more…)
The P/E (price / earnings) ratio is one of the key measures of market sentiment towards a stock. It measures the relationship between market price and current profits (earnings) and can be calculated as follows;
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“Hedging” or opening up a “hedge position” is the process of establishing an exposure to a particular risk in order to offset an existing but opposite exposure. The term originates from the game of roulette where the lines between betting squares are called hedges. A bet place on the “hedge” wins if the ball lands on one of the numbers either side of it but the payout is lower than for betting on the number itself. The phrase “hedging you bets” became common parlance in English and over time has become established finance terminology. 
