Globalisation : India, the Super power in making

Target 2025: India, the Global Economic power

Dear friends,
I spent my last weekend attending the 18th Annual conference of Karnataka State Chartered Accountants Association. The theme of the conference was Power of CA-Challenge the potential. The conference revolved around how the profession needs to adapt itself to take utmost advantage of the changing global scenario and provide leadership to the business community in its endeavor.

However, the best part of the conference was the keynote address by Shri Mohandas Pai, CFO, Infosys Technologies. In his impeccable style, Mr. Pai addressed the gathering on Globalisation and its challenges and its impact on India. I would not dwelve much on the other aspects and would confine my article to points that should be of interest to the common Investor.

The world dynamics are changing
The world is shrinking into a global village and the dynamics are changing. US and Europe, which used to rule the world, are now bowing before the developing economies. The opening up of bilateral trade has done wonders to the developing economies and has provided them bigger muscle power. Not only US and European countries are worried about the trade balance with Asian countries, they re also worried on the front that even if the inter-asian countries trade flourishes, it would pose a major challenge to them. China has already proved its mettle and India is fast approaching the big league.

India is Young
Yes friends, more than 70% of India’s population consists of the middle age working people and the younger generation. That means the large population of India, which was once considered as a drag on its growth has finally converted itself into its strength. The young workforce of India will convert India to a global economic super power in the next 20 years. This advantage to countries like china and India is due to the old population in European countries and US. The fertility rate in these countries has fallen sharply and poses a threat to the economies of these countries in long term. These countries will need to source young workforce from countries like India to maintain their economies and will open the gates of wealth for countries like India.

Right skill sets required
Though India has an advantage of large and young population, a significant part of India resides in villages and good education is still a distant dream for a bigger part of the society.
If India has to take utmost advantage of this young generation, it has to invest significantly in providing education to this section so that they can equip themselves with the right skill set to exploit the maximum.
One more thing Mr. Pai pointed out was the contrast between Indian and western farmers. A major part of Indian farmers are poor while the farmers in western countries have a good standard of living. India has one of the highest cultivable lands in the world, still our farmers are poor. It is high time that our farmers are educated about the best way of framings so that they can also in turn add to India’s success.

This is India’s century
The 16 & 17th century belonged to the English, the 18th & 19 th century belonged to the European countries like Germany and the united states. China ruled the 20th century with its robust growth. Now this is the turn of India to become the global economic superpower. So guys, cheer up to be part of India’s success.
The stock markets are considered to be the barometers of the economy and the way Indian markets have grown up in the recent past is the testimony of India’s potential. Read More!

IPO Update: Gitanjali Gems

Diamonds are shining,but not the financials

Gitanjali Gems is entering the capital markets with its initial public offer of 1.7 Crore shares offered at a price band of Rs.170-195. Investment Guru recommend investors to subcribe to the issue. The company does not have any listed peers in the market and hence the listing of this stock will determine the valuation for such companies. Investment Guru expects moderate listing gains on listing of Gitanjali gems.

Let’s look at the Offering :

Gitanjali is the largest manufacturer and retailer of diamond and jewellery in India. The company has got two-diamond manufacturing facilities located at Borivali in Mumbai and at the SEZ in Surat. Facility at SEZ, mumbai caters to export and produces gold and platinum diamond studded jewellery.The facility at MDC, Mumbai caters to retail operations in Inida.

Gitanjali boasts of brands such as Nakshatra, Asmi, Gilli and D’Damas. These brands feature among top 10 jewellery brands in India.

For branded jewellery, the company has in place a large retail setup, which includes 26 exclusive distributors across India, around 620 outlets including those in host stores, five stand alone stores and 17 franchisee stores in 30 cities and towns in India

India continues to be a leading diamond processor in the world. India accounts for 55% of global polished diamond market in terms of value, 80% in terms of caratage and 92% in terms of pieces.

The company sources rough diamonds from countries such as Australia, Russia and South Africa. The major export destination of cut and polished diamonds are USA, Hongkong and UAE.

The object of the issue is to achieve benefits of listing and raising capital. The fund would be used for investment in subsidiaries, joint ventures and associates. The funds will also be used for setting up diamond manufacturing facility at Hyderabad and for future expansion puposes.

For Six months ended Sep,2005, the company has clocked revenues of Rs.11552 Million and a net profit of 245 million. If we expect the company to maintain the same growth in the next half of the year, the offer comes ata PE mutliple of 22 times.

The weighted average EPS for the consolidated entity comes to Rs.4.2 . Average return on networth comes to 6%. Net asset value per share comes to Rs.86.

Despite the not so exciting financials, the company future growth looks good with more market being captured by the organised sector. Also the demand for diamond jewellery is increasing in India which would further boost the local operations of the company.

Issue opens on : February 16, 2006
Issue closes on : February 21, 2006
Retail Investors :Rs. 100,000.
Registrar : Karvy Computershare
Read More!

Investment Guru rules ; Sensex turns 10K

With liquidity refusing to dry up, Is 11K on the cards ?
The BSE sensex touched the magical number of 10K in yesterday's trade, much to the delight of the Investors. When the experts were getting nervous at the beginning of this year and claiming that the road to 10K would not be easy, Investment Guru Blog showed the right way to the Investors. The blog carried an article stating that 10 K would be achieved not later than by March,2006.
With the pyschological mark of 10K beyond us, certain experts have again started ringing caution bell. But let me tell you, this time they are not fully wrong. I will explain you 'why' later in the article.

The 10K events has aslo carried uncertainty in the minds of Investors as to what should be future course of action. Should they books profits on the table or should they hold in anticipation of further rally ? Lets take a look at what is going in in the markets.

What's up with the India Growth Story ?
The Q3 results have been satisfactory except for the oil marketing companies. The aggregate profitability of Corporate India (excluding these oil marketing companies) has grown by 23 %. The GDP growth rate is also expected to outperform the economists estimate of 6.5 to 7%
Foreign investors are still queued up to invest in India.

India Vs. Other growth economies
As per current estimated , India Inc is trading at a P/E of 18. This looks reasonable if we compare it to the P/E of other growth economies like Taiwan, Hongkong, Korea which are currently running at P/E levels of 16-21.

The above data may suggest that the valuations going ahead would look stretched and the Indian markets may have lost its competitive advantage to other economies. However, Investment Guru is of the view that Indian economy has a potential which is unmatched to these econmies and this will held the markets in a strong position in the long term.

FII & Retail Combo
FII's have pumped in arounf $3 Billion in the last 1000 point rally. The US and Japanese are still queued up to invest in the India story. Another interesting thing was that this 1000 pts. rally was not fuelled only by FII's, but a equal credit goes to the retail investors who have participated in the rally.

What's hot, what not ?
Though the past rally has been broadly secular in nature across caps and sectors , the sectors which are expected to remain hot would be Software, Pharma , Private sector banks, aluminium, copper and infrastructure.

Steel and PSB's may show some stagnant growth and the oil marketing companies would be picked only by those with contrarion approach. The upstream oil companies will continue to attract big ticket investments. The outlook for telecom sector is stable with negative bias due to pricing pressure. Auto & Auto ancillaries would continue to be performer.

A note of caution
Since the markets have reached a stage where the stock prices are driven more by liquidity than pure valuations, it is advisable to take caution for the near future. The traders are busy making money with the volatility round the corner and investors should differenciate good stocks with momentum stocks unless they are in trading mood.

A special note of caution for the recently listed IPO's which have seen unrealistic valuations. Please check the fundamentals and growth potential of these stocks before investing in them.

Investment Guru will continue to guide you through this exciting journey of the Indian Stock Markets

Happy Investing !! Read More!

The Third Eye: Rajesh Exports

All that glitters is Gold !!!

Rajesh Exports scrip has show good strength in last few sessions. The stock has been able to garner investor confidence with slew of order wins and impressive performance.

The company has announced results for the third quarter with Revenues clocking a 46% growth. Net profits zoomed by 114 % and exports grew by 46%.

The company has recently bagged an order from a major jewellery wholesaler worth Rs.1.5 billion which will be executed by March,2006.

Given the strong performance in Q3 and the orders in hand, the company is expected to post robust results for Q4 too. The performance of the company has not yet been fully factored in terms of its stock price and hence give ample room to the stock for upward movement. Read More!