Sunday, 4 October 2015
Global Learning Solutions: Start Your Day With These Success mantra
Global Learning Solutions: Start Your Day With These Success mantra: The world is moving fast and our expectations from our lives have changed. We are more career oriented now, seek to beat the odds and be e...
Friday, 2 October 2015
PE Ration Definition & Importance
The price-to-earnings ratio, or P/E ratio, is an equity valuation multiple. It is defined as market price per share divided by annual earning per share.
>"Trailing P/E" uses net income for the most recent 12 month period, divided by the weighted average number of common shares in issue during the period. This is the most common meaning of "P/E" if no other qualifier is specified. Monthly earnings data for individual companies are not available, and in any case usually fluctuate seasonally, so the previous four quarterly earnings reports are used and earning per share are updated quarterly. Note, each company chooses its own financial year so the timing of updates varies from one to another.
- "Trailing P/E from continued operations" uses operating earning , which exclude earnings from discontinued operations, extraordinary items (e.g. one-off windfalls and write-downs), and accounting changes.
- "Forward P/E": Instead of net income , this uses estimated net earnings over next 12 months. Estimates are typically derived as the mean of those published by a select group of analysts (selection criteria are rarely cited).
Some people mistakenly use the formula market capitalization/net income to calculate the P/E ratio. This formula often gives the same answer as market price /earning per share , but if new capital has been issued it gives the wrong answer, as market capitalization = market price × current number of shares whereas earning per share = net income /weighted average number of shares.
Variations on the standard trailing and forward P/E ratios are common. Generally, alternative P/E measures substitute different measures of earnings, such as rolling averages over longer periods of time (to attempt to "smooth" volatile or cyclical earnings, for example),[3] or "corrected" earnings figures that exclude certain extraordinary events or one-off gains or losses. The definitions may not be standardized. For companies that are loss-making, or whose earnings are expected to change dramatically, a "primary" P/E can be used instead, based on the earnings projections made for the next years to which a discount calculation is applied.
Interpretation
By comparing price and earnings per share for a company, one can analyze the market's stock valuation of a company and its shares relative to the income the company is actually generating. Stocks with higher (or more certain) forecast earning growth have a higher P/E, and those expected to have lower (or riskier) earnings growth usually have a lower P/E. Investors can use the P/E ratio to compare the value of stocks: if one stock has a P/E twice that of another stock, all things being equal (especially the earning growth rate ), it is a less attractive investment.Companies are rarely equal, however, and comparisons between industries, companies, and time periods may be misleading. P/E ratio in general is useful for comparing valuation of peer companies in similar sector or group.
.
Friday, 25 September 2015
What is MAT
What is this MAT issue pertaining to FIIs, then?
This Rs 40,000 crore demand is a tax pertaining to years before Finance Minister Arun Jaitley announced scrapping of MAT. Therefore, the tax demand is legitimate although it is likely to hurt investment sentiments.
MAT
Minimum Alternate Tax (MAT) is a tax levied on short- and long-term capital gains and interest income.
The tax rate is 20% and goes back as far as Financial Year 2009.
What is the Government asking?
CLSA said, "Government officials are largely going by the precedent of the case of Castleton Investments, wherein the Authority for Advance Ruling (AAR) gave a verdict in August 2012, that Castleton is liable to pay MAT when it transferred shares from a Mauritius entity to a Singapore entity. The case is currently with the Supreme Court. If the Supreme Court upholds the AAR ruling then the case of the income tax authorities will become very strong. If the Supreme Court strikes down the AAR ruling, then the case will weaken considerably.
The government is simply asking funds to pay up the tax that is due to India. Finance Minister Arun Jaitley has said that total tax collection from this avenue could be in the range of Rs 40,000 crore and he could fund India's irrigation projects for farmers with that money.
Moreover, the new government had clearly said that no new retrospective taxation cases will be opened but the ones currently underway will have to reach their logical conclusions.
Since this tax demand is of a period prior to abolishing MAT, the demand isn't unjust.
Jaitley has reiterated that India is not a tax haven.
FIIs in India
Foreign Institutional Investors (FIIs) ownership in Indian equities was at an all time high of 20.7% as on December 31, 2014.
The investment jumped 40% from FY14 to FY15.
The US (32%) and Mauritius (22%) together account for 50% of the total foreign investments in India followed by Singapore and Luxembourg at 9% each.
Thursday, 24 September 2015
Mukesh Kapri: What is EPS & Its Significance for an investor .
Mukesh Kapri: What is EPS & Its Significance for an investor .: EPS = Earnings Per Share Earnings per share, also known as EPS, This is a very important number in business. it tells shareholde...
Sunday, 13 September 2015
NCFM Financial Market Courses NCFM (NSE) National Stock Exchange @8527203757: NCFM National Stock Exchange (ऐन सी एफ एम) N...
NCFM Financial Market Courses NCFM (NSE) National Stock Exchange @8527203757:
NCFM National Stock Exchange
(ऐन सी एफ एम)
N...: NCFM National Stock Exchange ( ऐन सी एफ एम ) NSE: नेशनल स्टॉक एक्सचेंज NCFM (NSE)= National Stock Exchange NCFM Foundati...
NCFM National Stock Exchange
(ऐन सी एफ एम)
N...: NCFM National Stock Exchange ( ऐन सी एफ एम ) NSE: नेशनल स्टॉक एक्सचेंज NCFM (NSE)= National Stock Exchange NCFM Foundati...
Recovery in stock price happened when the retailer loosed all his patient ----
After falling the almost 83% the share price of Amtek Auto Turned in green with the upside movement of 53% on 11 Sept 2015, When promoter infuse near about 75,00,00,000 ....Why they did not come forward when 1st time all this news came in to media and sudden fall was in the stock -Being a promoter they should have some responsibility regarding investor money . But then another question comes in mind when the regulatory body SEBI is so late then why other would come on front. Same case we have seen in so many instance Ie. Investor suffered loss in In Adai Enterprises due to corporate action. ....
Indian Stock market need more strict surveillance system ....
...
Indian Stock market need more strict surveillance system ....
...
Thursday, 27 August 2015
Trading in equity market is not suitable for retail market
After shrinking approx 7 Lakh Cr. Market Turn in to Green globally ,,,90% of the money lost from poor man's pocket ...playing short term in equity market is never valuable for retail investor :
Tuesday, 9 June 2015
NIFTY BELOW 8000 AFTER ALL POSITIVE DOMESTIC FACTOR ???
After the record high in January NIFTY fall down almost 10% in the current financial year ,
Where as Domestic data of may-june 2015 are more supportive as compare to Dec-Jan
Inflation are ate lowest side . GDP no are good , RBI Rate cuts , In spite of all domestic factor market fallen and about the break crucial support level , Most of retail investor are confuse whether this should take an opportunity or need to wait for more correction or for a bottom out , Look at today's
Morgan Stanley SENSEX TARGET 30000 TILL Dec 2015
Although Q4 earning season has been a dampener for Indian equities and woes of a poor monsoon season looms large, experts from Morgan Stanley are super bullish on India’s prospects. On the sidelines of the Morgan Stanley India Summit, Jonathan Garner Chief Asia & EM Equity Strategist says while Japan is among the most preferred market right now, India too has the potential to see a significant uptick in growth. Agreeing with Garner's view, Chetan Ahya, Co-Head of Global Economics & Chief Asia Economist, said that India gross domestic product (GDP) could stand in at 6.5 percent for FY16 and 7 percent for FY17. This estimate, he adds, is based on the earlier GDP calculation method and hence is likely to be higher. Furthermore, Ahya says the market concerns of poor monsoon stoking higher inflation are unfounded. Ahya says unless there's a drought-like situation, there is no real reason for inflation to rise. Citing current account deficit (CAD) and rural wages, Ahya says most of the sources of inflation have been killed and it is likely to come in at 4.75 percent for FY16. On the micro-market front, Garner believes earnings will see a meaningful jump in the next 2-3 quarters and he expects the Sensex to close the year over 30,000. Below is the verbatim transcript of Jonathan Garner and Chetan Ahya's interview with Latha Venkatesh on CNBC-TV18. Q: To what do you attribute this mid April onwards selling that we are seeing in emerging markets to some extent as a whole but a little accentuated in India? Is it that EM has lost its sheen as an asset class? Garner: Emerging markets is certainly still our least preferred area in global equities. Our top pick is Japan which is being going the other direction and unfortunately yet again the earning season has turned out to be quite disappointing and that includes India. In terms of India’s actual performance, most of the underperformance of India versus the rest of emerging markets took place earlier in the year between January and March. At the moment, India is holding its own relative to other EM. The EM index overall has been down 11 straight days. Q: To what extent should we worry about things like German bunds rising? I remember mid-April it was 0.05-0.07 percent on one day, now almost 85 bps higher and likewise US treasury is 1.9 percent mid-April and now almost 2.4 today perhaps 6 bps lower but should we worry about these bonds, is this the reason why we are seeing this outflow? Garner: Earnings is one of the catalyst for the performance. Certainly rising bond yields under strong US dollar has been the other catalyst. Japan for example a weak yen helps corporate earnings but for most of emerging markets, you get a negative dollar translation effect which is that dollar strengthens and your debt servicing cost also rise. However, we don’t think India is as vulnerable as other parts of our coverage universe this time around. So at this conference two years ago we were very worried about India but we are hopeful this time around that India will be more insulated from these problems than other emerging markets. Q: Do you think this yield hardening scenario continues for sometime so we should worry that emerging market equities as an asset class is going to be under pressure for sometime? Garner: That is right. We see the 10-year yield going higher and we think we are only mid-way through a probably 5-7 year dollar bull run and this is a negative feature for emerging markets overall. Now that said in terms of India’s near-term outlook if there is a better chance that growth picks up in India than almost anywhere else that we cover in the emerging world, that is an early sign of encouragement in that regard then that is the reason why we are overweight India within this overall bad environment in emerging markets. Q: So you would think that if you have to give me a view for the next 12 months, it would be not terribly favourable for emerging markets but India could outperform? Garner: That is our view. We have been ratcheting up our exposure to India now to quite a large overweight as the market has had a relatively poor year that is what we like to do, we like to buy low sell high and if our economics is correct that strategy should work quite well. Q: We just had a credit policy which gave the third rate cut for 2015 or the third rate cut for the cycle, but the bond markets were not enthused what are your initial comments on the credit policies take away? Ahya: The bond markets were not enthused for two reasons because of what is going on in the global market; today global bond yield are rising and second is that Reserve Bank of India (RBI) a very hawkish inflation forecast. I know that there was a lot of focus in the media on the January 2016 but for March 2016 it was close to 6.4 percent. That was definitely a big spanner in the view. So that is what I would explain the bond yield rise in India too. Q: What is your own sense, inflation gets as bad as that? Let us assume for the moment that the monsoon is a mediocre not a drought year but not the best of monsoons. Ahya: Except for a drought I struggle to find a reason why inflation will go up to 6.4. Crude is unpredictable and our view is that crude is not shooting up to 100. If it stays below 80, that is not going to be a big deal. Fuel directly doesn’t have much impact on consumer price index (CPI) as we know. So from drivers of inflation perspective, how we have approached is two sources of drivers - one is domestic and the second is external. As far as the domestic drivers are concerned the first and the most important issue at length is rural wages. They have collapsed. They are growing at 5 percent. Inflation is a 5 percent so on real basis rural wages are growing at 0 real rate. Similarly the second biggest domestic sources of inflation is the government spending. That on a 12 month trailing is growing at – central government is growing at 5 percent which is also on a real basis growing at zero. So the domestic sources of inflation have been killed. Then comes the issue of the external side. On the external side it is global commodity prices. We had macro imbalances like current account deficits so currency was volatile that was adding to the pressures on domestic inflation. So, from all the sources of inflation that I can see, I struggle to find one. Property prices they are also not growing and probably close to at zero. So housing, imputed rental cost and CPI which is about close to 10 percent rating is also going to continue to decelerate. So I want to really conjure up a number, we are at 4.75 for March 2016 and we are not seeing it going up above 5 in our forecast. Only for a short while, with some base effects it goes to 5.1-5.2. Largely it is around 5 or below. You have to really make a bearish call on weather and then if it is weather how long can I assume inflation is going to be high because of weather. What happened because of unseasonal rains? Nothing happened, we have enough inventory. Domestic wheat and rice prices are actually higher than international prices. It is going to be hard to be get even food inflation with some weather problems. I am not saying that they are doing the wrong thing, they have to make a rational and conservative call but the market's stress out of it is I would say is probably bit too much. Q: In any case, as Jonathan will definitely second my view, India is not bought by foreign investors or any investor because it has got balance, because the macro economic parameters are now in balance or there is quality in other macro economic parameters – the only parameter why India is bought is growth. So, how does that look to you because RBI lowered that as well? Ahya: Growth is a little complex one and that I think is probably agreeable. The world is in a difficult shape. We have very weak neighbour which is China and we think that is one of the key drive on the global growth. In our global universe that we cover, China is about close to 20 percent on PPP weighted basis. We all look at the headline number but we have another proxy for China but that is in kind of recession. So, if you impute the right China numbers, the global growth is weak. Therefore we are also seeing that in some form or the other, of course in form of lower commodity prices and inflation but also in form of lower export growth. Exports are contracting for five consecutive months, together goods plus services exports to GDP is 24 percent. So, we can’t ignore that line item. So, that is the first one. As far as the earnings growth is concerned, I am getting a bit into Jonathan’s area but there is an element of commodity companies seeing the same impact of global commodity prices and we see that impact in wholesale price index (WPI) inflation. It is now contracting as well. So, that is showing up in total topline growth and earnings growth. So, on earnings growth there is a complex story from the global side which is going on. From a growth perspective, whether I should be concerned or not, I look at just one single parameter which is what is happening to the capex cycle. On the capex cycle, you look at engineering and construction companies order book, on an aggregate some are giving bad numbers, some are giving good numbers particularly Larsen and Toubro (L&T) had a big one. It is heavyweight on that total number and most importantly a transparent number, no messing around with it is capital goods imports. That is now up for five consecutive months in a significantly positive territory. So, capex cycle is picking up and then the other side of the capex cycle is the FDI. On a gross basis, they are up by 25 percent, on a net FDI basis because of domestic entrepreneurs now not going outside is up 90 percent on a year-to-date (YTD) basis. So, we have seen a big increase in capex. So, we think that the capex story is holding up the overall growth story and so we are not yet turning bearish on India. Q: What are you working with as a number, if you are working with the old GDP series then what would it be? Ahya: I would prefer to look at old GDP series. So, we were at 4.5 percent trough in FY13, we are looking at 6.5 percent in March 2016. So, that is a meaningful steady acceleration that we are building and then March 2017 we are at 7 percent. Q: We were expecting this turn, 4.5 percent is FY13. I am sure FY14 also by the old series is closer to 5.5 percent but we have not seen the earning cycle turn. In which quarter do you think we are going to see a meaningful jump in earnings growth? Garner: I would say in the next two-three quarters. In the most recent quarter we are running at about 1 percent year on year – that’s probably the trough and if we get this growth pick up that I am talking about, we could be looking at high teens year on year earnings growth by this time next year and that’s a better outlook for earnings than we have almost anywhere else in emerging markets. Many we are underweight countries which are trapped in quite deep or severe recession places like Brazil or South Africa or indeed Russia and actually with worse currency outlook that India has. So that should be borne in mind. Q: You would say India could give an earnings growth this year in FY16 of over 15 percent? Garner: I think it is entirely possible. If you look at the March 2017 yearend, my colleague Ridham Desai, who looks after India in detail, is about 15 percent above consensus – that has an effect on forward multiple on the market. If he uses consensus earnings then India is trading above one year forward about 16 times and that is back inline with long run averages. The entire Modi premium in Indian equities versus the rest of emerging markets is now gone now, we are back in valuation relative terms to where we were at the end of 2013. That’s why we have been looking to upgrade India. Q: If indeed the RBI is able to achieve a stable, if not 4 percent at least 5 percent inflation over the two years that we have been talking about, will that up the valuation matrix because it is going to be stable inflation country? Garner: It depends what happens to valuations globally, but that multiple I just gave for India is little bit below the multiple on the S&P and on Europe and we think it is more than fair for the return on equity that India delivers right now and we are at the peak, we are trading about 60 percent forward PE premium to emerging markets and that was late last year and that’s now almost halved particularly with the underperformance from January to March. Q: Nevetheless, the China contradiction is a little difficult to understand for an Indian investor. When we speak to an economist like Chetan, they are continually telling us that China is going to do worse with each passing year in terms of gross domestic product (GDP) growth. And yet, we saw this extra ordinary performance in the stock markets. Do you think that stock market performance will not sustain? Garner: If you look at the Asia markets, we have argued that the risk reward has deteriorated and going forward it is getting less attractive. For the off-shore markets, the MSCI China, we downgraded from overweight to equal weight recently. MSCI China formed emerging markets about 4,000 basis points over a year. So, in terms of booking profits on that and rotating towards India that has underperformed recently, that is what we have been trying to do. Q: But, with the MSCI Index getting recast and possibly A-shares of China being included in that index, could there be a pull of money possibly intended towards India going towards China for a tactical gain? Garner: We will find out about that tomorrow. We think it is a close call, we do not know for sure what is going to happen. But even if it does happen, there is probably only about one percent of the MSCI Benchmark shift that is likely to take place. So, China’s A-shares will not come in at a full market capitalising initially; they will apply a probably a five percent free-float rating. And one percent is a tracking error; it is the size of a market like Poland which investors either decide that they want to be in it or they do not. I really do not think it has a particular significance for India, this event tomorrow. Q: What is your forecast of China? Ahya: The headline number is something that we have to try and predict as to where the official numbers will be, so that is around seven. But the industrial China or the one which matters for the rest of the world which is what is measured in MS Checks, as we call it is in a recession condition. Or the other number to look at would be non-oil import growth in China. That is averaging about minus 15 percent in the first four months of the year. So, I would say that we would rather look at these indicators to know what is going on in China in terms of growth trajectory. Q: Considering the kind of inflation forecast you have, how many more rate cuts are you expecting from the Reserve Bank. Ahya: We are expecting another 50-75 basis points by March, 2016. Q: So, what might be either the ten-year yields or base rate for that matter? You see that also falling by about one percentage point; the cost of money in India for borrowers. Ahya: That is right, you have to look at the weighted average yields on loans and advances; that would probably be down by about 75-100 basis points. And the other measure could be looking at commercial paper rate which is already actually down quite significantly. That could also be down by another 75-100 basis points in another six to seven months time. Q: Well, you are in good company. Aditya Puri or HDFC Bank also told us that he expects base rates to fall by around 100 basis points or at least 75 basis points in the next 12 months. You gave us an earnings forecast, how much do you think the Nifty or the Sensex might gain in the next 12 months and in the next 24 months if that is a more comfortable time period? Garner: Getting back above 30,000 on Sensex is really quite likely and really that is the target that my colleague Ridham Desai has. So, weighted scenario probability of going back above 30,000 on Sensex a year from now seems likely to us. Q: But, more in terms of equity returns over the next 12-24 months? Garner: I guess you are going to see probably reasonable double digit returns from here for the dollar investor and the Indian rupee investor given we think rupee is likely to be reasonably stable. Q: Would it be realistic to expect a 15 percent equity return in the next 12 month would say, 10-15 percent, 12 months out and then obviously, we would want to review the situation but, that is much better than the forecast we have for emerging markets overall, where we have maybe three to five percent upside
Where as Domestic data of may-june 2015 are more supportive as compare to Dec-Jan
Inflation are ate lowest side . GDP no are good , RBI Rate cuts , In spite of all domestic factor market fallen and about the break crucial support level , Most of retail investor are confuse whether this should take an opportunity or need to wait for more correction or for a bottom out , Look at today's
Morgan Stanley SENSEX TARGET 30000 TILL Dec 2015
Although Q4 earning season has been a dampener for Indian equities and woes of a poor monsoon season looms large, experts from Morgan Stanley are super bullish on India’s prospects. On the sidelines of the Morgan Stanley India Summit, Jonathan Garner Chief Asia & EM Equity Strategist says while Japan is among the most preferred market right now, India too has the potential to see a significant uptick in growth. Agreeing with Garner's view, Chetan Ahya, Co-Head of Global Economics & Chief Asia Economist, said that India gross domestic product (GDP) could stand in at 6.5 percent for FY16 and 7 percent for FY17. This estimate, he adds, is based on the earlier GDP calculation method and hence is likely to be higher. Furthermore, Ahya says the market concerns of poor monsoon stoking higher inflation are unfounded. Ahya says unless there's a drought-like situation, there is no real reason for inflation to rise. Citing current account deficit (CAD) and rural wages, Ahya says most of the sources of inflation have been killed and it is likely to come in at 4.75 percent for FY16. On the micro-market front, Garner believes earnings will see a meaningful jump in the next 2-3 quarters and he expects the Sensex to close the year over 30,000. Below is the verbatim transcript of Jonathan Garner and Chetan Ahya's interview with Latha Venkatesh on CNBC-TV18. Q: To what do you attribute this mid April onwards selling that we are seeing in emerging markets to some extent as a whole but a little accentuated in India? Is it that EM has lost its sheen as an asset class? Garner: Emerging markets is certainly still our least preferred area in global equities. Our top pick is Japan which is being going the other direction and unfortunately yet again the earning season has turned out to be quite disappointing and that includes India. In terms of India’s actual performance, most of the underperformance of India versus the rest of emerging markets took place earlier in the year between January and March. At the moment, India is holding its own relative to other EM. The EM index overall has been down 11 straight days. Q: To what extent should we worry about things like German bunds rising? I remember mid-April it was 0.05-0.07 percent on one day, now almost 85 bps higher and likewise US treasury is 1.9 percent mid-April and now almost 2.4 today perhaps 6 bps lower but should we worry about these bonds, is this the reason why we are seeing this outflow? Garner: Earnings is one of the catalyst for the performance. Certainly rising bond yields under strong US dollar has been the other catalyst. Japan for example a weak yen helps corporate earnings but for most of emerging markets, you get a negative dollar translation effect which is that dollar strengthens and your debt servicing cost also rise. However, we don’t think India is as vulnerable as other parts of our coverage universe this time around. So at this conference two years ago we were very worried about India but we are hopeful this time around that India will be more insulated from these problems than other emerging markets. Q: Do you think this yield hardening scenario continues for sometime so we should worry that emerging market equities as an asset class is going to be under pressure for sometime? Garner: That is right. We see the 10-year yield going higher and we think we are only mid-way through a probably 5-7 year dollar bull run and this is a negative feature for emerging markets overall. Now that said in terms of India’s near-term outlook if there is a better chance that growth picks up in India than almost anywhere else that we cover in the emerging world, that is an early sign of encouragement in that regard then that is the reason why we are overweight India within this overall bad environment in emerging markets. Q: So you would think that if you have to give me a view for the next 12 months, it would be not terribly favourable for emerging markets but India could outperform? Garner: That is our view. We have been ratcheting up our exposure to India now to quite a large overweight as the market has had a relatively poor year that is what we like to do, we like to buy low sell high and if our economics is correct that strategy should work quite well. Q: We just had a credit policy which gave the third rate cut for 2015 or the third rate cut for the cycle, but the bond markets were not enthused what are your initial comments on the credit policies take away? Ahya: The bond markets were not enthused for two reasons because of what is going on in the global market; today global bond yield are rising and second is that Reserve Bank of India (RBI) a very hawkish inflation forecast. I know that there was a lot of focus in the media on the January 2016 but for March 2016 it was close to 6.4 percent. That was definitely a big spanner in the view. So that is what I would explain the bond yield rise in India too. Q: What is your own sense, inflation gets as bad as that? Let us assume for the moment that the monsoon is a mediocre not a drought year but not the best of monsoons. Ahya: Except for a drought I struggle to find a reason why inflation will go up to 6.4. Crude is unpredictable and our view is that crude is not shooting up to 100. If it stays below 80, that is not going to be a big deal. Fuel directly doesn’t have much impact on consumer price index (CPI) as we know. So from drivers of inflation perspective, how we have approached is two sources of drivers - one is domestic and the second is external. As far as the domestic drivers are concerned the first and the most important issue at length is rural wages. They have collapsed. They are growing at 5 percent. Inflation is a 5 percent so on real basis rural wages are growing at 0 real rate. Similarly the second biggest domestic sources of inflation is the government spending. That on a 12 month trailing is growing at – central government is growing at 5 percent which is also on a real basis growing at zero. So the domestic sources of inflation have been killed. Then comes the issue of the external side. On the external side it is global commodity prices. We had macro imbalances like current account deficits so currency was volatile that was adding to the pressures on domestic inflation. So, from all the sources of inflation that I can see, I struggle to find one. Property prices they are also not growing and probably close to at zero. So housing, imputed rental cost and CPI which is about close to 10 percent rating is also going to continue to decelerate. So I want to really conjure up a number, we are at 4.75 for March 2016 and we are not seeing it going up above 5 in our forecast. Only for a short while, with some base effects it goes to 5.1-5.2. Largely it is around 5 or below. You have to really make a bearish call on weather and then if it is weather how long can I assume inflation is going to be high because of weather. What happened because of unseasonal rains? Nothing happened, we have enough inventory. Domestic wheat and rice prices are actually higher than international prices. It is going to be hard to be get even food inflation with some weather problems. I am not saying that they are doing the wrong thing, they have to make a rational and conservative call but the market's stress out of it is I would say is probably bit too much. Q: In any case, as Jonathan will definitely second my view, India is not bought by foreign investors or any investor because it has got balance, because the macro economic parameters are now in balance or there is quality in other macro economic parameters – the only parameter why India is bought is growth. So, how does that look to you because RBI lowered that as well? Ahya: Growth is a little complex one and that I think is probably agreeable. The world is in a difficult shape. We have very weak neighbour which is China and we think that is one of the key drive on the global growth. In our global universe that we cover, China is about close to 20 percent on PPP weighted basis. We all look at the headline number but we have another proxy for China but that is in kind of recession. So, if you impute the right China numbers, the global growth is weak. Therefore we are also seeing that in some form or the other, of course in form of lower commodity prices and inflation but also in form of lower export growth. Exports are contracting for five consecutive months, together goods plus services exports to GDP is 24 percent. So, we can’t ignore that line item. So, that is the first one. As far as the earnings growth is concerned, I am getting a bit into Jonathan’s area but there is an element of commodity companies seeing the same impact of global commodity prices and we see that impact in wholesale price index (WPI) inflation. It is now contracting as well. So, that is showing up in total topline growth and earnings growth. So, on earnings growth there is a complex story from the global side which is going on. From a growth perspective, whether I should be concerned or not, I look at just one single parameter which is what is happening to the capex cycle. On the capex cycle, you look at engineering and construction companies order book, on an aggregate some are giving bad numbers, some are giving good numbers particularly Larsen and Toubro (L&T) had a big one. It is heavyweight on that total number and most importantly a transparent number, no messing around with it is capital goods imports. That is now up for five consecutive months in a significantly positive territory. So, capex cycle is picking up and then the other side of the capex cycle is the FDI. On a gross basis, they are up by 25 percent, on a net FDI basis because of domestic entrepreneurs now not going outside is up 90 percent on a year-to-date (YTD) basis. So, we have seen a big increase in capex. So, we think that the capex story is holding up the overall growth story and so we are not yet turning bearish on India. Q: What are you working with as a number, if you are working with the old GDP series then what would it be? Ahya: I would prefer to look at old GDP series. So, we were at 4.5 percent trough in FY13, we are looking at 6.5 percent in March 2016. So, that is a meaningful steady acceleration that we are building and then March 2017 we are at 7 percent. Q: We were expecting this turn, 4.5 percent is FY13. I am sure FY14 also by the old series is closer to 5.5 percent but we have not seen the earning cycle turn. In which quarter do you think we are going to see a meaningful jump in earnings growth? Garner: I would say in the next two-three quarters. In the most recent quarter we are running at about 1 percent year on year – that’s probably the trough and if we get this growth pick up that I am talking about, we could be looking at high teens year on year earnings growth by this time next year and that’s a better outlook for earnings than we have almost anywhere else in emerging markets. Many we are underweight countries which are trapped in quite deep or severe recession places like Brazil or South Africa or indeed Russia and actually with worse currency outlook that India has. So that should be borne in mind. Q: You would say India could give an earnings growth this year in FY16 of over 15 percent? Garner: I think it is entirely possible. If you look at the March 2017 yearend, my colleague Ridham Desai, who looks after India in detail, is about 15 percent above consensus – that has an effect on forward multiple on the market. If he uses consensus earnings then India is trading above one year forward about 16 times and that is back inline with long run averages. The entire Modi premium in Indian equities versus the rest of emerging markets is now gone now, we are back in valuation relative terms to where we were at the end of 2013. That’s why we have been looking to upgrade India. Q: If indeed the RBI is able to achieve a stable, if not 4 percent at least 5 percent inflation over the two years that we have been talking about, will that up the valuation matrix because it is going to be stable inflation country? Garner: It depends what happens to valuations globally, but that multiple I just gave for India is little bit below the multiple on the S&P and on Europe and we think it is more than fair for the return on equity that India delivers right now and we are at the peak, we are trading about 60 percent forward PE premium to emerging markets and that was late last year and that’s now almost halved particularly with the underperformance from January to March. Q: Nevetheless, the China contradiction is a little difficult to understand for an Indian investor. When we speak to an economist like Chetan, they are continually telling us that China is going to do worse with each passing year in terms of gross domestic product (GDP) growth. And yet, we saw this extra ordinary performance in the stock markets. Do you think that stock market performance will not sustain? Garner: If you look at the Asia markets, we have argued that the risk reward has deteriorated and going forward it is getting less attractive. For the off-shore markets, the MSCI China, we downgraded from overweight to equal weight recently. MSCI China formed emerging markets about 4,000 basis points over a year. So, in terms of booking profits on that and rotating towards India that has underperformed recently, that is what we have been trying to do. Q: But, with the MSCI Index getting recast and possibly A-shares of China being included in that index, could there be a pull of money possibly intended towards India going towards China for a tactical gain? Garner: We will find out about that tomorrow. We think it is a close call, we do not know for sure what is going to happen. But even if it does happen, there is probably only about one percent of the MSCI Benchmark shift that is likely to take place. So, China’s A-shares will not come in at a full market capitalising initially; they will apply a probably a five percent free-float rating. And one percent is a tracking error; it is the size of a market like Poland which investors either decide that they want to be in it or they do not. I really do not think it has a particular significance for India, this event tomorrow. Q: What is your forecast of China? Ahya: The headline number is something that we have to try and predict as to where the official numbers will be, so that is around seven. But the industrial China or the one which matters for the rest of the world which is what is measured in MS Checks, as we call it is in a recession condition. Or the other number to look at would be non-oil import growth in China. That is averaging about minus 15 percent in the first four months of the year. So, I would say that we would rather look at these indicators to know what is going on in China in terms of growth trajectory. Q: Considering the kind of inflation forecast you have, how many more rate cuts are you expecting from the Reserve Bank. Ahya: We are expecting another 50-75 basis points by March, 2016. Q: So, what might be either the ten-year yields or base rate for that matter? You see that also falling by about one percentage point; the cost of money in India for borrowers. Ahya: That is right, you have to look at the weighted average yields on loans and advances; that would probably be down by about 75-100 basis points. And the other measure could be looking at commercial paper rate which is already actually down quite significantly. That could also be down by another 75-100 basis points in another six to seven months time. Q: Well, you are in good company. Aditya Puri or HDFC Bank also told us that he expects base rates to fall by around 100 basis points or at least 75 basis points in the next 12 months. You gave us an earnings forecast, how much do you think the Nifty or the Sensex might gain in the next 12 months and in the next 24 months if that is a more comfortable time period? Garner: Getting back above 30,000 on Sensex is really quite likely and really that is the target that my colleague Ridham Desai has. So, weighted scenario probability of going back above 30,000 on Sensex a year from now seems likely to us. Q: But, more in terms of equity returns over the next 12-24 months? Garner: I guess you are going to see probably reasonable double digit returns from here for the dollar investor and the Indian rupee investor given we think rupee is likely to be reasonably stable. Q: Would it be realistic to expect a 15 percent equity return in the next 12 month would say, 10-15 percent, 12 months out and then obviously, we would want to review the situation but, that is much better than the forecast we have for emerging markets overall, where we have maybe three to five percent upside
Saturday, 7 March 2015
6 common investment strategies of fund managers
6 common investment strategies of fund managers
The criteria that mutual fund
managers use to select their assets vary widely according to the individual
manager. So when choosing a fund, you should look closely at the manager's
investment style to make sure it fits your risk-reward profile.
"Investment style
is incredibly important because of the way that investing works"
Both risk and return are
connected to style. According to current practice portfolio theory, you can
optimize a blend of styles for diversification, balancing reward and
risk."
Here's a look at a
half-dozen common investment strategies among fund managers.
- Top-down investing
- Bottom-up investing
- Fundamental analysis
- Technical analysis
- Contrarian investing
- Dividend investing
Top-down
or bottom-up investing :
Top-down investing
strategies involve choosing assets based on a big theme
For example, if a fund
manager anticipates that the economy will grow sharply, he or she might buy
stock across the board. Or the manager might just buy stock in
particular economic sectors, such as industrial and high technology, which tend
to outperform when the economy is strong.
If the manager expects
the economy to slump, it may spur him or her to sell stocks or purchase shares
in defensive industries such as health care and consumer staples.
Bottom-up managers
choose stocks based on the strength of an individual company, regardless of
what's happening in the economy as a whole or the sector in which that company
lies.
"The great
advantage of top-down is that you're looking at the forest rather than the
trees," says Mick Heyman, an independent financial adviser in San Diego. That makes screening for
stocks or other investments easier.
And, "When you're
right, you're really right," says Tim Ghriskey, co-founder of Solaris
Asset Management in Bedford Hills, New York.
Of course, managers
might be wrong on their big idea. And even if they're right, that doesn't
guarantee they'll choose the right investments.
"A good example is
gold," says James Holtzman, a shareholder at Legend Financial Advisors
in Pittsburgh. "That would make sense for a top-down investor. But what if
you're looking at a gold-mining stock and the company is being run into the
ground? The particular stock could be ready to collapse, even though INVESTMENT
IN GOLD makes sense."
A bottom-up manager
benefits from thorough research on an individual company, but a market plunge
often pulls even the strongest INVESTMENT down.
Fundamental
or technical analysis :
Fundamental analysis
involves evaluating all the factors that affect an investment's performance.
For a stock, it would mean looking at all of the company's financial
information, and it may also entail meeting with company executives, employees,
suppliers, customers and competitors. "You want to analyze management,
really understand what's driving the company and where growth is coming from,
Technical analysis
involves choosing assets based on prior trading patterns. You're looking
at the trends of an investment's price.
Most managers emphasize
fundamental analysis, because they want to understand what will drive growth.
Investors expect the stock to rise if a company is growing profits, for
example.
But fundamentals don't
always carry the day. "You can have a period of time where the MARKET
moves
on technical’s," Holtzman says.
moves
on technical’s," Holtzman says.
Heyman sees power in
technical analysis, because he believes an asset's price at any single moment
reflects all the information available about it.
The best managers use
both fundamentals and technicals, he says. "If a stock has good
fundamentals, it should be stable to rising. If it's not rising, the market is
telling you you're wrong or you should be focusing on something else."
Contrarian
investing
Contrarian managers
choose assets that are out of favor. They determine the MARKET'S consensus
about a company or sector and then bet against it.
consensus
about a company or sector and then bet against it.
The contrarian style is
generally aligned with a value-INVESTING strategy,
which means buying assets that are undervalued by some statistical measure,
strategy,
which means buying assets that are undervalued by some statistical measure,
"In the long run,
value has beaten growth in assets around the world, though during certain periods
that's not true, "The contrarian style generally rewards investors, but
you have to choose the right assets at the right time."
The risk, of course, is
that the consensus is right, which results in wrong bets and losses for a
contrarian manager.
Dividend
investing
As the name suggests,
dividend funds buy stocks with a strong record of earnings and dividends.
Because of the stock market volatility
of recent years, many investors like the idea of a fund that offers them a
regular payout.
"Even if the price
goes down, at least you're getting some income," says Russ Kinnel,
director of mutual fund research at Morningstar. "It's a nice way to
supplement income if you're retired."
However, the recent
popularity of dividend stocks causes some market pundits to wonder if they’re currently overvalued.
Also, beware of funds with extremely high yields. That could be a sign that
companies are taking outsized risk and are headed for declines.
Most experts advise
diversifying among INVESTMENT styles. "In the end, a balanced way of
looking at things tends to create fewer errors,"
Mukesh Kapri
Thursday, 5 February 2015
"Global Learning Solutions" Creating a Brand in the Field of Learning & Development
Global Learning Solutions
It was a Dream to teach and Develop the people those who are keen to learn but due to external and internal force which abstract them to achieve the same . Money is one of the most and biggest factor in it .Scarcity of money multiplied our problem ,it has been always a matter for the Student to take a decision what to do after 12th or Graduation Whether to earn for livelihood or to plan for higher studies or professional. I knew the pain of all such situation it has been going years to facing them.But no more the situation will remain the same. As i Determine to share my knowledge/experience or the moments which I face . I am seeking some some hands to join us to make a situation more better and give an opportunity to student those who are lacking just because of 5 latter "MONEY" let's make them Aware the power of these 7 words "ABILITY" "ATTITUDE" "PASSION.
kindly join us at GLOBAL LEARNING SOLUTION
Developing People
Subscribe to:
Posts (Atom)