Our markets are down by about 5-6pc since last year. As we go ahead the fall over the year would become between 15-20pc as towards Dec10-Jan11 the Nifty had touched 6250. Now if we have some more points of Niffty still to lose than the fall will be over 20pc.
We now have confirmed figures of PAT moving up by over 10pc over last twelve months for broad spectrum of companies that have announced results so far. This has been achieved while the interest rates have been jacked up in many tranches. Simply seen it may be said that higher interest could still not adversely affect the corporate profitability in India. It may that the potential was higher and less was achieved. Now, when the interest rates should move down for no where else they are going up and when the crude is down the inflation would have to lose stream too, other things remaining the same, profitability should improve and sales should catch up in consumer durables market .
In one year the Nifty companies add Rs 340 to their net worth and roughly this much amount has been added for last four years every year ie a sum of more than Rs 1250 has been added to net worth of companies in just four years. Further the period prior to 2007 was a good period all through since 2003 so more less an amount of Rs 850 was added in this period represented by 2003-2007. Both periods together have added Rs 2100 to net worth of Nifty companies.
We know that a bulk of the above had gone into asset creation, in fact it may have been more than the gross sum itself as there may have been use of some borrwed funds. While the depreciation has been taken care of by pre-tax profits, the real value of assets should taken to be more than Rs 2100 as there has been a good inflationery run.
Now we go back to period since 1996 which saw companies performances not very stable but it was this period which saw weaker companies going down under and let only the stronger ones to remain operational, so the Indian corporate universe has become better managed and stronger. This reflected also in taking advantage of the goood times and also warding off the competition from around the world. It was this strength the mega mergers and foreign take-overs were successfully attempted by all leading houses.
Some of Nifty companies are into FMCG, Pharma and High Technology sectors where intangible assets like brand values, processes and technologies whose value are not covered in traditional assessment of book value. Besides there happens to be premium on licenses. Not to speak that establishment become more valuable than the sum of parts. The real assets like land have appreciated as much as by 1000 times in some cases and not less than 100 times for most.
No doubt, the circumstances do convert profitability into loss making scenario. I do not think that situation is about to arrive in India in foreseeable future. The interest rates cycle, inflation, crude price cycle, currency parities, political upheavals, restrictions on trade and other such matters have had to be taken in stride but the same have never left a permanent weakness that has to be taken care of.
The break-down of financial order and systems spanning the whole world may have its toll but when such scenario is in expectation generally, it never plays out because the instinct makes everybody to prepare for it. This instinct has seen the bullion prices go sky high already.
Why I have gone to assess every thing in light of history is due to the fact that the business take time to get established and can not be just written off for small winds of change which in fact may provide an opportunity as much as it may kill and opportunity.
The export performance has been stellar as it went up by 80pc for latest month. The IIP number was better at about 8pc too. The car sales had plummeted but only expectedly. The two-wheelers sales have however risen. All may not be well its not all bad too. The monsoon has caught up lately. The agricultural production may be higher this year. If the inflation in yet not under control than the fault lies in the strength of Indians having more to spend on food. This greater expenditure of food would be coming from the households which have been on margin in terms of enough calorific intake. Not a bad thing to happen which will be responsible for greater transfer for income to agriculturists.
In India therefore remaining half invested is OK today and also it calls for gradually increasing level of investment either when market drops or when it remains level for some length of time.
In the same breath that I told you above, I have to further tell you that QE III would be resorted to as it is the safest and the easiest thing to do for Uncle Sam. Why on earth pain be inflicted on the voters of the day, but further borrowing should be stopped. If it happens , India should have no problem as the QE I and QE II have not harmed it in last three years. Supposing there will be contraction in money supply for any reason, then of course the price damage will be seen in almost all asset classes and most of all in case of bullion, real estate more than else where.
There are very many voices, some say 4700 is possible and some say 6700 is possible in the next eight-ten months. So we have a range in sight to work upon.
Wish you happy times...kbk
We now have confirmed figures of PAT moving up by over 10pc over last twelve months for broad spectrum of companies that have announced results so far. This has been achieved while the interest rates have been jacked up in many tranches. Simply seen it may be said that higher interest could still not adversely affect the corporate profitability in India. It may that the potential was higher and less was achieved. Now, when the interest rates should move down for no where else they are going up and when the crude is down the inflation would have to lose stream too, other things remaining the same, profitability should improve and sales should catch up in consumer durables market .
In one year the Nifty companies add Rs 340 to their net worth and roughly this much amount has been added for last four years every year ie a sum of more than Rs 1250 has been added to net worth of companies in just four years. Further the period prior to 2007 was a good period all through since 2003 so more less an amount of Rs 850 was added in this period represented by 2003-2007. Both periods together have added Rs 2100 to net worth of Nifty companies.
We know that a bulk of the above had gone into asset creation, in fact it may have been more than the gross sum itself as there may have been use of some borrwed funds. While the depreciation has been taken care of by pre-tax profits, the real value of assets should taken to be more than Rs 2100 as there has been a good inflationery run.
Now we go back to period since 1996 which saw companies performances not very stable but it was this period which saw weaker companies going down under and let only the stronger ones to remain operational, so the Indian corporate universe has become better managed and stronger. This reflected also in taking advantage of the goood times and also warding off the competition from around the world. It was this strength the mega mergers and foreign take-overs were successfully attempted by all leading houses.
Some of Nifty companies are into FMCG, Pharma and High Technology sectors where intangible assets like brand values, processes and technologies whose value are not covered in traditional assessment of book value. Besides there happens to be premium on licenses. Not to speak that establishment become more valuable than the sum of parts. The real assets like land have appreciated as much as by 1000 times in some cases and not less than 100 times for most.
No doubt, the circumstances do convert profitability into loss making scenario. I do not think that situation is about to arrive in India in foreseeable future. The interest rates cycle, inflation, crude price cycle, currency parities, political upheavals, restrictions on trade and other such matters have had to be taken in stride but the same have never left a permanent weakness that has to be taken care of.
The break-down of financial order and systems spanning the whole world may have its toll but when such scenario is in expectation generally, it never plays out because the instinct makes everybody to prepare for it. This instinct has seen the bullion prices go sky high already.
Why I have gone to assess every thing in light of history is due to the fact that the business take time to get established and can not be just written off for small winds of change which in fact may provide an opportunity as much as it may kill and opportunity.
The export performance has been stellar as it went up by 80pc for latest month. The IIP number was better at about 8pc too. The car sales had plummeted but only expectedly. The two-wheelers sales have however risen. All may not be well its not all bad too. The monsoon has caught up lately. The agricultural production may be higher this year. If the inflation in yet not under control than the fault lies in the strength of Indians having more to spend on food. This greater expenditure of food would be coming from the households which have been on margin in terms of enough calorific intake. Not a bad thing to happen which will be responsible for greater transfer for income to agriculturists.
In India therefore remaining half invested is OK today and also it calls for gradually increasing level of investment either when market drops or when it remains level for some length of time.
In the same breath that I told you above, I have to further tell you that QE III would be resorted to as it is the safest and the easiest thing to do for Uncle Sam. Why on earth pain be inflicted on the voters of the day, but further borrowing should be stopped. If it happens , India should have no problem as the QE I and QE II have not harmed it in last three years. Supposing there will be contraction in money supply for any reason, then of course the price damage will be seen in almost all asset classes and most of all in case of bullion, real estate more than else where.
There are very many voices, some say 4700 is possible and some say 6700 is possible in the next eight-ten months. So we have a range in sight to work upon.
Wish you happy times...kbk
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