Thursday, January 25, 2007

Topic for the day - Take 11

Hey guys,

Here is the GD topic for the long weekend. Let us see the group coming up with more than obvious analysis. C'mon guys go for the assault. It is a vast topic, so invest time, be very specific and read comments of others before adding yours to avoid repetition.

"Boom in the Indian stock market - Is it for real"

And sorry for the delay in case analysis. It may take some time since I have day long meetings on Monday and Tuesday. But I will try myy best to keep pace. In the meanwhile, from the feedback, it looks like Key Talking Point sessions are helping clear some basics that will help in your group discussion. So I shall keep more coming. In the meanwhile comment on my analysis of the previous ones if you are not clear about anything. Also put in your answers by clicking Latest Key Point Questions

Also please use the upper right hand links to navigate easily and reach the needed destinations easily

Click here for the complete analysis

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13 Comments:

Blogger Gyan-ee said...

Hey guys,

Wassup, no participation on this topic. Is it that the long weekend has made you complacent, or too many GDs have sapped your enthu or you are preparing for PI or is the topic too tough.

The topic will be open till tomorrow and I wud like to see people putting in their good efforts.

Let me know if you want me to cover any other areas in the GD. And also let me know if we have had too many GDs and we shud do something else.

Anyway, please let the queries on PI coming at http://catfundae.blogspot.com/2007/01/pi-prep_05.html#links as I am sure the interview dates are closing in.

Any other help needed, you are welcome.

4:57 AM, January 29, 2007  
Blogger Sumit Khandelwal said...

The BSE ,30 share Sensex soaring new heights and gaining close to 5000 points last year has left the world looking keenly to the success story of Indian Economy.This boom has been the result of the efforts put in by each and every citizen of India directly or indirectly and is mere when compared to the exponential curve expected in the stock market.

The boom has been significant brought under the influence of the Finance minister and the UPA Governemnet Liberalising on FII policies to bring in huge investement and lot of inflow of fund from International Investors.

As rightly indicated by Goldman Sachs that the Indian Economy is in the growth path and is bound to beat other nations and rise to become Global Leader by 2050 and the Index of the Stock market has righhtly portrayed just a part of it.

The Stock market comprising of shares and investor's money is an outcome of all the global achievements brought by Indian Inc players like the deals of 8 o clock coffee by Tata, Mahindra tie up with Volkswagen, Posco investing in Orissa to set up a Steel Industry etc...

All these considered and many more new projects lined up for completion like the deal of Tata-Corus the market is bound to reach newer heights. A slight correction might come due to the fear and reforms an outcome of climate changes or risk of TYerrorist attacks or other such unpredicted mishaps.

Else the economy is on a growth path and this is a mere transformation from the adolescent to an Adult.

5:27 AM, January 29, 2007  
Blogger Gyan-ee said...

Hey for all those scared of the topic, here is a voting option. Let me know if you think that
1. The topic is too tough to talk about
2. The topic is too boring
3. We have had too much of economy related topics these days
4. Too many GDs and its tiring
5. Could not find the latest topic
6. I am saving myself to peak in the actual GD :D

9:46 PM, January 29, 2007  
Anonymous Anonymous said...

The boom has been dre for long n is surely bound to stay for long coz of liberalisation dat present indian govt has brought in.
Wen foreign investors start selling den only d value of stock index delves down,this thing happened few months ago wen d index slid down drastically.
BUt because of increased FDI n urge to let d investors stay invested is d priority,d index will continue to rise.

12:25 AM, January 30, 2007  
Anonymous Anonymous said...

Stock markets in India have risen to unprecedented levels in recent times. But any such fast paced growth story demands explanations whether it's a one time bubble or there are strong fundamental reasons behind it. We can analyse stock market boom by considering various parties involved, government policy changes and future prospects of stock markets for next one or two years.

1) The topic of debate here is, whether it is the all round growth of indian economy which is having a very healthy positive rub off on stock market or is the growth of stock market being fuelled by purely FII inflows or speculations.

2) Though stock market isn't a true indicator of a country's economy and the reverse isn't true also(e.g. China which has very poor equity markets), still India is renowned the world over for its equity markets. Though there might have been some hitches and scandals, still the increasing FII inflows show that global investors have belief in Indian regulatory framework in monitoring stock markets.

3) Reasons which can clearly be attributed for the current bull run are strong showing of Indian corporates in recent years. Indian firms made 18$ bn of acquisitions in year 2006 compared to 8.8 $bn of acquisitions in 2005. It clearly shows the growing confidence and potential of Indian companies in recent times. Another factor is good showing of monsoon for many years now which is having a positive effect on agricultural sector resulting in improved Economy overall.

4) A factor which can be considered both good and bad for Indian stock markets is the gradual slowing of US economy. Since the prospective returns from US and European markets are becoming lower, the FIIs are investing their money in India where the Indian Economy growth story has resulted in Stock market boom. However, the downside is that FIIs can exit Indian markets too as soon as they find some other attractive option elsewhere. Unless India is pitted against a growing US or Europe, or if the China starts improving its Stock markets, we might not know the resistance of Indian stock markets.

5) After the May-2006 crash, The retail investor participation has gone down and it is increasingly the FIIs that are moving the market. So, even though there is a boom in Stock market, the retail investor do not have enough confidence to invest right now.

6) One point in support of current rally is the broad based rally in the current bull run rather than just the growth of technology sector as it happened it 1999. With the strong showing of recent quarter results coupled with attractive P/E valuations of Indian companies, It can be argued that there is every reason for FIIs to invest in India and it would be wrong to say that since the current rally is mainly led by FIIs, the boom is not a real one and will last only till when the FIIs find another destination for their funds.

Overall, looking at the sector-wise rally of the stock market, the resilience and strong showing of stocks of blue-chip Indian companies does prove that there are strong fundamentals behind the current stock market boom. However, one has to take consideration of the fact that slowing of US Economy coupled with good monsoons in recent years have only helped in sustaining the current boom.

3:50 AM, January 30, 2007  
Anonymous Anonymous said...

Hey Gyan-ee, i didn't had nything concrete 2 talk about on d topic...so my vote goes 2:

The topic is 2 tough 2 talk about

ANYA..

6:55 AM, January 30, 2007  
Blogger Himanshu Gupta said...

Hi gyanee.. the second anonymous is me. I had commented using my blogger id but it's not showing here.. so just indicating that i tried :)

9:07 PM, January 30, 2007  
Anonymous Anonymous said...

My 2 cents on this, though dont have good points.

1)As we have discussed, its the great investment by FII, & FDIs that our market is going on its boom spree.

But what has to be carefully wactched are the P/E ratios of the companies listed in the nifty, or the sensex.

As long as they are within their limits, not much to worry about.

2)Another cause for concern is the US trade deficit. US being a largely consumer driven economy, is raking up huge deficits, without any savings, or control.

Since the majority of our investment, & IT contributions come from them, the US currency falling, could trigger panic in the market.

Since then, they would not find India very viable, because of the falling exchange rate, we would lose our edge.

3)The real estate market in India is also a cause for concern, with prices rising 200 - 300% in a year.We could be witnessing an estate bubble.

Some discretion & control in this regard could also be exercised.

4)The steel markets are also doing very well, with the recent Tata-Corus merger, Jindal, & SAIL posting good profits.

The majority of the demand in steel is due to exepcted rise in China's requirement due to rapid industrialization, & the increase in the number of vehicles.

If the demand in China were to reduce because of some reasons, we could be facing a big crisis with a surplus of steel production, as our own domestic consumption is not much.

5)There was a fraud regarding an FII Nissan Copper, which was exposed, although no action has been taken still.

They were accused to artificially hiking up the prices of the shares, before the IPO.

Sufficient measures for the control, & swift investigation for such crimes will go a long way in preventing huge market crashes.

5)The bull run is currently based on the expected behaviour of the market. But any one of these factors mitigated, would probably lead to a crash.

Some control from the BSE authorities, research on the FII companies involved, & a watch on the interest rates by the RBI, would keep this under control.

Aparna

PS I wouldnt say the topic was too tough, I would say I didnt know enough :)

PPS If you could please give all of us some gyan, & also post some articles, for info on how to analyze the market factors.

12:59 AM, February 02, 2007  
Blogger Gyan-ee said...

Sumit,

There are some good data points that you have brought in. But you still have not analysed the issue is the 'stock market rise is for real'.

You seem to be hinting everything is fine, but you need to substantiate harder

3:46 AM, February 06, 2007  
Blogger Gyan-ee said...

Anonymous 1,

Liberalisation has not been brought by present govt. Be careful or the people in the group will jump on you in the GD.

You have said that the boom is going to stay. 'Why' has not been strongly addressed.

3:48 AM, February 06, 2007  
Blogger Gyan-ee said...

Himanshu (anonymous 2),

Good start, especially your approach of analysing various parties.

And very very good points. You take the trophy and not just for low participation, but also for some very valuable points.

I will write in detail in the final analysis coming in a while.

4:06 AM, February 06, 2007  
Blogger Gyan-ee said...

Anya,

Thanks for the suggestion. Will keep in mind. But do read up the topic so that you can cover in case something similar comes in a GD.

4:07 AM, February 06, 2007  
Blogger Gyan-ee said...

Aparna,

Good attempt, especially since the topic was tough.

It was good to see you bringing in the PE ratio point.

Good point on US deficit too. But note that India is slowly and strongly moving away from the cost advantage and exchange rate advantage. It is moving into the higher area of quality offering. E.g., in IT the salaries have gone up while the billing rates have gone down. But companies are still churning out good profits, which shows the fundamentals have become very strong.

Real estate bubble seems to have no arguments in support from your side, though the concern is valid:)

Domestic consumption of steel is growing at a rapid pace. And though demand in China can go down, it cannot be drastic
Also note that just because Tata bought Corus doesnt mean it is good for investors. Infact tata shares crashed after the deal since the market felt the price was too much.

4:32 AM, February 06, 2007  

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