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Archive for the ‘Economy’ Category

Emerging Facts of India Economy

Tuesday, August 18th, 2015

The complete central time zone which can be explained in the India Economy:
If companies can deliver services to different regions of the world from a single location! India’s Geographical location offers this advantage leading to the very lower cost of operation, management & delivery, better to say everything. Services in Singapore and Hong Kong can be delivered by starting early in the morning, late evening shifts in evening to serve in UK & some European countries while the night working shifts perfectly match the timings of US to serve clients there.

India, which is becoming organized in trades and Investments:

The growth in number of companies listed on BSE is a significant indication of Indian industry becoming more organized. The companies in several places whether it is health care, real estate, manufacturing, service, IT, hospitality, or retail have shifted from unorganized to organized space. This transition is expected to become even fast paced.

The transparency levels across the investment horizons are also improving according to the JLL Transparency Index 2014 which is undergoing finalization. The transparency improvement in the preliminary findings of the index is better than even the Asia Pacific average.
The facts such as IBM which entered India in 2003 have grown its employ strength in India by 16 times from just 9000 in 2003 to 150000 in 2014. This is one third of total work strength of IBM across the globe. Accenture added more than double employees from about 32000 in 2007 to around 85000 in 2014, Ericsson India employee strength of about 19000 accounts for 16% of its global workforce. Some UK and Germany based financial institutions in India have also added significant number of employees in past few years for their back office and off shoring operations. Companies headquartered in USA today, occupy almost half of the office supply in India while Europe based corporate occupy 14%.

The Union Budget in 2014 announced on 10th July has also indicated that there are lots of new infrastructure projects and improvements are coming in India. The things such as available office space stock, office absorption and supply rate, improved transport infrastructure well placed hospitality industry, growth in foreign travelers, development of industrial corridors and improvement in physical & social infrastructure are the clear indication that India is a perfect investment destination for foreign corporate.

Very low cost of real estate
Ask any Indian who do not have any knowledge about the international real estate prices, his answer will contain the words/phrases “huge, almost impossible to afford, skyrocketed, 10 times, not for common man”. But the prices have gone up considerably in past decade but it is still cheaper than most other developed countries. To be specific, office space in Banglore, India’s fastest growing office market, is available at about 85% less cost than Tokyo. In the list of world’s costliest cities for office rental, Bangalore, which stood at 21st place while Delhi and Mumbai feature at number 10 and 11 respectively?

Indian Economy

Thursday, August 9th, 2012

Before the global meltdown, India’s growth has been broad-based, unlike the cyclical one historically. The silver lining has been the structural change in policy making that has given wings to corporate India. The huge working population that drives a robust consumption given the changing demographics and increase expenditure on infrastructure are the key factors of growth in India.

India’s structural growth impulses continue to remain strong, given the high domestic saving rate, sound financial system and growth-supportive macroeconomic policy environment. The strong forex reserve backed by favourable external factors has helped country to receive huge FDI inflows. We expect a sustained and strong industrial capex to accelerate going forward.

Consumption is the key growth driver as India is predominantly a domestic demand driven market. By 2016, more than 50 per cent of the current population would attain the status of ‘middle class’. The ‘high income’ segment could more than triple. Share of ‘low income’ households could halve to 7 per cent from the current 16 per cent. Therefore the growth this time will be an urban-led story with an increased income levels.

We still believe the risk reward for the Indian markets is in favor though it is trading at the higher band of the market valuations. We have used three valuation methods on P/E basis, Dividend Discount model and Price to Book of the Sensex and in all these cases we have arrived at a value of 15000 to 19000 for FY11. We expect the Indian markets to trade at 14.5 to 18.5 times on a PE basis. On price to book valuation methodology we are currently valued at 3x, historically the market has been trading at a price to book of 3.4, which is fairly valued. On a dividend discount model taking 8 per cent yield we arrive at a range of 15000 to 18900.

A normal monsoon as expected would bring down the food prices cooling off the inflationary pressure. Higher crude oil prices put pressure on on the inflationary front. Global sovereign defaults could add to the woes that could keep the markets depressed.

Government stimulus seems to prove beneficial for India. For the last six quarters, the growth is mainly due to the government spending. Therefore, with government spending, backed by the spending by the private sectors is likely to end with 8 per cent GDP growth. Coming to the last quarter and the fiscal 2010 results, it has been giving out mixed cues. Topline is increasing but the margins are facing some pressure due to the increasing raw material costs. But going forward, we feel the raw material costs would come down, providing some respite to the margins of the companies.

We are betting on sectors based on the domestic demand like industrial, consumer discretionary and non-discretionary, IT, ferrous metals, construction, healthcare and infrastructure. We are neutral on banking and finance and underweight in sectors like telecom and real estate. At this juncture we suggest a top pick from a sector-perspective and a bottoms-up approach to stock picking with a preference for large caps. In mid-caps when you are investing, it is preferable to invest in niche mid-caps.