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Posts Tagged ‘Government’

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.

Constitution of India

Tuesday, April 17th, 2012

Constitution of India was adopted in the in the constituent assembly on 26th November 1949. It is document that contains set of instructions and policies that a government in power of India must follow. Indian constitution came into force on 26th January 1950, the republic day of India, defining India as a republic union of states. Indian constitution also defines the fundamental rights, directive principles and fundamental duties of a citizen of India. Constitution of India declared India as a state to be sovereign, democratic republic but later in the amendment of constitution of 1976 the India was added to be a socialist and secular state.

The constitution of India is the longest written official book than any other of an independent country. Indian constitution is considered the best constitution that an independent country has in the world. It is a well drafted book that is a result of research of years.

The committee that drafted the constitution of India was headed by Dr. B.R. Ambedkar and other six members as Jahwahar Lal Nehru, C. Rajagopalachari, Rajendra Prasad, Sardar Vallabhbhai Patel, Maulana Abul Kalam Azad and Shyama Prasad Mukherjee. All these members were great politicians and major scholars of India. Indian constitution is written in the hand writing of Dr. Ambedkar.

Indian constitution is the best official draft one must read to know how a democratic and independent republic nation works. It will provide a deep insight of the laws and principles that Indian government follows to run the union of India.