Category: Economy, Markets and Macro Views

The FII have bought into the Indian Equities as if their is no tomorrow and have made the BSE Sensex breach the historical 20,000 levels. What next ?

BNP Says – The Liquidity Driven Market Rally – typically drives markets and stock prices above fair valuation. During times of high liquidity (March-May’06 and Jan-December ’07 for example), the market tends to trade at large premium compared to fair value. During May 2006 and Feb 2007 Sensex traded at 17-19% premium compared to our fair value, while at the peak liquidity of January 2008, it traded at 65% premium. We believe if the current run rate of FII flows continue (i.e. 0.4-0.5% of free float market cap), (more…)

Data from a large FII suggests that Households have essentially shifted out of low yielding bank deposits, fixed income funds in 2010, and put their cash into a variety of higher yielding assets. Indians have been buying small savings schemes (up 200%), property
(+144%), gold (+90%), equities (up seven fold albeit from a low base), and new insurance schemes (+37%) in the first half of 2010 compared to the same period in 2009.

Risk appetite seems quite good if the increase in flows (more…)

Indian’s Obsession towards Gold has increased in the past 5 years despite rising prices. Data suggests that demand for Gold has been secular and is not linked to either inflation or alternative investment opportunities.

IN the last 4 years, Gold has performed largely in line with Sensex and has delivered a better risk-adjusted-return, suggesting that the relationship could endure for some time to come. (more…)

Goldman Sachs Analysts have set a new theme of China being a threat to the Indian IT Services industry. As for any meaningful competitive threat to Indian IT from Asian countries, China is potentially the most threatening in our view. But there are material
challenges for Chinese companies to accomplish this. Goldman came to the view that anecdotal evidence is exaggerated and a meaningful challenge to Indian IT’s global market share might not occur till 2015. We project the Indian IT sector to continue to grow (more…)

The Pillars of Indian Capital Market – SEBI, IRDA and the Supreme Veto Authority, the Finance Ministry are somewhat disconnected in their recent actions and functioning.

It all began with Mr. C.B.Bhave the Chairman of SEBI tightening the rules for errant Agents / brokers in the Mutual Funds and Insurance industry. Since AMFI, the body overlooking Mutual Funds was meek, SEBI overpowered and to an extent cleaned the mess of funds churning and underhand commissions AMCs were rolling out at the cost of investors. SEBI introduced a regime of Zero entry load, a good move. However, recent implementation of compulsory KYC is uncalled for as the systems that approve KYC reject an application if there is a single mis-match of a “letter” anywhere in your address putting investors at loss. Standardize PAN card for now is our opinion.

Mr. Bhave knows the Day Light Loot Insurance Agents have been resorting to by ripping commissions as high as 20% on ULIP Policies. (more…)

The earnings season looked tepid – but the headline numbers hide the underlying strength. For example, excluding ONGC, Bharti and RCom, Sensex earnings were up 36%, its best performance in four years. The quality of earnings was also quite strong – net financial income’s share in pre-tax earnings fell to a near 8-year low.

Earnings growth in the broad market (3,038 companies) slowed down (as expected), though it was particularly damaged by the
energy sector (ex-energy growth was at 22%). Earnings at the aggregate level appeared to be in line with expectations — though (more…)