Samvat 2062 has been a good year for Indian stock markets, as more money, both domestic and foreign, was pumped into equity markets.
Samvat 2062 has been a good year for Indian stock markets, as more money, both domestic and foreign, was pumped into equity markets. The Sensex went up since last Diwali by 59% to 12709.
Corporate performance has been excellent, justifying investor expectations for the quarter ended September 2006: The first 45 results announced showed an increase of 41% in sales and 56% in profit after tax.
There were stunning results by TCS and Wipro (profits up 46%), HCL Tech (49%), Ranbaxy (652%), Grasim (108%), Tech Mahindra (186%) Hindalco (90%), Ultratech Cements (profit of Rs 127 crores against nil). The Reliance juggernaut rolled on, and despite margin pressures, posted a 9.2% increase in profits to Rs 2,709 crore. Thanks to price control, its refinery business is not yet generating the kind of profits it should, but will once pricing of petro products gets more market related.
Corporate news flow is also encouraging. In the past year, Indian companies have made overseas acquisitions of $2.6 billion. This figure will get a boost after the acquisition by Tata Steel of Corus, for over $8 billion, an all cash offer, is through.
The IPO market is picking up, with the next big ticket item to hit it being Cairn Energy, expected to be over $ 2 billion. It is trying to raise $500 million in pre-IPO placements. So is DLF, the mother of all IPOs, trying to get Goldman Sachs to invest Rs 1,000 crore in a pre-IPO deal.
RIL’s refinery profits will get a boost now that it has been permitted to sell aviation turbine fuel, hitherto a PSU oligopoly. It plans to do this at 25 airports in the country.
The Essar group is also planning to invest a whopping Rs 50,000 crore to hike refinery capacity at Jamnagar to 60 million tonnes.
Will the bullish trend continue in Samvat 2063? Will foreign investors continue to invest more and more? Yes!
The McKinsey Quarterly report on ‘Ten Trends to watch out for’ says that the centre of economic activity will shift profoundly to Asia.
At present, Asia’s share of global GDP is 13% (excluding Japan) and Western Europe’s is 30%. Over the next 20 years, these will converge. The reason is population: China and India account for 37% of the world’s population. And both have a young population.
What sort of sums are we talking about? The total stock of financial assets in the world is now $118 trillion! That is more than 5 times the combined global GDP! This stock has grown from $ 12 trillion in 1980. So, as people become richer, they save more in financial assets.
By 2010 this is expected to grow to $ 200 trillion! With India growing the way it has been, and the corporate sector performing well, foreign investors will pump in money to earn better returns. The amounts invested into equity markets are just loose change compared to this stock of global financial assets.
There is, thus, plenty of money out there to fund India’s growth. ne could witness the start of an overdue correction this week. The best results would be out by then. Prepare for some unpleasant earnings surprises. The Sensex could probably start a correction after Muhurat trading. It would then give lot of time to select stocks for the next rally. By next Divali, the index should be over 15K, but a dip is the proper time to buy.
jmulraj@gmail.com
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