Which company do you trust the most?
In this issue:
» Infosys results spook markets
» India & China need to copy each other
» The US$ 37 bn blow to the US
» Indian govt. on an austerity drive
» ...and more!----------------------------- A Good Time To Sell Bad Stocks -----------------------------
It's never too late to get rid of 'bad stocks'.
After all, you never know how bad a market crash could get.
But what are these 'bad stocks'? How do you identify them?
For answers to these questions, and more,click here to read on...
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00:00 | ![]() | |
But the matter did not end there. In recent times, a spate of scandals has erupted in the telecom space which has indeed tarnished the image of India Inc. While all of these have highlighted the unholy nexus between politicians and businessmen, there have also been instances of Indian companies involved in 'window dressing' accounts in some form or the other. All with the aim of displaying higher profits to investors.
Indeed, finding any fraud in the way companies report their financial statements is practically impossible for any investor. But if a careful study of annual reports every year does throw up some anomalies, investors would do well to be careful before investing money into the stocks of such companies.
Investing in stock markets is not only about how fast companies are growing. Is the quality of growth good? Are profits higher because of the strength of the company's business or because of some accounting manipulation? Does the company's management have a good understanding of the business? Are its business decisions sound? How good are its corporate governance practices? These are some of the questions that investors need to ask themselves. In a bull run it is very easy to get carried away with all the exuberance surrounding potential growth prospects. But ultimately the strength of a company's business and the soundness of its financial statements do get reflected in the valuations.
Thus, even now, it is better late than never to identify those companies having strong managements with good corporate governance practices at reasonable valuations. This will certainly ensure strong returns in the long term.
So, which company do you trust the most when comes to the credibility and transparency of the reported financial statements? Please take our poll and cast your vote.
01:26 | Chart of the day | |
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Data Source: The Economist
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Since its turnaround in 2010, the IT companies have seen a steady increase in demand. However, pricing has remained a concern as clients have not shown the willingness to pay higher for the services. But some companies like TCS and HCL Technologies have indicated positive uptick on this front. With Infosys reporting lackluster numbers in terms of billing rates, all eyes would naturally turn towards the bellwether TCS to see if the trend is different. If not, it does appear that the IT industry may witness another round of slowdown.
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For India though, the problem is exactly of the opposite kind. The execution of investment projects is woefully slow and has always fallen behind schedule. Still, the Government keeps on setting new lofty goals for itself. But this may not be the solution to the problem. Obstacles to timely execution will have to be addressed. It may help to take some inspiration from China. And the dragon nation in turn could do itself some good by allowing more consumption to take place like how it is in India currently.
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However, a number of these benefits are expected to run out this year. With US$ 37 bn less flowing in, this consumption fed economy may just falter. Unless more jobs are created, and wages increase, there will be no money for consumers to spend. Thus, once benefits stop, the economy may very well go further down in the dumps.
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While steps towards expenditure rationalization are certainly appreciated we doubt whether they are enough to achieve the ultimate road-map towards fiscal prudence. It may be noted that the government has a target to restrict fiscal deficit at 4.6% of GDP for FY12. And considering the current state of affairs it does appear to be challenging. We believe that subsidy is the real culprit for the current financial/fiscal imbalances. While deregulation can bring an end to the subsidy era, it is a politically sensitive issue. Unless we have a consensus over it, fiscal challenges will continue to prevail. While austerity measures will provide some respite, it is certainly not a foolproof solution.
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04:56 | Today's investing mantra |
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5 Responses to "Which company do you trust the most?"
Adi Daruwalla
Jul 12, 2011For the soundness of the companies financial statements, the shareholders must attend the annual shareholders meeting and ask if the financial figures have been whetted by the auditors independent from the boards fixing or needling the same. Recently Wipor has been asked to prove to SEC in the USA that its auditors are independent when it comes to fulfilling their audit duties as there was a 32 million siphoning off by an inidvidual in Wipro which also resulted in one suicide in the USA. There is a lack of integrity in all aspects of Indian life, and what is the veracity of an audit done by so called external auditors.
C.S.NAMBISAN
Jul 13, 2011Interesting read indeed.
two points
1)China 's massive capital expenditure was good for economy as infrastructure was developed eg. 300 KMPH trains crisscrossing country( India do not have anything near it)which brougt employment to many,more income,consumerism, real massive alleviation of poverty- except for inflation raising its head now.May be India shall follow same instead of throwing money through subsidies
2) Euitymaster was recommending Buy on Infosys-still with new results trickling in , does it hold good ?- as usual there are three opinions from various agencies - Sell ,Hold and Buy