'I've lost most money in Indian stocks' - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster

'I've lost most money in Indian stocks' 

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In this issue:
» China could topple US in 20 years
» Government directive to private banks
» IT industry still the most preferred for engineering students
» 10 US banks to free themselves from government's clutches
» ...and more!

'I think I've lost more money in India than anywhere else.' These are the words of George Soros, who The Indian Express has called a brilliant speculator and a very generous philanthropist. Mr. Soros was of course referring to the crash in the Indian markets post the bursting of the credit bubble which even he was not able to escape. "I think actually I made a mistake in my judgment because I thought there would be some decoupling between the Indian markets and the rest of the world. And that did not happen", is how the hedge fund titan chose to put it across. In a freewheeling interview, Mr. Soros also spoke on a lot of other issues like the inefficiency of the markets, the end of the super bubble of American domination and the one advice he would like to give to Obama, the Chinese premier and to Manmohan Singh. With regards to the advice to Mr. Singh, Soros opined that to the extent possible, he should spend on infrastructure. It is important to stimulate the economy and this is not the time to be too conservative and cautious.

------------------------ Stock markets are on a tear... ------------------------
Beware of enthusiastic TV anchors and unscrupulous brokers!
This is the time to lay the foundations for a wealthy future. Not the time to speculate in momentum stocks.
Our recommendation - go out and invest in blue-chip stocks that are available for dirt cheap.
To know how you can go about picking the right stocks for your blue-chip portfolio, read on...


Jim O'Neill, Chief economist of Goldman Sachs and the one who became famous for coining the term BRIC has now made another bold prediction. He believes that the Chinese economy could become bigger than the US in 20 years, much before the earlier prediction of 30 years. We think the reason behind the change in outlook could be the global financial crisis. China may suffer some initial hiccups on account of its export driven model but it could soon resume its trend line growth of 9%-10% on account of the massive internal demand and the huge monetary resources it has at its disposal.

The US on the other hand may be undergoing a structural downward shift in its economic growth. Years of excesses has left both its government as well as its citizens knee deep in debt and thus, it could see economic pain for years to come as its citizens cut back on spending and the government becomes frugal. Infact, Bill Gross, one of the world's foremost bond experts has gone to the extent of saying that the era of 3% economic growth in the US could be a thing of the past and growth of 1%-2% is likely to be the new standard. Thus, with US economic growth contracting and that of China remaining constant and may be even increasing, it looks quite possible that China could overtake US earlier than expected.

Even as the Indian IT industry passes through one of its most testing times ever, it has still managed to retain its standing as the industry of choice for engineering students passing out of colleges next year. Going by the latest Neilsen Campus Track T-Schools survey, about 43% of the engineering graduates of the 2010 batch found the IT sector as the most worthy career option. The economic slowdown has not decreased the sheen of the sector as students continue to be attracted towards the sophisticated MNC culture, opportunities to work with highly skilled technical professionals and cutting edge technology. Fields like management consultancies and financial services that topped the charts last year, were pushed lower with sectors like nanotechnology, IT services, power, oil and gas and telecom reigning at the top. It appears that John Keats was right when he said that "A thing of beauty is a joy forever".

A clutch of US banks, 10 to be precise, have decided to free themselves from Washington's grip. In other words, these firms have decided to pay back the TARP (Troubled Asset Relief Program) money that the US Government had invested in them last October to tide over the financial crisis. In all, money worth US$ 68.3 bn will be repaid, roughly around 25% of the total money that US banks have received since last October. Although the repayment is a sign that these banks have been nursed back to good health and have other sources of capital available for them, the news were not treated with a lot of enthusiasm because the challenges facing the US economy are far from over. Furthermore, it only highlights the strong dividing line between the country's banks as some big banks like Citigroup and Bank of America are still not considered healthy enough to repay the money. Experts argue that letting the banks slip away from the government's grip also does away with the one real chance of reforming the financial sector, a step which many consider necessary in order to prevent further crisis. The banks that are repaying the money would however be heaving sighs of relief as restrictions on employee compensation will no longer be there. Who knows, the investment bankers would again be driving Bentleys few months from now.

Constructions firms are in an upbeat mood. Not only has a stable government been elected at the centre but the economy is also looking to walk the path of recovery. No wonder then that many of the construction firms are rubbing their hands in glee as they expect these positive developments to translate into more projects coming their way. The slowdown in the economy, lack of financing and higher interest rates meant that the National Highways Authority of India (NHAI) was able to award only 10 of 60 projects last fiscal. But the tide is gradually turning. Besides working capital rates subsiding to 10% from over 14%-15% six months back, the Indian Prime Minister Manmohan Singh is gung-ho about India's GDP, which he expects to grow by atleast 7% this fiscal. Further, there are huge expectations from the forthcoming budget as the government's continuing focus on building and ramping up infrastructure will get converted into swelling order inflows. Thus, infrastructure firms may have received a severe beating in the past one year but the poor state of India's infrastructure and the government's increasing efforts to address this issue means that the former's cash registers will keep ringing!

Private sector and foreign banks may now have to perform a task which they probably abhorred to do uptil now. Given the tightness of liquidity still persisting in the economy, the government is contemplating asking both private and foreign banks to step up disbursals to the industry after having directed state-run banks to do the same. The uneasiness of private sector banks and their foreign counterparts is understandable as they feared that the slowing economy would pile on more nonperforming assets onto their books. But this has also generated some resentment amongst public sector banks which have had to forego healthy margins to cater to government directives. For instance, during the last fiscal, private banks' credit disbursals grew by 10%, while it was still lower for foreign banks at 4%. In sharp contrast, state run banks reported a 25% growth in advances. Of course, foreign banks can still get away because their parent companies are mired in losses as well, but private sector banks may not find it that easy to evade this issue.

If Dr. Manmohan Singh, India's prime minister is to be believed, India is capable of growing by 8%-9%, even after the recent global financial meltdown. And the reason it can do so is because of its high savings rate. "Since our savings rate is as high as 35%... if all work together, we can achieve a growth rate of 8%-9%, even if the world economy does not improve", is how the man, who many consider as the architect of India's modern reforms, chose to put it across. He further added that the country is expected to log in a growth rate of 7% this fiscal, a number which is good enough given the turmoil the rest of the world, especially the developed world is into.

In the meanwhile, Asian indices ended strongly in the positive today amidst signs that the economic pain is on the ease globally. Sensex, the Indian benchmark also ended higher, logging in gains in excess of 2%. Most European indices are also trading in the positive currently.

04:46  Today's investing mantra
"The great majority of operating businesses have a limited upside potential also unless more capital is continuously invested in them. That is so because most businesses are unable to significantly improve their average returns on equity - even under inflationary conditions, though these were once thought to automatically raise returns" - Warren Buffett
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3 Responses to "'I've lost most money in Indian stocks'"


Jun 12, 2009

I dont understand hedge funds so I dont feel sorry for Mr. Soros. If his firm was one of the P Note villains, then God help all of them. They'll reap what they sowed.



Jun 11, 2009

i have very little amount of capital. basically i m n inter-day trader.....i hod lost my hole capital for tow time yet before, and for third time again i have lost 60% money from my total capital. i need some help from an experience trader..... thank"s


warren buffet

Jun 10, 2009

please use quotes from Peter Lynch whom I admire greatly.

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