What will it be like for investors to revisit 1991?
In this issue:
» Equities: The least preferred financial asset class of Indian households
» Will discounts help improve the realty inventory situation?
» Another scam in the Indian PSU banking space!
» China puts a cap on how much a CEO of a state owned firm can earn
» ...and more!
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Now over this time, companies like L&T, Nestle, Voltas and ACC that were part of the Sensex way back in 1991 went on to create unimaginable wealth. The L&T share price and Nestle share price, for instance, gained 65 times and 47 times respectively since 1991. Now, as we know, it is not as if the Indian stock markets were on a secular uptrend during the past two decades. In fact thanks to several domestic and external factors, stocks markets have seen several bull as well as bear phases during this period. However, the fact that helped each of these stocks come out unscathed from each market cycle, was that they were the key beneficiaries of what we call 'Mega trends'.
The Mega Trends have diverse meanings and impact for different industries and companies. As the economic dynamics globally are changing rapidly, new competencies are coming into play at half the lifecycle speed of the past decade. The Mega Trends are therefore a vital cog in a company's future strategy, development and innovation process. Especially since it influences product and technology planning. Mega Trends can be used as a base for strategic decision-making in organizational functions such as marketing, R&D budget spending, product planning and development, human resource management, technology planning and innovation scouting.
According to us, several such Mega Trends are set to play out over the next decade or so. Ones that could create so much wealth that by 2025, investors will find the stock prices of today as puny as we find the ones in 1991.
Those who believe that investing based on such Mega Trends can hardly yield results should not forget that India's outsourcing opportunity was nothing but a Mega Trend way back in 1991. One that led to the creation of IT behemoths like Infosys, Wipro and TCS, as we know them today.
So the key is to accurately identify such Mega Trends that could play out over the next decade, irrespective of geo-political, economic and social headwinds. Having done that, one needs to zero in on companies that have rock solid managements and balance sheets to capitalize on the trend, come what may.
And for investors who never had the chance to invest in stocks in 1991, this could be a once-in a lifetime opportunity to revisit 1991. A chance to witness what it is like to invest in companies that will be the biggest game changers over the next decade and more.
Which Mega Trends according to you will drive the Indian stock markets over the next decade? Let us know in the Equitymaster Club or share your comments below.
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Chart of the day | |
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The reasons why participation in equities has remained low is largely a matter of perception. Many retail investors have burnt their fingers during the 2008-2009 meltdown and many consider investing in equities akin to gambling. But nothing could be further from the truth. Equity investing is all about following a disciplined approach. It means buying when prices are low and selling when they are high. The period post the 2008 crisis was the perfect time for retail investors to get into the market. But many had done so during the peak in early 2008 before the bubble burst and suffered losses. Now stock markets have once again begun to rise and this has seen more and more investors getting invested. But the point is that retail investors will need to remain selective about the kind of stocks they want to invest in and not rely solely on tips provided by brokers and friends.
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It is little wonder then that property developers are preparing to dole out discounts of up to 15% during the festival season later during the year. Will property sales improve this year given these discounts and the improving economic sentiment? Well, industry participants expect the festival season (Oct to Dec) to fetch sales of at least 60,000 units across the seven major cities. It is worth noting that this would be double of what was achieved during the same period in 2012 and 2013.
While we do not doubt that there is positive sentiment owing to the business-friendly government coming to power at the Centre, we are not too convinced about the overly optimistic property sales projections. If there was indeed so much demand for property, why would developers be compelled to offer discounts?
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Today's investing mantra |
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3 Responses to "What will it be like for investors to revisit 1991?"
Ashok Kumar Sethi
Aug 20, 2014The corrupt practice prevailing in PSU Banks and its highlighting is opening he sixth sense of people of the country and in particular the investors who have purchased shares of these PSUs. In one of my comments, I tweeted that the people who are involved in such corrupt practices are the real Financial Murderers of our Nation and the strict IPC like 302 should be imposed on them. We first were astonished about the role of Mr Jain of Syndicate bank and now the instances of Dena Bank and OBC have once again opened the line of discussions. I don't understand, how the UPA Govt. was not aware of such loopholes. Now, it is high time for Modi Govt. to take stern action and ensure that this does not happen again, failing which the credibility of Modi era will be fading away.
Ramchandra Naik
Aug 20, 2014I think the one of the next mega trend will be in the Engineering sector. Over a period of time, India has become well known for Information Technology and Pharmaceutical Industries.
The next trend will be in Engineering Goods. Increasingly, more and more Fortune 500 companies are setting up their R&D centres in India and this will lead to innovation and development of products that will be 'Made in India' and sold across the world.
Nirmal Kumar Mishra
Sep 14, 2014Although banking sector has been slurred a bit because of some corrupt practices; this sector holds promise considering the amount of money people pour in them. The present system must have a devise to plug loopholes in this sector. Pharma, IT, and auto sectors will also hold the sway. But there are other areas where the growth potential is very high. It is imperative that investors are illuminated and encouraged to invest in them and for this experts in this field have to throw some light on.