Tatas bag this honour fourth time in a row - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster

Tatas bag this honour fourth time in a row 

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In this issue:
» What Jim Rogers thinks about Federal Reserve?
» US stock markets in a bubble territory
» Is it time to regulate bit coins?
» Every asset class is overvalued in Faber's view!
» ...and more!

With new scams coming to light every now and then, corporate governance has assumed even greater importance in recent times. As corruption issues make new headlines every day, investors have turned circumspect. They are discounting companies with poor governance practices.

We at Equitymaster pay utmost importance to management quality. This is because management is the torch bearer of any company. Hence, if they lack ethics or are opaque in their practices, the business and thus the share price can suffer.

Time and again we have conducted polls to gauge companies that are considered to be the most trustworthy. Recently, we concluded the 2013 polls. And the response was overwhelming to say the least. Nearly 14,000 people took part in it and voted for the management they think is the most trustworthy.

Tata group bagged the honour for being the most trustworthy group for the fourth time in a row. More than 30% of the participants have expressed their confidence in Tatas as being the most trustworthy. And not surprisingly so. Tatas have always been the epitome of good corporate governance amongst Indian corporates. HDFC Group has bagged the second place with 12% votes while L&T came in a distinct third with 8% share.

We present herewith the list of top 5 corporates. In order to access the full results of our 2013 polls please click here.

Final ranking for the 2013 polls
Corporate Groups % of votes
Tata Group 31.8%
HDFC Group 12.5%
L&T 7.8%
Aditya Birla Group 6.4%
Infosys 5.1%

The most surprising aspect is the way Infosys has slipped in position over the last few years. While it used to occupy runners up position in most of our previous polls, the company slipped to third position in 2012. And now in 2013 polls, it has further slipped by two positions to number five. Even the Re-instatement of Mr Narayana Murthy and the appointment of his son as executive assistant did little to improve the company's standing amongst investors. It continued to lose trust and slip further below in rankings.

The current results also reveal some interesting viewpoints. Bagging the honour for the fourth time in a row displays the unrelenting trust of investors towards the Tata group. Succession planning was the main issue with such a giant conglomerate. However, appointment of Cyrus Mistry has allayed all those fears. So far, he has done little to indicate he's not a worthy successor to Mr Ratan Tata.

Also, the fall from ladder, for Infosys, reveals that investors have become increasingly non-accommodating about governance issues and management quality.

Slowly and gradually, it is getting ingrained that it is not just strong financials but a better management quality that also plays a part in the long term success of a firm. In fact, a solid combination of two is what investors should look out for. When such companies are bought at reasonable levels, the long term results could be fantastic.

Do you think the Tatas deserve their place atop the list of most trustworthy companies? Let us know your comments or post them on our Facebook page / Google+ page

01:45  Chart of the day
Amidst slowdown concerns India's employment prospects have turned grim. As per India Skills Report, a human resource consulting firm, hiring figures in India are likely to increase by just 1.4% in 2014. And this is not good news where approximately 12 m people join the labor force every year. Slowdown across industries is not the only reason for dismal hiring prospects. The more concerning issue is that Indian youth lacks necessary employment skills in itself to get hired. In fact, only 34% of the people entering the job markets have the desired skill set to get employed as per the report. Amongst sectors, pharma has the highest percentage (54%) of potential candidates that have the right skill set required for the job. Pharma is followed by engineering and other sectors.

Unemployment due to deficiency in skill sets is a grave concern for India. With more than 65% of India's population below the age of 35 the proportion of working age population is huge. However, with most of them lacking the necessary skill sets India might witness an unemployment problem. Skill development programs and employee training are few ways through which the employee skills can be enhanced. And it is the onus of government and educational institutions to see that this happens.

Employable pool sector wise

ITI- Industrial Training Institutes; MCA- Master in computer application

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Time and again we have voiced our criticism about the US Federal Reserve's reckless monetary policies. We believe that the massive QE gamble that the central bank is experimenting with is going to have dire consequences in the long term.

Renowned global investor and commodity expert Jim Rogers is known for his no holds barred approach when taking on policymakers. In a recent interview Rogers was asked what he'd do if he was made the chairman of the central bank. This is what he said: "I'd abolish the Federal Reserve, and then I'd resign."

As per him, economies across the world have managed to survive even when there were no central banks. Of the three central banks that America had in its entire history, two had disappeared. Rogers is of the view that the US Fed too will disappear someday due to its self-destructive policies.

We do agree with Rogers on his concerns about the US Fed. However, not all central banks are useless, especially the one we have back at home. The Reserve Bank of India is highly regarded for its conservatism.

There's a new headache in town for the policymakers and regulators alike. And it answers to the name of Bitcoins. Only in its fourth year but the currency is gaining acceptance on an exponential basis. Its price has gone up around 5 times in the last one month alone. And it is far from done yet. Thus, with its wider acceptance come the risks of issues like money laundering and the fear of it being misused in the form of Ponzi schemes. Little wonder, Governments across the world are trying their best to regulate Bitcoin transactions as it does with other monetary assets. However, the task is going to be far from easy. Number one, there is absolutely no physical transaction that takes place for Bitcoins and number two, on account of it being virtual, it moves seamlessly across borders. Thus, this is not your normal currency that can quickly be brought to book. Keeping Bitcoins under a tight leash will certainly take some doing according to us. And the more the Governments debase fiat currencies, the more powerful will Bitcoin become we believe.

This gentleman has quite a reputation in calling doom scenarios. In fact, being the publisher of "The Gloom Boom & Doom Report", Dr Doom Marc Faber takes his nick name quite seriously. In a recent interview with Equitymaster, he had highlighted why investors should prepare for the worst. But this time, in an interview with CNBC he has actually gone to name several commodities that according to him are in bubble territory. Surprisingly, one of them is his favourite, 'farmlands'. Faber has earlier citied significant upside in the price of agricultural commodities in the long run. This was primarily based on demand -supply gap with falling size of farmlands. However in the latest interview, he pointed out that prices of farmlands are up 10 times in 10 years. Moreover, in addition to stocks and commodities, even assets like bitcoins that were unheard of until few years back are in bubble territory. Thus, Faber believes that until the Fed stops printing money, more and more assets will have irrational valuations.

When the UPA government announced the loan waiver scheme for farmers, it thought that most of the problems of the latter would get resolved. After all, debt repayment has always been the biggest issue that rural farmers have been grappling. But the reality is completely different. First of all, small and marginal farmers hardly have any access to credit. As per an article in the DNA, only 45-51% of the small and marginal farmers have access to credit. Only 39-58% of these small and marginal farmers got money from banks. What this means is that most of them are compelled to go to the moneylender to access funds who charge high rates of interest. That is not all. Ever since the loan waiver scheme was introduced, banks have become wary of lending to small and marginal farmers. After all, no bank wants to deal with the issue of rising bad debts and restructured loans. This has made the access of credit to smaller farmers all the more difficult. And has hardly done much in reducing dependence on money lenders. Thus, the loan waiver scheme will only make the small farmers suffer more. This means that sending a signal to farmers that not repaying loans is fine is certainly not beneficial to anyone in the longer run.

Stocks and real estate are asset classes that have performed well in the current year. But this seems to be the case despite no significant improvement in the global economy; which is why many economists are of the view that these asset classes are overvalued. Nobel prize winner, Robert Shiller shares this view as well. Mr Shiller believes that the sharp rises in American stocks - an asset class that he is 'most worried' about - could lead to a bubble situation. He has also raised alarms on the Brazilian housing market. He has gone to say that the way things are going on in the South American market reminds him of the early years of the real estate bubble in the US. "Bubbles look like this. And the world is still very vulnerable to a bubble," says Mr Shiller. We cannot help but link this to what is happening here in India as well. Given the high inflation rates and the volatility of stock markets other asset classes such as gold and real estate have shot up in recent times. So much so that a good amount of the household savings are going into real estate investments. Investors need to keep these factors into consideration before making such investments, we believe.

In the meanwhile Indian stock markets have shed some morning gains, albeit trading in positive territory. The benchmark BSE Sensex is up 89 points (0.43%) at the time of writing. Majority of the sectoral indices are trading strong today with those from healthcare and capital goods spaces being the top performers. The midcaps and the smallcaps stocks are also in demand, up by 0.7% and 1% respectively. Asian stocks were trading mixed, with China and Hong Kong being the top performers.

04:50  Today's investing mantra
"When you combine ignorance and leverage, you get some pretty interesting results." - Warren Buffett
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7 Responses to "Tatas bag this honour fourth time in a row"

Mukesh Mittal

Dec 7, 2013

TATA, the most reliable group in India is holding position no 1 and deserve for this.



Dec 4, 2013

If not anything they will not cheat shareholders and will not indulge in building personal wealth through illegal means.



Dec 2, 2013

TCS is the crown jewel in TATA companies -its Chief Chandrasekharan has led company to still greater heights ,after taking over from illustrious Ramdorai.He raced ahead, widening the performance gap with Infosys ;whereas Infosys's leaders along with Company, were slipping after Nandan Nilekani left.

Like (1)


Dec 2, 2013

Yes. Tata Group deserves the top position in ranking.

Like (1)

P F Sethna

Dec 2, 2013

Tata group's management & ethics in business undoubtedly generates confidence among all class of investors.

Like (1)

B K Sinha

Dec 2, 2013

Unequivocal YES

Like (1)

santosh arora

Dec 2, 2013

already commented. in the end tata will not have a return equal/less then the bank

Like (1)
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