|»5 Minute Wrap Up by Equitymaster|
On This Day - 27 DECEMBER 2010
India's top wealth creators of the decade
In this issue:
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From within the Sensex, there have been companies that have risen even more. We can call them the wealth creators of this decade - blue-chip stocks that returned the most during 2001-2010. And here are the top five of them.
For identifying these wealth creators, we have considered the 10-year performance of only those companies that were part of the Sensex in January 2001 and are still there now. As the chart above shows, two of the best performers have been from the industrial/manufacturing sector (BHEL and L&T), while the remaining three are from the consumption space (M&M, Tata Motors, and SBI).
This just goes to show the mindshare these two themes - consumption and industrial - have received from Indian investors over the past ten years. These stocks' performance also throws much light on the relevance of India's domestic story, which just seems to be unfolding.
As far as the wealth creators of the next ten years are concerned, we are keeping our eyes and ears open to identify the same.
At such a time, we wonder as to what is driving up the price of silver. Is it real demand? Well that has remained low. And supply? There is over supply in the markets. So what has been the reason behind the sudden interest in silver?
The answer is - investor interest. Investors looking for a share of the commodity cake are pouring money into silver which is driving the gains. So will this continue? Till such time as investors find better investment opportunities, metals will continue to go up. So maybe silver will continue to shine for some time to come.
As for the other key Asian markets, while China closed down by 1.9%, Japan and Singapore were up 0.8% and 0.5% respectively.
It is not just that. Confidentiality is also another key reason why bankers are being left out of the equation. Promoters are concerned that involving a banker in the deal making process would lead to some information getting leaked. This would then hurt the deal. On a pure monetary basis, bankers' fees are also done away with. One needs to look no further than some of the big corporate deals struck over the past few years. Ranbaxy-Daiichi, Piramal Healthcare-Abbott, Tata Steel-Corus to name a few are all examples of deals struck between the top honchos with no banker involved. Plus promoters of companies have become savvier. They have made it a point to have knowledge of all aspects of the business that they are running. Indeed, we believe that investment bankers would have to bring something new on the table. If they do not want to be left out of such big corporate deals that is.
Meanwhile, central banks in Asia will have to work overtime to keep cheap dollars at bay. India's RBI raised interest rates six times in 2010. With China looking at a firmer trend in interest rates, the RBI's job is far from done. Growth rates in both China and India may get tempered with borrowing costs getting dearer. But we believe that inviting hot money with the lure of higher growth rates to emerging economies in Asia will do more evil. We would be better off with more rational central banks.
Take for example the numerous policy imbalances. Farmers complain of the gradual change in land use patterns for not growing staple crops. Maharashtra, which meets more than 30% of national onion demand, is a major culprit. Since 2002, farmers who traditionally grew onion have moved to sugarcane and grapes. The high minimum support price for sugarcane and huge domestic and export demand for grapes is a big cause for the shift. The story is similar in many other states as well.
On the other hand, international crude oil prices are hovering around US$ 90 per barrel. This is close to its two-year high. Earlier this month state-run fuel retailers had lifted the price of petrol. Now, the government is expected to decide this week whether to increase state-set fuel prices. We believe this move will have a much broader inflationary impact. It remains to be seen how wage pressures and high input costs shape corporate profitability in 2011.
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