X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Stockmarkets: There is more to it... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 9, 2005

    Stockmarkets: There is more to it...

    ...than meets the eye! Or, so it seems! As the Indian indices scale new heights each week (the latest is 8,000 for the BSE-Sensex), self-proclaimed market experts set higher targets for the markets to chase. Fundamentals, long term potential or valuations, nothing seems to justify the intimidating heights that the indices have breached. What is more interesting to note, is that, the foreign investors seem to have more faith in us than we have in ourselves! Here we try to fathom some reasons as to what is it that makes India such a favoured investment destination.

    Consistency is the key: While most of the Asian economies (led by China and India) have tread on a steady growth path (albeit on a lower base) in the last decade, their counterparts in the developed world have struggled to counter various macro economic shocks and keep the growth engine going. This has resulted in a lack of consistency in the GDP growth of the advanced economies vis--vis that of the Asian ones. The same has translated into better reliance on the developing economies with regards to delivery of performance and sustenance of growth.

    Stronger fiscal position: While the fiscal balance position of the Asian developing economies has marginally improved in the last couple of years, those of the advanced economies have steadily deteriorated. The rise in crude oil prices is not helping conditions improve either. On the other hand, a sharp surge in inflow of invisibles and trade surpluses due to low cost manufacturing (e.g. China) and low cost services (e.g. India) has helped consolidate the positions of the developing Asian nations. In fact, while the consolidated fiscal position of the Asian economies has remained almost stagnant over past two years, a steady rise in the debt levels of the advanced countries has persuaded investors to look for alternate investment venues. No wonder, most the funds have found their route into the 'emerging economies'.

    Currency appreciation: The appreciation in currencies of developing nations, mainly on account of the weakness of the US dollar has acted as a dual benefit to the overseas investors putting their money into Asian economies. This is because the depreciation in value of the US dollar will fetch them (largely the US investors) higher returns on their investment, over and above the returns garnered through investments in emerging markets.

    Higher rate of return: Last but not the least, the prime factor that attracts investors to the so-called 'emerging economies' is the high rate of returns on assets offered by them. So much so, that the returns adequately compensate for the high beta (indicative of market risk) of these stocks. In other words, investors already factor in the possible risk of losses that they are exposed to due to such investments. To put things into perspective, banks offer loans at higher interest rates on risky assets so as to garner higher yields that can compensate them for the delinquencies. Thus, a bank would not mind NPA levels of 7% on credit cards that offer yields up to 16% to 17% per annum. Similar is the strategy followed by the overseas investors.

    So what should investors do?
    As the legendary investor, Benjamin Graham had indicated, instead of registering choices on the 'voting machine' (his definition of markets in the short term), investors should weigh their investment strategies carefully on the 'weighing machine' (markets in the longer term). As such, small investors need to weigh in the pros and cons of their probable investment decision before risking their money. While relying on fundamentals is a sure shot way of garnering adequate returns in the long-term, relying solely on the foreign money might lead you to nowhere!

     

     

    Equitymaster requests your view! Post a comment on "Stockmarkets: There is more to it...". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 18, 2017 (Close)

    MARKET STATS