Nano has some serious competition! - Views on News from Equitymaster

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Nano has some serious competition!

Dec 8, 2009

No, we aren't talking cars here. Instead, we are referring to another path breaking product from the Tata stable that has the potential to do to the water purifier market what Tata Nano has done to the car market. In an attempt to provide safe drinking water to millions of Indians, three Tata Group companies viz. Tata Chemicals, TCS and Titan Industries came together ten years back and got cracking on an ultra low cost water purifier. Yesterday saw the culmination of their efforts as the group chairman Ratan Tata unveiled two variants of water purifiers called 'Swach'. Priced at an extremely attractive Rs 749 and Rs 999, the purifiers will see a market launch inside the next one month. Considering that the water borne disease is the single greatest threat to global health and the tremendous price-value proposition that the product offers, 'Swach' could really set the cash registers ringing for the Tata Group. What more, the Group also plans to take the product to the African markets.

Really, the Tata Group seems to have made addressing what is called as the 'Bottom of the pyramid' market its specialty in recent times. And why not? At nearly 3 billion people, it is easily the largest market in the world and if it manages to address the needs of even a fraction of this market, the implications for the company's growth and profitability could be huge. Its time other companies try to emulate the Tatas.

When gold went to sleep for 30 years
Imagine investing in an asset class at its peak. Now, ask yourself how long would you be willing to wait before you breakeven with your investment in real terms? Let us take the example of Sensex. Sometime in January 2008, the index reached its all time high. Now, about two years later, it is around 20% off its all time highs. One can say with a reasonable amount of certainty that over the next 2-3 years, an investor who would have bought into the Sensex at its all time high, could manage to break even not just in nominal terms but perhaps in real terms as well. Thus, at best it took five years for an asset class like Indian equities to go back to its previous highs.

What would be your opinion of an asset that even after nearly 30 years, has not helped an investor to breakeven in real terms had he made the mistake of buying the asset during its last peak in January 1980? Not very high, isn't it? But this is exactly what the yellow metal Gold has done and still is among the most favorite asset classes right now. As per Bloomberg, investors who paid US$ 850 an ounce way back in 1980 would have earned just 44% as gold touched a record US$ 1,227 on Dec 3, 2009 in London. Contrast this with the S&P 500 return of a booming 2,100%! Infact, even US Treasuries have done way better, giving 1,000% returns. Thus, while the yellow metal may be in a nine year bull market, if you are a very long term investor and are waiting for the world to end, putting a large portion of your portfolio in gold may not be the best thing to do. For the world is unlikely to end and the problems that we are witnessing in the global economy could eventually pass away.

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