Yes, you've read that right! If Morgan Stanley India head, Narayan Ramachandran is to believed, Indian companies are expected to raise more than Rs 3 lakh crores (US$ 70 bn) through share sales over the next three years. Speaking at the Reuters India investment summit, Ramachandran opined that Indian companies have raised US$ 18 bn by selling new shares this year and a long list of firms are waiting in the wings, hoping to come out with IPOs and secondary offerings in Asia's third largest economy.
Interestingly, nearly half of the 3 lakh crores that the Indian companies are expected to raise over the medium term will be accounted for by stake sale in state run firms. Other sectors that would dominate the fund raising are, not surprisingly, companies belonging to the energy and infrastructure space, two of the most important long-term growth drivers for India. Besides, telecom firms are also likely to tap capital markets so that third generation mobile networks could be built across the length and the breadth of the country.
It should be noted that since most of the fund raising could be done for projects involving long gestation periods, the track record of the management and its execution skills should come into sharp focus at the time of investing in issues.
Another theme that could gain prominence over the next couple of years could be overseas acquisitions by Indian companies said Ramachandran. A combination of strong currency and cheaper valuations will make the temptation of going in for foreign acquisitions too hard to resist for the Indian companies. However, the companies could do well to not stretch themselves a great deal and make use of a judicious mix of debt and equity to fund their acquisitions.
Defending oneself against bursting of asset bubbles
While there is a lot of talk about bubbles being built up currently in a variety of asset classes, the fact remains that most people come to know of it only when it ends up bursting. Hence, the best defense against these so called bubbles may not be in trying to predict the timing of its bursting but making an attempt to minimize one's damage from it. And this is where a nice write up from CNNMoney.com can come in handy. As per the write up, there are three fairly simple defenses that can come to investor's rescue. And these defenses are common sense, diversification and rebalancing.
While the first one refers to applying old-fashioned independent judgement to whether an asset class has run up too much in too short a time, the second one involves building a balanced portfolio so that one does not get carried away and bet big on a single asset class. The third one involves selling a portion of investments that have outperformed and plowing the proceeds into those that have lagged to bring one's portfolio back to its correct proportions every year or so.
Let us see how the above crash course will help you. If someone tells you that emerging markets are in bubble territory right now, you will certainly not lose your sleep over it. This is so because you have invested in these markets for the right reasons, which is to ensure more diversification and in the right manner so that if someone would have invested in these markets a year back, he would have obviously done the rebalancing needed by buying into these assets at a time when their prices were low and selling it now, when they have really run up a lot. You can try this with other asset classes as well, without ever having to worry a great deal about bubbles.