Herd Mentality in Current Fund Raising Environment

herd_groupIn last few months, quite a few Indian business houses embarked upon fund raising for one reason or the other. Some businesses raised funds for debt financing needs, some needed operation cash, some needed working capital, some need for growth needs, and many needed it little bit for everything. Furthermore, the method adopted by business houses have been varied such as qualified institutional placements (QIPs), american depository shares (ADS), global depository shares (GDS), non-convertible debentures (NCDs), asset sales, stake sales, and public offering (IPOs). In general the response has been tremendous and quite a bit of capital was/is being committed by all the participants, including retail investors like you and me.

In April/June 2009 timeframe, it is estimated that a total of $24 billion was raised by Indian companies, while it is estimated that $30+ billion was raised in first six months of 2009. Now this is just the amount raised and does not include the amount committed. The table below shows the some the companies that have gone to capital markets for raising funds. It is not comprehensive but shows the level of capital raised in foreign markets, and in Indian markets.

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SENSEX Trends – Fair Valuation and Improved Earnings

sensex--indexThe current rally has added 98% to the SENSEX relative to March 2009 low of 8160 points. The rally is going on for last 5 months, the question is, what is fueling this rally? This rebound will make us believe it is start of next Bull Run. Any prudent investor will try to figure out what has happened since March 2009 that justifies this rally. As always, at hindsight everything makes sense.

With the unprecedented level of stimulus from many different countries, the global economy is showing signs of stabilization. In addition, the rebound of Oil prices in international market seems to give boost to many countries. Accordingly, I believe Indian economy is also showing signs of stability. I think the biggest boost for Indian business sentiment and environment has been the continuity of the pro-reform government at its helm.

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Rookie Trader or Investor – Turbulent Journey Cut Short

I am presenting a direct copy of an email by one of the readers of TIPBlog. In this email, the reader shared his/her journey and is narrating an experience. After the story I will present my views and thoughts about it.

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moneymaze1My experience in stock markets has been one involving many emotions right from elation (beginning with RPower in Jan 2008) to point of being depressed (with the Oct-Lehmann crash)……. I just wanted to share it with someone hoping you can bring some clarity to my investing/trading style and how I can chart a path in this field.

I was a college grad with 1 yr experience and already into a second job (hopping very early) in early 2008 when I got caught inmoneygrabber the euphoria of RPower. That was when I actually came to know the ‘ABC’ of stock markets. I wanted to make quick bucks (and still in that mindset I feel) and subscribed to full limit thinking it would double in no time after listing. I even borrowed from my brother to invest on his behalf. I didn’t know what was a ‘bull’ or ‘bear’ and just blindly went on buying stocks which propped up in media and held some 2L worth of stocks during the Feb ‘08 – June ‘08 period. I didn’t even know that a fully charged bear market was ongoing until it was too late for me to grasp the various terms and happenings around the world.

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Oil India Ltd – Should I Subscribe?

question1I am not a fan of IPOs. I do not consider them an attractive opportunity for my investment objectives. In general, companies or organization come to the market with IPOs to generate capital. Their objectives are to generate as much capital as possible with minimum possible dilution. Companies usually choose opportune time frame to offer it to open public so that sufficient premium can be added to fair value (or book value). I do not find fault with the company. They are doing what they are supposed to do. They are attempting to meet their objective to get maximum possible value from the market.

Everybody will have an opinion which is perfectly acceptable. The broking world says “buy it for long term”. Retail market sentiment says buy, buy, and buy. However, I am not buying it. I am giving it a pass. The key question here is what is in there for me as an investor?

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Gujarat Gas: Waiting for Right Price to Buy

GG logoGujarat Gas Company Ltd. (GUJARATGAS) is India’s largest private sector company in natural gas transmission and distribution. As the name suggests operations are in state of Gujarat. It distributes natural gas to industrial, commercial, and domestic customers. British Gas Group has a majority of the stake of close to 65% stake in the company. Few key aspects that I like about Gujarat Gas are its business model of gas distribution and practically debt free balance sheet.

Trend Analysis

The whole reason for any business to exist is to generate sales revenue and make more profits. At a minimum, the parameters listed below should have continuously increasing trends. All the data below is based on last 8 years i.e. from 2000 to 2008.

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