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Herd Mentality in Current Fund Raising Environment

TIP Guy 19 September 2009 bonds, economy, markets No Comments

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

TIP Guy 15 September 2009 commentary, markets 6 Comments

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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NIFTY Expected Returns for Different Trading Time Scales

TIP Guy 17 June 2009 analysis, markets 16 Comments

monthly-dividend-portfolio-reviewI presented a long term view about expected return for SENSEX. I mentioned that the compounded expected return was 12.1%, while the arithmetic average was 16% per year.

Today, I am discussing the short term perspective using a NIFTY index. Similar calculations can also be done using SENSEX, but I believe NIFTY is a better representation. I calculated daily returns, weekly returns, and monthly returns for NIFTY from August 2002 to May 2009. In all three cases I have used average closing value on a given day, given week, and given month. The table below shows the summary for these results.

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Expected Returns from SENSEX Index

TIP Guy 16 June 2009 markets No Comments

I conducted a poll on MoneyVidya site to get a feel of what users understand about the expected returns on yearly basis from SENSEX index. In the image below, you may see the question that I asked in the poll and four options that I gave to the users. The poll received 54 votes out of 2000+ users at that point in time. That is approximately 2% to 2.5% as a sample size. With this small sample size I do not think we can draw any conclusive results. However, I do believe that it is an indicator and demonstrates the directional trend.

Poll on MoneyVidya - Expected Return

Poll on MoneyVidya - Expected Return

Based on my calculation from Year 2001 to Year 2009, the compounded expected return for SENSEX was 12.1%. At the same the arithmetic average was 16% per year. Majority of the user in this sample size (52% or 28 users) said the compounded return for last ten years is between 11% and 20%. At least based on this small sample size, the majority of users on MoneyVidya site seem to have realistic expectation.

I performed this poll with a long term view of more than 2 years. So it is likely that many of user may wonder whether it makes sense to provide a long term perspective.

In my next post, I will discuss short term returns using NIFTY index.


The Bull Running for Red Flag – Waiting to Get Hit?

TIP Guy 8 May 2009 commentary, markets 2 Comments

newsThe current rally has added 48% to the SENSEX relative to February 2009 low of 8160 points. Is this the start of next Bull Run? The market players and traders will make you believe it is in fact the start of next Bull Run. Any rational investor will ask himself one question, what has happened since February 2009 that justifies this rally. Has the global economy turned around? Has the Indian economy turned around? Has the earning of companies turned around? Or the general question can be has it even stabilized to say it is turned around? Some may argue that equity markets are leading indicators and hence things have changed for better.

The real economy across different countries and India has showed continued sign of slowing down. The US economy contracted by approximately 6% last quarter, European economy shows no sign of stopping the slide, and Japan has been in 18 year downward spiral. In addition, the export oriented economy of emerging markets continues to slow down. Russia is in tatters, Brazil is hit by reduce material demand, and Indian companies are looking ways to maintain profitability. China is attempting to spend its way out of this slow down.

In addition, I looked into the latest quarterly earnings of the 30 Indian corporations that are included in the SENSEX. Continue reading rest of this article…

Dividend Yields in Global Markets

TIP Guy 17 April 2009 analysis, markets 2 Comments

My investing philosophy involves investing in high quality dividend paying companies at a fair value. I am willing to wait for 10 years or more. So many times I have been questioned on this investing approach and believe it or not, I just smile and move on. Not because I cannot respond, but because I am confident that I will have the last laugh. As an example, you may read one of my earlier posts on yield on cost.

Indian companies are not alone in paying dividends to its shareholders. Dividends are paid to common shareholders by corporations across the world, in different economies, different markets, and variety of industry segments. The characteristics of common shareholder dividends are not same. There are differences with respect to yield, frequency, how dividends are perceived, quality, and growth rates. In addition, for an international investor, effect of currency fluctuations is an added risk.

Today I am presenting the dividends yields and growth rates in three different parts of the world. It would very difficult (if not impossible) to either screen or identify every dividend paying companies in these markets. Therefore, I am using individual index and their yield to look at trends in any given market. While there may be varied arguments about quality and validity of such comparison, I still believe it is a good start to understand any given market and its policies vis-à-vis common shareholder dividends. Continue reading rest of this article…



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