Back in 2001, Warren Buffett had talked about the Mcap to GDP ratio as probably being one of the best measures of valuation. On a top down basis this is one of the indicators that he tracked to identify extremes of market irrationality. Like all valuation indicators there certainly are limitations to the measure. And in pursuit of perfection one could make multiple adjustments to make the measure more robust. But as Buffett puts it “On a macro basis, quantification doesn’t have to be complicated at all”.
India’s corporate sector and its leaders were very impressed as the current government took reigns at the centre on the back of reforms it had set out to achieve. However, a review of the current scenario suggests that things haven’t changed much on the ground. Essentially, the rise in share prices of a majority of companies in the last year have been driven more by valuation re-rating than actual improvement in earnings. Likewise, there is an interesting set of data that is emerging in terms of the shareholding pattern across companies. Read More
In this opinion piece which was published in the Economic Times, the author is referring to “network effect”. Mr Sridhar has in a way suggested that companies like Flipkart and Amazon enjoy a network effect and has compared these businesses with that of Visa and Mastercard. Read More
Caught in the middle of political uncertainty, market volatility and fickle FII flows, investors in the Indian stock market could take their cues from the investment behavior of multi-national corporations (MNCs). More than two dozen MNCs operating in the country have ignored all political and the economic instability issues to increase the size of their domestic investments. This, more than any rhetoric, indicates a high degree of confidence in the India growth story.
A high level of Capital Expenditure (capex) in a country is believed to be a good indicator of economic growth since it indicates a high level of confidence in the growth story of a country. In India, the capex level has been falling for three years and is now the same as it was in the year 2001. Read More