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A Presentation On

A Presentation On . Wealth Creation Through Capital Market By D Prasad, FCA 9810018028. Factors Influencing Investment. Fundamentals Technical X-Factor

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A Presentation On

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  1. A Presentation On Wealth Creation Through Capital Market By D Prasad, FCA 9810018028

  2. Factors Influencing Investment • Fundamentals • Technical • X-Factor • Techno-Funda ( Best of both Worlds) Fundamentals point the gun & Technical pull the trigger

  3. Critical Components of Investment Decision System Money Management Psychology

  4. Market Cycle G r e e d D I s b e l I e f B e l I e f B e l I e f D I s b e l I e f F e a r

  5. The Indian Story

  6. India – An Attractive Investment Destination( promise of a new ERA ) India- an economic superpower in the making…. GDP Growth- 8% plus after a decade Declining Interest rates Structural reforms Solid infrastructural plans Regulations in line with global standards Massive Corporate restructuring post 1994 High foreign exchange reserves contd…

  7. Broad based growth across all sectors Consumerism – a cascading affect Political stability Liquidity Boom Equity Mindset Inevitable Tax Paradise Huge Domestic Savings Low Equity Exposure Modernized Trading Systems Good Regulatory Environment Favorable Demographics- 54% of population <25 years GOLDMAN SACHS - BRIC Economy (Brazil, Russia, India, China) – To boom - INDIA to be the third largest economy

  8. Financial sector Labour reform Infrastructure Development Telecom Tariff reduction Confluence Insurance Competition Bill of Reforms Power VAT / Indirect taxes Capital Market Direct taxes MULTIPLIER EFFECT

  9. EQUITIES – A TAX PARADISE • If you sell your investment in less than 12 months (short term), you pay 10% tax! • If you sell your investment in more than 12 months (long term), you NO TAX • And even the Dividends are TAX FREE

  10. Money Money Money Equities- The Best Option • At 28% domestic savings rate – Annual household savings at Rs. 850,000 Cr • Reduction in capital gains taxes to drive strong flows into the equity markets • Reducing returns in bond funds to increase momentum of shift into equities • At 3% into equities – Rs.25,000 Cr into equities every year

  11. Demographics & Consumers Western World is ageing / India is YOUNG • 54% of population below 25 years of age. To add close to 100 mn productive population in next 8 years. • Sustained earning & spending – Indian consumer is turning out to be a great growth engine

  12. Demographics & ConsumersAttitudinal Shift – no longer debt averse / willing to spend for comfort

  13. What does this mean ? • A younger and working age population means – • Income levels to rise • Higher savings and consequent flows into equity markets • Increased household consumption • Significant increase of labor supply

  14. Liquidity - FIIs • Growing recognition amongst global fund managers regarding India’s long term potential • Steady stream of new FIIs

  15. Infrastructure growth • No longer afford to ignore • Easy availability and low Cost of capital • Initiatives by private sector • Infrastructure spending has a multiplier effect (huge employment generation, consumption growth etc) • Huge Investments happening in • Telecom • Roads • Water supply & irrigation • Huge Investments likely in • Electricity • Ports, Airports

  16. Indian Corporate SectorRedefining itself • Lower interest rates – lower cost of capital • Global scale of operations – economies of scale • Significant Cost reduction – better profitability • Nimble on global opportunities • Significant debt reduction – lower risk • Globally competitive

  17. MICRO TRENDS • Biggest micro trend is the expansion of mindset and horizons • Indian companies being globally cost competitive • Pharma, Software, Tisco, Guj. Ambuja, Tata Motors, Hindalco • Indian companies acquiring companies globally • Ranbaxy, Tata Motors, Tisco, Bharat Forge, Kirloskar Brothers, Amtek, Sun Pharma, etc • Indian companies gearing up to global size • Infosys, Tata Motors, Bharat Forge, • Indian companies becoming global sourcing hubs • Pharma, Textiles , GE, Sundaram Fasteners, Toyota Kirloskar, Cummins, Hyundai, • Indian companies expanding through internal accruals and focusing on superior cash flows

  18. Strategies / Themes In Play Valuation Story Momentum Trading Growth Ideas Liquidity Frontline/ Midcap/ Sector

  19. How to Play INDIA Outsourcing – Pharmacy, Textiles, Auto components, Engineering, IT enabled Infrastructure – Telecom, Power, Steel, Cement, Housing, Realty Retail – Banking , Financial Services, Hotel & Tourism, Departmental stores, Media Commodity – Copper, Iron ore, Coke, Aluminium

  20. Outsourcing – Changing trends • Lower end Labor arbitrage • Value added outsourcing • Innovation based exports • Exports through acquisition • Customer acquisition • Direct Market presence • Buy out and relocate production base to India

  21. Valuations EPS P/E • FY05 - 446 - 27 • FY06E 537 22.3* * SENSEX • FY07E 675 17.77* LEVEL- • FY08E 780 15.38* 12000

  22. POTENTIAL PARTY SPOILERS Elections Crude Oil Prices Monsoon World Economy IPO Supply Inflation & Interest Rate Indo-Pak Tensions/ Terrorism

  23. Key risks & challenges • Politics – a potential spoilsport • Inflation – Rising oil prices • Interest rate increase • Momentum high but slight deceleration • Key concern is global liquidity tightening( ex. China overheating, US debt shock) • Temporary contraction could crack the India story for short term • Real risk is extremely high volatility & not a bear market • SOLUTION IS TO ADOPT A BOTTOM UP APPROACH IN STOCK PICKING

  24. Thank you

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