NIFTY versus the Sectors

Market correction: “When” not “If”? We’ve all been bracing for it for a while now. At Price-Earnings of 25+, NIFTY PE is now two full standard deviations above its median value of 19, that suggests or rather shouts “correction coming!”. Simply put, we’re paying ₹25 for each ₹ of Earnings from the 50 companies in the NIFTY. Put it another way, if earnings of NIFTY companies stay at the current level, and if they pay out 100% of their earnings to shareholders, it will take 25 years to recover your investment. You’re thinking that makes no sense. Even the median value implies 19

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India’s true sunshine sector

As of this writing, the NIFTY is trading slightly below its lifetime high of 10,477 points, nearly doubling from 5,517 in early September 2013. In the same period, NIFTY Price-Earnings has risen from about 16 to over 26, a zone considered to be significantly over-valued compared to median values. Price multiples expansion typically accompanies improving prospects for earnings growth in times of general optimism. The problem, for India, has been the lack of translation of that optimism into earnings growth. While the NIFTY (Price) has risen by 17% annually for the last four years, NIFTY Earnings Per Share (EPS) has

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What if you were the world’s unluckiest investor?

[This post was inspired by Ben Carlson’s post: What if you only invested at market peaks?link on his fantastic blog ‘A wealth of common sense’. Highly recommend following Ben on twitter @awealthofcs] What would your returns look like if you were the world’s unluckiest investor? Fairly early, you decided you would diligently invest a fixed amount in Indian equities every year. You would even increase the amount invested year-on-year in line with your increase in income. However, you spend most of your year on remote oil rigs in the middle of the ocean or mines out in the hinterland, with no opportunity

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Difference between ROCE and ROIC and does it matter

Financial metrics and investment quality Deciphering financial ratios can be daunting for investors looking to differentiate potential investments on quality. But if you’re set on picking your own investments, then you need to be able to understand and interpret them. If there are better ways you could be spending your time, then leave it a mutual fund manager in spite of its drawbacks or even just buy a low-cost index tracker, which tends to beat most active investors anyway. When it comes to financial metrics, it’s important to understand the spirit more than the letter of the metric, i.e. what the

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Can buying cheap NIFTY stocks beat the index?

Legendary value investors, past and present, and the best value investing blogs offer this as the one consistent message. Focus on buying stocks trading at relatively lower valuations to the market and the returns will take care of themselves. Ironically, the most-quoted “value investor” in the world, Warren Buffett deviated from this simplistic strategy a long time ago when he started buying “wonderful businesses” (brand, pricing power, future ability to generate cash with minimal capital) at fair prices over fair businesses at “wonderful prices” (current low price to book / other earnings multiples”. The term “wonderful business” has since then

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5 things not commonly known about the NIFTY

Earlier this week, NSE announced effective Sep 29, 4 stocks (ACC, Bank of Baroda, Tata Power, Tata Motors DVR) will be dropped and 3 (Bajaj Finance, Hindustan Petroleum, UPL) will be added to the NIFTY. When analysts talk about the performance of the “Indian Stock Market”, they are typically talking about the NSE NIFTY Index, and the BSE Sensex Index (to a lesser extent). Most investors know the NIFTY consists of 50 stocks (currently 51), of the largest companies by market capitalisation trading on the Indian markets. 5 things not commonly known about the NIFTY: 5. How the NIFTY 50

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Evaluating stocks with TCI Rapid X-Ray

So many stocks…So little time Investing is largely a process of elimination, and the more efficiently you can eliminate investments that do not check the boxes on your investing checklist, the more time you can spend diving deep into the ones that do. For equity investors in the Indian Stock Market, there are about 1,500 listed stocks on the NSE and nearly 5,000 on the BSE, to choose from when making investment decisions. Sure, there are ways to whittle that list down using filters of market capitalisation and sectors, but you’re still left with a few hundred potential investments to

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TCI Investment Note: Persistent Systems

This is a post with a difference. For the first time on this site, I’ve tried to articulate my thesis for a specific stock. Note that this is not a recommendation to buy or sell this stock but more a look into the various aspects to consider when identifying your stock picks, which I described conceptually in my post on investment checklists. The sources for financial data are the annual reports and screener.in, those for the industry analysis are various reports available online. Disclaimer: I currently own the stock and therefore more than likely to be biased. Persistent Systems Introduction This is

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