RAGHURAM RAJAN : THE ROCK STAR (from my facebook wall)

India attract almost $5 billion in last one month after opening of FCNR route by Raghuram rajan despite one of the most repulsive time globally for emerging markets generally and India particularly. It show how pragmatically decision taken by an Individual can change everything. although it cannot be made point as of now that Raghu will take India out of all difficulties but at the same time, it is also right that at least he is very competent than his predecessor. a very right person at not so right time.

THE CHINA IS GOING TO COLLAPSE - IF NOT TODAY THAN CERTAINLY IN NEXT FEW YEARS (INPUT FROM RAJIV HANDA)

China, are doing their very best to self-destruct in a debt fuelled investment spending frenzy. This will result in a deflation and in a few years' time China will turn to the printing press for a solution. Today's front page of the Financial Review comes with the hopeful headline 'China shield against iron ore price fall'.

The shield in question? An announcement by the city of Changsha to spend $130 billion on 195 projects, many of which will apparently use steel. The article goes on to tell us that the stimulus amounts to 147% of the region's 2011 GDP.

You know that Australia relies heavily on iron oreexports (a key ingredient in the steel making process) and therefore relies heavily on Chinese steel making. But the halcyon days are over for Australia's iron ore players.

That's what the falling iron ore price is telling you. It is now trading around US$115 a tonne, well off its 2011 highs of over US$180 a tonne. In just the past few weeks, the price has fallen from US$135 tonne. We should get a bounce from here (it's been falling for nearly 2 weeks straight) but a sustained recovery is unlikely.

The price collapse is hurting the world's largest iron ore producer, Brazilian company Vale. It just reported a second quarter profit of 52 cents a share, representing a 59% slump on last year. It will soonhurt BHP and Rio's profits too.

Prices anticipate the future, and the falling iron ore price certainly says China's steel output must slow. But according to this recent Bloomberg article, China's steel mills are ramping production up.

'Daily steel production in China rebounded to 2 million metric tons in June, the second highest following a record of 2.02 million tons set in April. Output, already more than twice the combined daily production in Japan, the U.S., India and Russia, may climb 5.4 percent to 720 million tons this year, further outpacing domestic consumption, according to the median of three analysts surveyed by Bloomberg News.'

That's why China's regions are all scrambling to announce more stimulus measures. Steel production is overwhelming domestic demand. But instead of curbing supply, in China you just create demand for your product and deal with the consequences down the track.

 

Come to think of it, that's pretty much what the West does as well. But instead of steel, the West produces paper, or more accurately, electronic money. This 'money' then finds its way into speculative trading vehicles like derivatives. Asset prices go up, and people think they are wealthy.

 

China and the West are really no different when it comes to economic management. They're both following a false model that is doomed to end at some point. That is, continually drag demand from the future into the present. When that model exhausts the supply of additional real demand, you turn to financial demand. When that's exhausted, the game is over.

 

But in the meantime there's always hope. Hope that China can stimulate itself into prosperity and turn thelaws of capitalism upside down. Hope that money printing will solve the world's ills.

Is it hope? Or delusion?

 

HAHA ! "ANGRY BIRDS" VALUED MORE THAN "NOKIA"

do you ever played "angry birds", a game Inspired primarily by a sketch of stylized wingless birds, in which players use a slingshot to launch birds at pigs stationed on or within various structures, with the intent of destroying all the pigs on the playing field. recently, the game, developed by Finnish game developers rovio mobile, valued by analyst cool $9billion, which is almost 140% of the biggest corporation of Finland "NOKIA". while Nokia valued under $7billion, based on closing price of its shares $1.69, ANGRY BIRDS now valued more than it. Remember, NOKIA is one of the biggest wealth destroyer in last 10 years, as its shares plunged from $60 to penny $1.60, due to its inability to compete with that of Samsung, apple, HTC and other players.                                                                                                                                                                                 while Nokia sales product(consumer telecom product, telecom equipment with Siemens etc) worth $40 billion last year, it incurred almost $1.2 billion of loss in Q1 of FY 2012.it has some 120000 people working across various domain, in comparison rovio mobile do sales worth than $100million and profit before tax of $48million in last financial year, which is ten fold as compared to the previous year.the game is used almost 1 billion times on various platform prior to its launching.                                                 

HOW MUCH REALLY INDIAN MARKET CAN CLIMB IN NEXT 3-4 YEARS.

Its really a worth of question. we are currently at the bottom of the sentiment in terms of prospectus. their is seem no any light even after such big dark tunnel of 4-5 years. but remember, thinking contrary always pays handsomely. when there is a lots of fears and darkness, one need to be bullish or at least positive, this is what the real rule of this game. so as i already write many times, we are at the point where the probability of gaining from circumstances nail the loosing one. so question remain, how far we can climb in the next 3-4 years, if things go accordingly. here is a calculation may be

As the markets flirted with their low levels during the course of this year the one thing that was missing was a feeling of complete capitulation and total apathy and panic setting into the markets. Although It is expected that lows of around 15500 for the Sensex and 4700 for the Nifty(for medium term) to hold and they have held till date none of these events earlier during the year saw a sharp unrestrained fall in mid cap stocks and also in a large number of infrastructure stocks which most investors had been holding on with the hope of a bounce back. This phenomenon has happened during the last few days and I have got a feeling in the market which is similar to the period of January/February 2009 before the markets formed a durable bottom and set the tone for the next up move. 

I believe that the markets are now ripe for contrarians investing as a vast majority of stocks are underperforming and it is only the high priced defensives that are outperforming. An analysis of the BSE 500 since the beginning of the year shows that out of 500 stocks only 90 are up and the rest of them are down for the year. —

So what is the basic tenet of Contra investing-?

Uncertainties emerge in global events, economic growth, government policy etc. All such events converging today, creating huge opportunity for generating future returns. Thus current environment is apt for contrarian investment

The reasons why a Contra strategy is apt at the current point of time are 

—Most funds/investors are betting on the safest stocks. Top holdings of mutual funds are all among the top 10 market capitalized companies in India and constitute over 30% of total equity holdings .When these stock don’t move, several MFs don’t perform in the short run and this kind of Risk Aversion prevents more creative stock selection.

—Majority of stocks have not performed in the last 12 months, although market is 20% down from the peak, several stocks are languishing much below their historic high

—Economic growth is bottoming out and fundamentals can only improve

—Significant fear clouds judgment and impedes value unlocking and Lot of high potential stocks cheaply available and a large number of well Several well established stocks have seen sharp P/E reduction showing loss of investors belief

Long term fundamentals of most of the stocks remain robust while there are short term challenges

All this has led to high under ownership in a vast majority of stocks. As a contrarian investor sudden drop in investor interest poses an entry opportunity.

—        As fundamentals change, the extent of under-ownership determines the speed of appreciation

—        A rightly timed investment into a under-owned stock can result in quick gains

—        Exit is easier when the herd comes in

The contrarian strategy is also applicable in investing over market capitalizations where mid caps/large cap premium and discount varies over periods of time depending on market sentiments. This switch between market capitalizations is also a contra strategy which is largely favoring mid caps at his stage.

                                                                                                                                                                                             The key is that contra investing is not value investing. The key is that when growth is contra one has to be a growth investor, when value is contra one has to go growth.

The contrarian investment theme is often confused with the fundamental or value investing. But it is a fallacy….It involves far more complex thought process. It is a way of thinking which is difficult to emulate.

•        Contra investing also requires incubating stocks for some time before they find favor with the rest of the market. Proactively identify new investment themes and build up strong positions before a majority of investors

•        It is also important to Monitor stock/sector ownership and relate it to the fundamentals of the sector. Get out of over owned stocks and get into under owned ones. Avoids momentum stocks and over owned sectors, thus improves risk profile

At this stage my key contra bets will be well established mid sized corporates which strong brand franchises or business franchise which might have some short term concerns that are leading to a severe mispricing of the long term potential. If one takes stocks with a market capitalization of at least Rs 1000 crores where stocks are down at least 60% from their peak values or the valuation discount from the peak valuations are at least 50% a portfolio of at least 20 high quality stocks can be easily built which on a buy and hold strategy can yield at least 100% over a two year holding period.

However while evaluating such companies it is also important to evaluate companies in a manner where there should not be a value trap as some companies specially in the infrastructure sector have destroyed their balance sheets via aggressive bidding and high Debt: Equity levels to such an extent that there is very little tangible equity value left in these companies, although the stocks might be cheap on a Price to Book basis.  Again to reiterate the value trap is the biggest folly in contrarian investing.

However on the flip side it is also true that post evaluation if one comes to the conclusion that as interest rates ease off and cash flows improve the debt burden can be reduced then one of the biggest equity value creations do happen via the shift of the total enterprise value from debt to equity while the overall enterprise value might not change. For example, let’s say there is a company with Debt+Equity of Rs 10000 Crores out of which, on today’s day Debt is Rs 8000 Cr and Equity is Rs 2000 Cr. Over the next couple of years it can happen that the overall company value does not change but Debt comes down to Rs 6000 Cr and Equity value goes upto Rs 4000 Crores. As such equity returns can be 100%.

In January 2008 India's market capitalization peaked at Rs 75 Lakh Crores and Market cap to GDP was at 160% & in March 2009 the Market Capitalization bottomed out at Rs 30 Lakh Crores.

Current Market capitalization stands at Rs 70 Lakh Crores and Market cap to GDP is at 77% on 2011-12 GDP & 65% on 2012-13.

—        Eventually as the bull market matures over the next 3-4 years, the Market cap to GDP should approach the earlier peaks.

—        India’s GDP in the year 2014-15 should be at Rs 135 Lakh crores.

—        Assuming a mature and peaking bull market at that stage the market capitalization could be at around Rs 200-220 Lakh crores.

—        This implies a tripling of Market Capitalization from the current levels over the next 4 years.

—        Per annum returns could be at an average of 25% plus.

—        The current bearishness and apathy towards equity could be one of the best entry points for the Indian markets

Since it’s already become a big note on Contrarian Investing I will write more on this subject later. However the value in the market is tremendous today and selective buys at these levels will generate huge returns over the next bull cycle. 

EPS DOWN-GRADATION AT THE LAST LEG

the downgrading of Indianhttps://dl.dropbox.com/u/5973996/Yogesh/9%20July/G-MOTILAL.pdf market seem to be in the last leg. following is one of the most important chart, which show our down gradation in last 1 and half year by analyst. 

25x times return in next 3 years........well it may be possible with KERALA AYURVEDA LTD.........................

yes, it may be certainly possible. as posted early, i already present my bullish view about india, its economy and its market, i see a opportunity, which will share with all of you friend,

                    India is at verge of "break-out country", which will enable it to grow at rate of 9-10% every year in future(just ignore the present headwind).consumption is going to be the biggest theme of all time. just think about it, we are now country of 1.2billion and every day, around 50,000 people join this club. these all are esteemed consumer and will be a beneficiary of great India growth story. so where one of the best bet is awaiting on this theme, which is almost risk free and have a greater story to unfold........yes it is KERALA AYURVEDA Ltd - a story which lay its inception from god's own country. It has really potential to become a great value-creator and one of the biggest multibagger company.it has potential to change life of its investor and it was a one-time life opportunity. 

ABOUT COMPANY:- 

                                                                                                                                                                                                                                      As  the name suggests it is a Kerala based company operating in Ayurveda based products and services..Company manufacturing  Ayurvedic medicines,running Ayurvedic Hospital and Clinics,operating Ayurveda based wellness centers and Resorts.KAL running an Ayurvedic Hospital at Aluva in Kerala and running more than 30 Ayurvedic clinics . Company selling its products through Ayurvedic Medical shops established in franchise model throughout India.  Recently its ‘AyurvedaGram ‘  located in Bangalore selected as the  ‘ Wellness services provider company of the year 2011’ by  Frost and Sullivan’ .In 2006.KAL taken over by Katra Group headed by Ramesh Vangal. He is well known  in India as the person who brings  Pepsi  to our country and also his business Interests in Tamilnadu Merchantile bank and Scandant group.Even after the takeover by Vangal ,there is any substantial improvement in Company’s performance so far .In an interview,he explained that the company is in the process of establishing some base and standards and making some re arrangements in its business strategy.Anyway  in recent times company streamlined the operations of its overseas subsidiaries and exited from some non performing assets.The business of Ayurveda having tremendous potential in India and abroad especially at a time there is more and more discussions  about the side effects of Allopathy medicines.In medical tourism segment ayurvedic wellness centers having huge potential .Being a pioneer in all these segments  KAL having very good future if it utilised properly.Vangal is a shrewd business man with great deal making skills and I don’t think he will waste the opportunity available in front.Recently KAL signed an agreement with Banaras Hindu  University to undertake research and development in areas like geriatric care, cancer, anemia, metabolic diseases, diabetes and epidemic prevention, etc. In another important development KAL signed a Memorandum of Understanding with Tata Global Beverages  to explore formation of a joint venture.Purpose of this JV will be to focus on development of a range of beverages and food products based on proven ayurvedic recipes and formulations for the global market.For the latest March quarter company posted sharp improvement on its performance. Turnover  almost doubled and loss reduced substantially .Actually if we exclude a one time expenditure ,company posted a profit of Rs.2 Cr .Considering the history of promoter ,potential of the industry ,lack of other listed companies in this sector and its improving financial performance ,it is surely a company to watch .

5 REASON WHY IT IS GOING TO CLIMB MOUNTAIN :-

1. the most favorable point about the company is its promoter. i am now confirm from my 17 year experience( 2 years of experience of mine and 15 years of my father about investing) that a company can not give return of a single paise to its minority investor till its promoter really believe in sharing of value creation theory.its promoter Ramesh vangal is really heavyweight, with cash and asset-proof. he is not going to leave this great opportunity in halt. he will  make sure that the last potential in this field will explored  by his team. also the corporate governance of this group is beyond credibility.

2. the company operate in field where any of major institutional competitor is yet to finalize any aggressive move. though their is many companies operate in same field(in health,spa and Ayurveda medicine) in kerala but certainly their scale is much more small than katra group.

3. in future,India specially kerala is going to be biggest hotspot of foreign tourist arrival and health tourism is going to expand upto what our IT services industries is of the scale. . kerala already show its competence in early time for attraction of tourist. the highly renowned campaign of kerala goverenment with tag line "god's own country" already make history in popularity.

4. the financial turnaround of company is going to be experience by its investor in near future(hopefully from next quarter). already in last quarter, company show great turnaround and it may be just start of a long prosperous journey. i am betting for at least 100 percent growth in both revenue and net profit for company for at least 4-5 years. 

and

5. you cannot expect a company with potential of several 1000's of crore of esteemed market and leader in its core competence of area in which it operate and headed by one of the most aspiring entrepreneur of country to be sold at rate of 40/share and market cap of just 42 crore. 

i am estimating that it can become 1000 crore company in next 3-4 years, which will be about 25 times from herein on. 

you can mail any query at perseuit@gmail.com. 

Indian rupees (INR) finally bottom out

The sharp strength shown by Indian rupees on Friday, seem like final bottoming of our currency, irrespective of like of dead cat bounce. currency depreciation of this time heavily due to strengthen of US dollar against major currency, especially of against Euro making all time low and also India's own problem gave a byte of contribution toward it. but it may be inferred now that on both of the front, their seem to be light after long tunnel. while European leader agreed on consolation , which will certainly end with short to medium term revival in their currency, thus weakening of dollar, evaluate as strengthen of Indian rupees. and also, under the new finance ministry portfolio of manmohan singh., things look like more lucrative on domestic front. so certainly their is a hope emerging from both of the front. m expecting rupees range for this year to 56.00-49.50. it will great benefit for us as global commodities look like in long downside.