Saturday, 4 November, 2006: "Have I missed the boat as an
NRI investor in India’s booming economy?" was the first
reaction of Manibhai Patel in London as he confronted the news
that Bombay Sensex had set a new record at 13,000 points October
30.
"Yes and No" is the answer. If Manibhai is thinking
how investors on the Mumbai stock exchange have scooped good profits
of up to 30% on blue chips this year, then he has missed the boat.
The Sensex set a searing pace this year shooting from 9,000 to
13,000 points in 10 months. This year started with the index touching
over 9,000 and then it took off crossing 10,000 Feb 7. In 44 days
it touched a new peak of 11,000. The bulls were on a rampage.
Again, in under a month, it climbed to a new high of 12,000 points
April 20.
On May 10, 2006, the sensex touched a high of 12,671 before closing
at 12,612. But this was short-lived. What followed was literally
mayhem. On June 14, the index touched a low of 8,929, a fall of
29.2 percent from its peak levels.
The index took just 87 trading sessions, gaining 42 percent since
the lows of June to recapture the peak scaled May 10.
Come Friday, October 13, and bulls came charging with a new high.
The sensex closed at a historic high of over 13,000 Oct 30. What
next? Does Friday the 13th bring with it ominous signs of another
meltdown or give hope of further growth? Does 13,000 mean the
last peak?
Where do we go from here? Analysts talk of Indian stocks getting
better valuation due to their better fundamentals and future growth
prospects. The July-September results of corporate India have
surpassed market expectations.
With P/E (Price to Earnings) Ratio of 22.62, the Indian market
may look expensive but with growth prospects of corporate India
at 15-20 percent plus, the valuations seem justified. In simple
language, the stocks may be priced high but are still good value
for money as the economy grows.
At current price levels the Sensex P/E ratio stands at 22.62 marginally
lower than 22.71 recorded May 10. With P/E ratio of 22.71, the
market valuation of Indian stocks is higher than all of Asia Pacific
markets. P/E of Shanghai-A of China is 16.2, Hang Seng of Hong
Kong is 12.8, Jakarta Composite of Indonesia is 15.8 and KOSPI
of South Korea is 10.7.
Experts talk about India achieving a sustained GDP growth rate
of 7.6 percent for the next 35 years! This is a very robust growth
rate. This is what the investor should be buying into. P/Es in
retrospect would therefore look very attractive. Basically, India
is a strong growth story led by domestic consumption rather than
investments. This will serve as a great buffer against any external
shocks over a period of time.
So what’s the outlook for Manibhai? If he wants to remain
invested for two-three years, Manibhai should be of buying into
the value the Indian market currently provides rather than waiting
for the market to correct and then invest.
The sensex has only 30 market leaders but there are plenty of
other quoted companies offering good growth potential and profitable
investment opportunities.
Don’t sell now. Hold on to what you have got. Some experts
are predicting that the Sensex will scale 14,000 before the end
of this year.
Foreign Investment Institutions make their allocations in January-February
2007. By that time, the Sensex can possibly touch 14,000 when
the budget is presented.
If you are willing to spend time and effort in research and have
the required expertise, enter directly. If not, buy mutual funds.
Consult investment advisors and let the fund managers do the hard
work for you.
The final word: "Manibhai, go ahead and invest! Indian economy
is the second fastest growing economy in the world. You have not
really missed the boat!" IANS
Source: http://www.gulf-times.com
