Thursday, April 29, 2010

INDIAN EQUITIES INDICES : % Weights by Sector.

Take a look at the newspaper clipping below.

The Indian Equity market provides international investors with an exposure to a well diversified emerging economy, that is not overly dependent on exports or raw materials and has a large domestic market.

BRIC nations like Brazil and Russia are more heavily concentrated on the commodity sector (basic raw materials).

China is an export oriented BRIC country.

However as the article says, the Agriculture and Trade sector are both absent from the NIFTY & BSE SENSEX.

Another point worth noting is the gradual rise in the % weight of the Banking and Financial services sector.
Internationally, both the FTSE (U.K) and the Hang Seng (Hong Kong) have considerable exposure to banking and financial services.

A Benchmark index must be truly representative of the underlying economy, and currently I feel that the Banking and Financial services' % weight in the index is too high.

In the long run, I would hope that sectors like Pharmaceuticals, Telecom, and Cement are given a greater share of the index.

The Automobile and FMCG sectors are also vital components when it comes to gauging consumer consumption demand.


The monsoon rainfall last year was well below average.
As India waits for the arrival of the south west monsoon, everyone's hoping for a normal monsoon this year.

Insufficient rainfall resulted in rising food prices, as the prices of vegetables and food grains soared.

Last year, consumer demand in rural areas held up pretty well despite a poor monsoon. Continuing inflation, especially ''food price'' inflation will have a dampening effect on consumer consumption in the auto, FMCG & durable goods sectors.

Thus, a back to back season of insufficient rainfall will have serious repercussions for the Indian economy.

In the meantime, the India Meteorological Department (IMD) has forecast a normal monsoon across the country this year.

'''Lending a quantitative perspective to the available indications, IMD said the total rainfall during the June-September monsoon season would be 98 per cent of the long period average. This assessment is subject to a model error of ± 5 per cent.'''

Lastly, just a warning for those who may blindly follow the forecasts of the IMD!!

''''Last year too IMD had predicted a near-normal rainfall of 96 per cent. Two months later, in June, it issued an update scaling down its assessment to 93 per cent of normal. Both these predictions went awry. IMD then revised its forecast for a third time in August, this time predicting 87 per cent of normal rains.

These predictions, however, turned out wrong and the country received only 77 per cent of normal rainfall. This led to a drought in large parts of the country.'''''


TAKE A LOOK-India forecasts normal monsoon rainfall

Monsoon to dispel clouds over sugar, grain

MD predicts normal monsoon

Thursday, April 1, 2010


Here's another failed deal from the 'LBO bubble' days of 2005.

Cheap money lead to excessive valuations for buyouts.

As I read the article below in the Economic times newspaper last week, I was reminded once again of how experts, analysts and investment bankers continued to justify deals that were irrationally dangerous and value destructive!

The only guys who benefited from these deals, were the investment bank advisers who earned massive fees on these now failing LBO deals.

Lastly, I leave you with an interview of the ever consistent, rational and down to earth - David Rosenberg.

He continues to be the lone voice advising caution and recommending measures to minimize portfolio volatility!

The bear: Dead or just sleeping? - The Globe and Mail

David Rosenberg - More downside to U.S. Home prices ?

The recovery in the U.S. housing market is taking longer than expected.
The crash in home prices has really eroded the networth of homeowners and rattled the U.S.consumer.

David Rosenberg recently highlighted the differences between Investor expectations and Consumer expectations (Wall St. vs Main St.).
In the chart below he raises a valid point of 'mean reversion' as the the shadow inventory of foreclosed homes and continuing foreclosures, continues to stress out the US Residential property market.