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basant
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Joined: 01/Jan/2006
Location: India
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Posts: 18403
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   Posted: 19/Aug/2006 at 4:04pm |
I guess you are referring to the percentage of the GDP that is not represented for instance agriculture is hardly represented whereas you have about more then 25% of GDP coming from there. SO these are additional kickers and need to be screened. But just think we have hardly any representation from Retailing, Insurance and Media whereas most of the developed markets are over weighted with these sectors. Once that happens the Market cap to GDP shall go up further. Hong Kong is a place which is too skewed I would think I do not follow Hong Kong but there isn’t adequate sect oral representation either in their indices or in their GDP. But even if you take the US they are at a market cap to GDP of 100%.
India's GDP is at present Rs 30 lac crores and should grow to about Rs 40 lac crores by the year 2010. The market capitalization of the BSE is at Rs 27 lac crores, which is 90% of the GDP. The previous high tested by the Indian system has been 67%.
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Moments! |
Market Cap to GDP ratio
at the peak |
Market Cap to GDP ratio
post the peak |
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The Harshad Mehta boom |
56% |
32% |
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Ketan Pareikh tech boom |
52% |
21% |
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During this structural boom |
90% |
Take a guess? |
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But on the whole service sector companies trade at a multiple of market cap to sales and market cap to GDP is a macro extension of that tool. That is something that economies and stock markets in the South east Asian countries tell us. When ever we go above 100% we are in dangerous territory. This is because there are a few sectors that are being reflected in the GDP but not in Market cap.
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basant
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Location: India
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Posts: 18403
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Posted: 19/Aug/2006 at 4:07pm |
Thanks Vikrant for your suggestion
"One up on Dalal Street"
I feel overwhelmed. We are already into that process except that in this case there are several authors and each one brings to the table a different perspective.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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basant
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Posted: 19/Aug/2006 at 11:56am |
We as investors are always concerned with the returns that we can make. If we could concentrate on minimizing the downside then even nominal returns from the other and one big multibaggers would make the portfolio look very pretty. My sense is that downside could be captured in two ways
1) Buy stocks with high book value and reasonable dividend yield. these stocks would protect the downside but upsides are not guaranteed because a cheap stoclk could remain cheap for years.
2) Buy companies that are growing at more then 25%. I will illustrate this case with an example. HDFC Bank has gone up some 25 times over the last decade. the stock always traded at a premium to its peers and will continue to trade that way. Many invetsors feel that HDFC Bank's PE is high and should come down. This has not happened for 10 years. even if you misjudged the pricing and got in you would have been put in a waiting period of one year and as the EPS grw the pE would have become reasonable. So stocks like these become cheap every six months.
I like capturing the downside risks from stocks that tend to grow year after year and not by buying high Book value/ high dividend yield stocks.The former assures that after a waituing period your downside will become capped and then there could also be upside lickers.
The growth investing strategy is very dangerous though and that is why you need to understand the companeis very carefully before investing.
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reema
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Joined: 15/Jul/2006
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Posts: 42
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Posted: 21/Aug/2006 at 9:07am |
Mr. basant why don't you list out ideal 10 stock portfolio for each of the following types. You cud include stocks that u have already discussed or some other that you wud like to Please do not include cash since that is like timing the market.
Value
Growth
Midcaps
Large Caps
Multicaps
Dividend yield.
Let the portfolio duratiin be 10 years and then we can have quarterly evaluations or when ever some news hits these shares.
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You should try to add wealth not multiply it
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basant
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Posted: 22/Aug/2006 at 7:44pm |
Good idea but would try and put it in but for the time being we can use the stocks that we have already discussed.
Edited by basant - 22/Aug/2006 at 7:45pm
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dhanaji
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Joined: 22/Aug/2006
Location: India
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Posts: 16
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Posted: 23/Aug/2006 at 11:32am |
i am really appreciated on your investment style because its very simple & understandable. i am regularly following your stocks & ideas.
please let me know the short term stocks to invest at currrent level.
looking for your positive reply.
Regds,
Dhanaji.
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dhanaji
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basant
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Posted: 23/Aug/2006 at 11:57am |
Thank you Dhanaji. I am a great follower of Peter Lynch and that is what introduces me to many ideas. Over the short term < 6 months it is very difficult to make money. let me illustrate this by an example.
If I tell you to buy 3 stocks A, B and C for 3 months chances are that you would make money in only one or at most two. Also the money that we make will be in direct proportion to our luck (market sentiments, psychology etc) rather then our skills.
FOr some one who is starting to invest the greatest urge is to make some quick money and then organise the investing startegy. But that quick money is never made. I am sharing an experience with you when I say this and do not think that i started to give you a lecture class. I used to do that day trading when I started early with far less resources each day appeared to be a new opportunity but then I realised that it was all an illusion. In fact opportunitiues in markets come once a quarter or maybe less then that.
Try to build a long term portfolio of about 10 stocks from the stocks that we keep discussing on the forum or otherwise and that should do very well over a period of time.
Edited by basant - 24/Aug/2006 at 12:01pm
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reetesh
Senior Member
Joined: 01/Sep/2006
Location: India
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Posts: 793
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Posted: 06/Sep/2006 at 10:33pm |
Mr. Basant let me ask you a generic question if you were to start a new business what kind of business that would be and second one if you were to buy a company to run it which compnay that would be?
Regards,
Reetesh.
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When going gets tough, that’s when tough (people) gets going.
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