Last Updated : Jan 28 2013 | 2:33 AM IST
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After spending a week in China I was privileged to be able to follow that with a week in India. While the comparisons between the two giants will probably be the subject of another article, let me focus on my perceptions of India.
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First of all I think that the markets are no where near topping out. The government and assorted intelligentsia are determined to uncover some sort of scam behind this near 60 per cent market rise, they cannot imagine that the market could have risen on its own steam, and given the past history of stock market scams in India one can hardly blame them for lacking belief.
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The hedge fund community seems to be in the cross hairs of the regulators, being an animal they have little understanding of and even less faith in. While the regulators are right to be strict and watchful, their obsession in trying to uncover a scam when nothing improper seems to be going on can backfire.
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Hedge funds are here to stay, they are the direction in which the fund management industry globally is evolving. Post-2000, hedge funds have raised more money than the traditional long only mutual funds and thus as a class of investors cannot be ignored.
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Despite the steepness of the market rise, most sentiment indicators still show little euphoria with limited equity flows into mutual funds, little IPO activity and quite balanced sectoral performance.
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As for the fundamentals, here also things look okay. It would not be a stretch to say that India will be able to grow its GDP at between 6-7 per cent over the next five years with inflation at around 4-5 per cent.
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With the broad economy growing at between 10-12 per cent, the private sector will grow faster, say at 15 per cent, this 15 per cent top line growth for India Inc. should translate to earnings of between 20-25 per cent per annum.
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If India Inc. as a whole were a stock how much would you pay for an earnings stream of 20-25 per cent, it is free cash flow positive, has a positive EVA spread and rising ROE
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Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of
www.business-standard.com or the Business Standard newspaper
First Published: Nov 27 2003 | 12:00 AM IST