Suppose if the petrol price per litre is Rs 51.90, here the break-up of cost calculated by the government:·
Basic Price = Rs 21.93 ·
Excise duty = Rs 14.35 ·
Education Tax = Rs 0.43 ·
Dealer commission = Rs 1.05 ·
VAT = Rs 5.5 ·
Crude Oil Custom duty = Rs 1.1 ·
Petrol Custom = Rs 1.54 ·
Transportation Charge = Rs 6.00 ·
Total price = Rs 51.90
So for a Rs 22 litre petrol at pumps, consumers in India pay Rs 28 tax extra.
Friday, August 29, 2008
Sunday, August 24, 2008
PE Ratio (multiple)
Stocks Which Are Profitable, Not Expensive
Investors should strategically buy stocks or sectors that are riding the boom. When markets are slipping, things are just the opposite. Some investors say, ‘buy in a falling market’, but it would be difficult to put your finger on one sector or stock as the right one. But sometimes the idea would be right. Bottom line – investing becomes confusing.
To identify good stocks, investors estimates various ratios like dividend-yield, price earning to growth, price to book value, price to earnings, etc. Investing by analyzing PE ratio (multiple) is like looking for discounts while shopping. Lower the PE, lower the amount investors are willing to pay for it and vice versa. However, some stocks like L&T and HDFC will command a very high PE multiple, because of the investor confidence on these stocks.
Now that the various stocks have corrected by 60-70% of their value, investors refuse to pay high price to buy them. Some savvy-shoppers try to avoid paying too much by buying low PE stocks.
Example:
Company XYZ- stock price- 500
EPS-20
Therefore, PE = 25.
Company ABC- stock price – 1,000
EPS-20
PE=50.
Market does not look at whether EPS is similar. It is more important in growth in EPS. Company’s PE ratio normally reflects investors’ expectations for future growth in EPS.
Market sentiments play a big role in pricing. Thus PE ratio may not necessarily reflect reality. In this case investors are willing to bet even on high PE stock because according to them, present valuation is cheaper than what it should be. Thus it is important that an investor not only looks as the PE ratio but also at the earning growth prospects over next several quarters.
Investors should strategically buy stocks or sectors that are riding the boom. When markets are slipping, things are just the opposite. Some investors say, ‘buy in a falling market’, but it would be difficult to put your finger on one sector or stock as the right one. But sometimes the idea would be right. Bottom line – investing becomes confusing.
To identify good stocks, investors estimates various ratios like dividend-yield, price earning to growth, price to book value, price to earnings, etc. Investing by analyzing PE ratio (multiple) is like looking for discounts while shopping. Lower the PE, lower the amount investors are willing to pay for it and vice versa. However, some stocks like L&T and HDFC will command a very high PE multiple, because of the investor confidence on these stocks.
Now that the various stocks have corrected by 60-70% of their value, investors refuse to pay high price to buy them. Some savvy-shoppers try to avoid paying too much by buying low PE stocks.
Example:
Company XYZ- stock price- 500
EPS-20
Therefore, PE = 25.
Company ABC- stock price – 1,000
EPS-20
PE=50.
Market does not look at whether EPS is similar. It is more important in growth in EPS. Company’s PE ratio normally reflects investors’ expectations for future growth in EPS.
Market sentiments play a big role in pricing. Thus PE ratio may not necessarily reflect reality. In this case investors are willing to bet even on high PE stock because according to them, present valuation is cheaper than what it should be. Thus it is important that an investor not only looks as the PE ratio but also at the earning growth prospects over next several quarters.
Gold
Gold is Gold
Analysts believe that Gold should be a part of the portfolio. In 1849, gold was discovered in California. During financial crisis, countries have turned to gold for help. In 1937, when agricultural production slumped, India sold 1,400 tonnes of gold. In 1991, the Indian government shipped out 45 tonnes of gold to temporarily bail out the country of a severe money crunch. In 1979, at the height of oil crisis, the US dollar was devalued, buyers lost confidence in the currency and bought gold instead.
3 major areas of gold: Jewellery, Industry and Investing.
Jewellery accounts for 60% of the demand for gold. India is the largest consumer of gold and accounts for one-fifth of the global gold trade. 30% of the demand comes from investors who trade in gold exchange traded funds and from countries that hold gold as an alternative currency.
Reasons for the demand of gold
Investors are shifting from equities to gold. The US economy has been spinning into a recession because of a huge bumper consumer spending. The recent subprime crisis accelerated the shift.
With the dollar losing its grip, Asian countries have begun substituting dollars with gold in their investment portfolio.
China, which did not allow people to own gold, has deregulated. In 2002, Shanghai Gold Exchange was formed; opening up the demand floodgates so much that by 2007 China has overtook US to become the second largest consumer of gold.
Gold will be Gold
Of every 100 tonnes of gold, 70 tonnes comes from gold mines, of which 35 tonnes comes from 8 countries alone. Prodcutiong of gold is stagnating in few countries due to exhaustion of inexpensive mine-able gold resources and strict environmental laws.25% of gold comes from sale of gold reserves from the country. A treaty signed in 1999 for sale of 400 tonnes of gold annually by participating banks expires next year and don’t show any sign of renewal. Thus, going forward, gold prices are likely to stay firm.
Analysts believe that Gold should be a part of the portfolio. In 1849, gold was discovered in California. During financial crisis, countries have turned to gold for help. In 1937, when agricultural production slumped, India sold 1,400 tonnes of gold. In 1991, the Indian government shipped out 45 tonnes of gold to temporarily bail out the country of a severe money crunch. In 1979, at the height of oil crisis, the US dollar was devalued, buyers lost confidence in the currency and bought gold instead.
3 major areas of gold: Jewellery, Industry and Investing.
Jewellery accounts for 60% of the demand for gold. India is the largest consumer of gold and accounts for one-fifth of the global gold trade. 30% of the demand comes from investors who trade in gold exchange traded funds and from countries that hold gold as an alternative currency.
Reasons for the demand of gold
Investors are shifting from equities to gold. The US economy has been spinning into a recession because of a huge bumper consumer spending. The recent subprime crisis accelerated the shift.
With the dollar losing its grip, Asian countries have begun substituting dollars with gold in their investment portfolio.
China, which did not allow people to own gold, has deregulated. In 2002, Shanghai Gold Exchange was formed; opening up the demand floodgates so much that by 2007 China has overtook US to become the second largest consumer of gold.
Gold will be Gold
Of every 100 tonnes of gold, 70 tonnes comes from gold mines, of which 35 tonnes comes from 8 countries alone. Prodcutiong of gold is stagnating in few countries due to exhaustion of inexpensive mine-able gold resources and strict environmental laws.25% of gold comes from sale of gold reserves from the country. A treaty signed in 1999 for sale of 400 tonnes of gold annually by participating banks expires next year and don’t show any sign of renewal. Thus, going forward, gold prices are likely to stay firm.
Cement Industry Update
Cement Industry
Growth of 9% in the last three years has drawn attention of foreign companies to Indian cement companies. The industry’s average PE is down to 7 times currently.
Rising input (coal, fuel and power) costs and regulatory measures to check cement prices have made it difficult for players to make profits even after rising demand. Decline in valuation has also trimmed the enterprise value per tone of the major cement companies, down by an average of 42% since the start of the year.
M&A deals this year
La Farge(France)- acquired Ready mix concrete (RMC) business of L&T.
Holcim(Switzerland)- holds 41% stake in ACC, 36% in Ambuja Cement, plans to invest more in the country.
CRH(Ireland)- acquired My Home Industries. Announced 50% stake in the company(for a consideration of $452 million) increasing its capacity from 3.2 million tonnes to 4.2 million tonnes.
Vicat SA(France)- buyout of 6.6% in Sagar Cement increasing capacity by 2.5 million tonnes per annum.Other companies like Cemex(Mexico), Italicementi(Italy) too plan expansion in the country.
Wednesday, August 20, 2008
Global Economy
Global Economy
US subprime crisis will soon celebrate its anniversary along with soaring oil prices, commodity prices, food shortages, spiking inflation and sluggish economic growth.
All banks and financial institutions with exposure to CDOs have been affected by the subprime crisis. Fannie Mae and Freddie Mac, the two US government enterprises that are chartered by the US Congress to provide a national market for mortgages, are the only financial institutions who are buying and scrutinizing the US mortgages. There are many central banks holding huge inventories of securities issued by these banks.
Considering the scenario mentioned above, Ben Bernanke, the Fed Chief, believes that US economic growth is “skewed to the downside” and he assures the US congress that improving the health of the financial markets is his top priority.
The Global Economy Problem
Since agricultural land is diverted for production of alternative energy sources, food prices have soared.
Prices of raw material like iron ore, etc. have soared as a result of the growing demand for natural resources from development economies like China. Oil prices have risen as a result of rising demand.
Adding to the problems, the weak dollar, besides pushing up US import prices, export inflation to all countries whose currencies are linked to the US dollar.
It would be difficult to say which way the global economy will go now, but amidst all the uncertainty, growth of emerging economies, whose growth according to the World Bank is estimated to be 6.5%, may pull out global economy from the recession in the world market.
Global Stagflation
US and Europe have been enduring financial doldrums and dissipating growth since mid 2007, which aggravated to recessionary environment in mid 2008. Britain’s economy grew by just 0.3% in the first quarter of this year, the service sector showing the weakest performance. In Japan, world’s second largest economy, consumer spending saturated as a result of soaring oil and commodity prices. This problem has adversely affected the growth of high-performing BRIC nations too.
Washington based World Bank, in its Global Development Finance report, predicts the world economic growth to decline to 2.7% in 2008 versus 3.7% in 2007. GDP in US is expected to grow at 1.1% in 2008 versus 2.2% in 2007, whereas GDP of Europe could grow at 1.7%.
Paris based Organization for Economic Cooperation and Development (OECD) foresees weak growth, around 1.8%, for most of its 30 members. They predict the US economy to grow at 1.2% in 2008, whereas both Europe and Japan to grow at 1.7%. Growth in China is expected to slow to 9.4% vs. 11.9% in 2007, South Africa from 5.1% in 2007 to 4.2% and India from 8.7% to 6%.
Inflation in UK soared to 3.3% in May, and inflation in Japan rose to a decade high of 1.5%. Inflation in Singapore is recorded as 7.5%, in Russia as 12% and in India as 12%.
Inflation results when the supply of money exceeds demand. Thus the Fed should be raising interest rates, but instead they have been decreasing interest rates to combat the subprime crisis.
The current inflationary situation is not because of an overheating environment but by the 3 Fs- fuel, food and financial speculators. So interest rate hikes alone would not fight inflation. Rising interest rates would cause more recession. As cost of money rises due to rise in inflation, growth will halt, and inflation, rooted in the 3 Fs, will continue to rise. The solution: lower fossil fuel consumption, raise food production, curb excessive speculation, stimulate investments, incentivize capacity addition, nudge productivity increase and adopt sustainable technologies.Massive public and private investments are needed to promote sustainable technologies. Hybrid automobiles with advances batteries, green buildings, carbon capture, cellulose-based ethanol, safe nuclear power and other advanced technologies can combat growing energy demands. Solar power is another alternative to global energy requirements. For food supplies, new drought-resistant crop varieties, along with new irrigation technologies, can help more food production in the changing climatic conditions.
US subprime crisis will soon celebrate its anniversary along with soaring oil prices, commodity prices, food shortages, spiking inflation and sluggish economic growth.
All banks and financial institutions with exposure to CDOs have been affected by the subprime crisis. Fannie Mae and Freddie Mac, the two US government enterprises that are chartered by the US Congress to provide a national market for mortgages, are the only financial institutions who are buying and scrutinizing the US mortgages. There are many central banks holding huge inventories of securities issued by these banks.
Considering the scenario mentioned above, Ben Bernanke, the Fed Chief, believes that US economic growth is “skewed to the downside” and he assures the US congress that improving the health of the financial markets is his top priority.
The Global Economy Problem
Since agricultural land is diverted for production of alternative energy sources, food prices have soared.
Prices of raw material like iron ore, etc. have soared as a result of the growing demand for natural resources from development economies like China. Oil prices have risen as a result of rising demand.
Adding to the problems, the weak dollar, besides pushing up US import prices, export inflation to all countries whose currencies are linked to the US dollar.
It would be difficult to say which way the global economy will go now, but amidst all the uncertainty, growth of emerging economies, whose growth according to the World Bank is estimated to be 6.5%, may pull out global economy from the recession in the world market.
Global Stagflation
US and Europe have been enduring financial doldrums and dissipating growth since mid 2007, which aggravated to recessionary environment in mid 2008. Britain’s economy grew by just 0.3% in the first quarter of this year, the service sector showing the weakest performance. In Japan, world’s second largest economy, consumer spending saturated as a result of soaring oil and commodity prices. This problem has adversely affected the growth of high-performing BRIC nations too.
Washington based World Bank, in its Global Development Finance report, predicts the world economic growth to decline to 2.7% in 2008 versus 3.7% in 2007. GDP in US is expected to grow at 1.1% in 2008 versus 2.2% in 2007, whereas GDP of Europe could grow at 1.7%.
Paris based Organization for Economic Cooperation and Development (OECD) foresees weak growth, around 1.8%, for most of its 30 members. They predict the US economy to grow at 1.2% in 2008, whereas both Europe and Japan to grow at 1.7%. Growth in China is expected to slow to 9.4% vs. 11.9% in 2007, South Africa from 5.1% in 2007 to 4.2% and India from 8.7% to 6%.
Inflation in UK soared to 3.3% in May, and inflation in Japan rose to a decade high of 1.5%. Inflation in Singapore is recorded as 7.5%, in Russia as 12% and in India as 12%.
Inflation results when the supply of money exceeds demand. Thus the Fed should be raising interest rates, but instead they have been decreasing interest rates to combat the subprime crisis.
The current inflationary situation is not because of an overheating environment but by the 3 Fs- fuel, food and financial speculators. So interest rate hikes alone would not fight inflation. Rising interest rates would cause more recession. As cost of money rises due to rise in inflation, growth will halt, and inflation, rooted in the 3 Fs, will continue to rise. The solution: lower fossil fuel consumption, raise food production, curb excessive speculation, stimulate investments, incentivize capacity addition, nudge productivity increase and adopt sustainable technologies.Massive public and private investments are needed to promote sustainable technologies. Hybrid automobiles with advances batteries, green buildings, carbon capture, cellulose-based ethanol, safe nuclear power and other advanced technologies can combat growing energy demands. Solar power is another alternative to global energy requirements. For food supplies, new drought-resistant crop varieties, along with new irrigation technologies, can help more food production in the changing climatic conditions.
News on the Loose
Two years ago, Bharat Sanchar Nigam (BSNL), the Rs.40,953 crore state owned company, floated a tender of 45 million lines of GSM equipment worth $45 million. Out of this, 10 million lines have now been earmarked for 3G services.
The tractor industry in China grew up to 2,20,000 units in 2007 from about 56,000 units in 2003, a compounded annual growth rate of 40%. Mahindra and Mahindra (M&M) entered into a JV with China’s Jiangsu Yueda Yancheng Tractor Manufacturing Co. Ltd.
The tractor industry in China grew up to 2,20,000 units in 2007 from about 56,000 units in 2003, a compounded annual growth rate of 40%. Mahindra and Mahindra (M&M) entered into a JV with China’s Jiangsu Yueda Yancheng Tractor Manufacturing Co. Ltd.
Nano The Info
"Talking to the point is the fastest mean of communication."
Paraphrase any news, article, book or any peice of information and jot down only the important part .
Paraphrase any news, article, book or any peice of information and jot down only the important part .
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