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Updates found with 'national stock exchanges'

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Updates found with 'national stock exchanges'

FIIs pouring in Moneyhttps://goo.gl/r600b9FIIs are having a ball in IndiaIndian stock markets are on a roll. Defying gravity, the Bombay Stock Exchange’s Sensex closed at 19939 and the National stock Exchange’s Nifty closed at 6050. At these levels these two key market indices are slightly lower than their all-time peaks and near about at the same levels of 31 January, 2013. The main reason behind this bull run is the foreign investment coming in hoards.Since the beginning of 2013, Foreign institutional Investors (FII) have pumped a whopping Rs 65, 309 crore in Indian equity shares, and no one is complaining. There are several reasons for the FII’s euphoria, though many may call it an ‘irrational exuberance’ considering the challenges India faces in the future.The significant and consistent fall in borrowing cost abroad, a result of monetary easing and lowering of interest rates by the central banks in America, Europe, Japan and Australia, has stoked the inflows in the emerging markets. The European Central Bank reduced interest rates to a record low last week to boost borrowing and investment. The US Federal reserve has just reiterated its commitment that it will keep buying $85 billion of Treasury bonds a month to stimulate US economy. Japan and Australia too have lowered interest rates. With foreign funds seeking investment opportunities, India was the biggest beneficiary as the largest chunk came here.The reasons are familiar. Among the top ten Asian markets, in the last 40 days only Tokio NIKKEI gave higher return (18 per cent) than the NSE Nifty at 6.40 per cent and BSE Sensex at 5.97 per cent. Return from all other stock markets was lower than India with Shanghai being at the bottom at 0.53 per cent. Going forward, market analysts expect that India will continue to perform better than its peers in the middle & near term and will continue to attract foreign funds more than others. The result of FIIs buying quality Indian stocks is that the FII ownership in top 500 Indian companies has hit an all-time high of 21.2 per cent, said a study by Citigroup.Surely, the Finance Minister P Chidambaram’s recent road shows in the US and in Canada to woo investors have also reassured them on India’s commitment to economic reform that began towards the end of last year. It is expected that the reform measures taken by the government will start showing positive results from the first half of 2013-14 and will pick up further momentum in the second half. Prediction of normal monsoon resulting in decent agricultural growth has also added to the optimism. This only shows that the ‘India story’ is still alive despite an unusually poor economic growth in 2012-13. The economy is also getting support from the drop in international prices of crude oil, gold and coal, the three together form a large part of India’s import basket.While the domestic investors are yet to join the FII party, it is recommended they exercise caution and be very selective in their investment. We must remember that money flowing-in in stocks is ‘hot money’ that can start flowing out quickly any day if India’s economic conditions worsen or other countries offer higher returns. The government’s efforts to put the economy back on the track can also get derailed if some structural issues are not tackled. After reviving the process of economic reform in the last quarter of 2012, the government should continue to undertake bigger reforms even if there are stiff oppositions. Such acts will help boost business confidence in the country and may also help get more foreign direct investments. Of course, the compulsions of coalition politics may restrain or slow down the reform process to the dismay of foreign investors. With the general elections due in the middle of 2014, the possibility of an even weaker government at the Centre is a cause of worry.
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Private Equity, Public Exits https://goo.gl/r600b9Bullish stock markets make exits easier for PEsWhen the Private Equity (PE) funds invest in companies, they always have an exit plan generally 5 to 7 years after the entry. But the actual exit and the return on investment depend on a variety of factors like performance of the invested company, the overall situation of the economy and, above all, the state of the IPO (Initial Public Offer) market.In India, the present market conditions appear to be conducive for exit as stock indices at the Bombay stock Exchange (BSE) and National Stock Exchanges have shot through the roof. According to a report in Business Standard, four PE investors are soon going to exit Justdial Ltd which has planned for a Rs 950 crore IPO. With market sentiments looking up, PE funds expect the IPO market will continue to be strong, offering opportunity to exit. In Justdial, PE funds together had invested $57 million which will fetch a return of 8 to 12 times at the proposed IPO price.While the future look good, the overall size of IPOs that were floated by the PE-backed companies has fallen by 70 per cent in the last three years. According to the data from VCCEdge, the year 2010 witnessed 28 PE-backed IPOs worth $2.6 billion. In 2011 the figure dropped to $1.3 from 20 IPOs and 2012 it dropped further to $778 million from only five offers, wrote Business Standard. Whereas in 2013, till date, five IPOs have been floated by PE-backed companies raising about $126 million. The E industry analysts also believe that in 2013 a large number of PE-to-PE deal (or secondary transactions) where one PE investor sells holdings to another.Meanwhile, on the brighter side, India remains to a be hot destination for funds. Apart from equity investments from FIIs, they have together pumped in a whopping Rs 65, 309 crore in Indian equity market since the beginning of 2013, the country is also attracting large amount o foreign direct ivestments. Baring Private Equity, for example, has just announced that it will pick up a 14 per cent stake in Lafarge India, the Indian venture of Lafarge SA, the France-based cement manufacturer, by investing $260 million or Rs 1430 crore. This is the largest ever PE investment in India’s cement sector, whose fortune is closely linked to the economic prosperity of the country.Surely, many believe that the Indian economy has bottomed out as the government expects a GDP growth rate between 5.5-6 per cent in the current financial year, up from 5% the previous year. Latest low inflation figures also has raised that the central bank will cut interest rates further, lowering the cost of fund for the industry. The Finance Minister P Chidambaram’s recent road shows in the US and in Canada to woo investors have also reassured them on India’s commitment to economic reform that began towards the end of last year. It is expected that the reform measures taken by the government will start showing positive results from the first half of 2013-14 and will pick up further momentum in the second half. Prediction of normal monsoon resulting in decent agricultural growth has also added to the optimism. This only shows that the ‘India story’ is still alive despite an unusually poor economic growth in 2012-13. The economy is also getting support from the drop in international prices of crude oil, gold and coal, the three together form a large part of India’s import basket.
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Indian economy on a recovery pathhttps://goo.gl/r600b9The government is bullish but one should be cautiously optimistic.Good news is flowing in from the Centre. The Prime Minister’s Economic Advisory Council (EAC) has just projected that in the current financial year (2013-14) Indian economy will bounce back from the low it reached in the last financial year. EAC has projected the GDP in 2013-14 will be 6.4 per cent as against the estimated 5.0 per cent in the last financial year. The government’s forecast follows International Monetary Fund’s report last week which also projected better growth prospects for the country.It is expected that the reform measures taken by the government in the second half of 2012, will start showing positive results from the first half of 2013-14 and will pick up further momentum in the second half. Normal monsoon predictions resulting in decent agricultural growth and the resumption of iron ore mining will also add to the economy’s well-being.This only shows that the ‘India story’ is still alive despite an unusually bad year in 2012-13. In fact, according a study by a Mumbai-based bank, in the last 12 months Indian stock market provided the highest return among the BRICS (Brazil, Russia, India, China and South Africa) countries. The economy is also getting support from the drop in international prices of crude oil, gold and coal, the three together form a large part of India’s import basket.Surely, with early signs of recovery, the optimism is back. But it can be short lived if things do not pan out the way they are projected. Moreover, not all are equally positive as the sharp drop in venture capital funding activities in India in the quarter that ended on 31 March 2013 was a disappointing news. According to VCC Edge the private equity (PE) investments in the first quarter of 2013 were pegged at $1.8 billion spread across 123 deals, significantly lower than $2.4 billion spread across 186 deals during the same period in 2012.After ruling high in the last financial year, inflation has softened in the recent months. This, in turn, has created a clamour for a reduction in interest rates by the RBI. If the central bank listen to the plea, interest rates could come down between 50-100 bps in the near future. If that will spur growth is debatable, but the cost of money will come down. There are also concerns if the government’s fiscal deficit targets would be met, and, more so, in view of the lack of robust growth in tax revenue.On the foreign trade front too things are bleak as demand contraction in Europe and USA has curtailed exports. Imports, on the other hand, driven mainly by crude oil, fertiliser and gold, continued to remain high, creating a widening gap in current account deficit. Sensing the uncertain time ahead, the foreign institutional investors (FII) have started pulling out their money. FII’s invested a net amount of Rs 138, 586 crore in Indian equity shares in the financial year 2012-13, but in the first 17 days of April 2013, they have net sold Rs 666 crore worth of equity.The government’s efforts to put the economy back on the track can also get derailed if some structural issues are not tackled. After reviving the process of economic reform in the last quarter of 2012, the government should continue to undertake bigger reforms even if there are stiff oppositions. Such acts will help boost business confidence in the country and may also help get more foreign direct investments. Of course, the compulsions of coalition politics may restrain or slow down the reform process to the dismay of pro-reform lobbyists. With the general elections due in the middle of 2014, some expect it to take place around November this year, it is likely that the government will take some radical steps to boost business confidence. It may also resort to large spendings in welfare measures and big projects that can boost rural demand. But the possibility of an even weaker government in the next parliament is a cause of worry.Another structural issue that needs to be tackled is the over-leveraging of Indian companies, particularly the big groups, and their increasing inability to service debt. According to a study by Equitymaster.com, 177 non-financial Indian companies have raised their capital expenditure five times to Rs 10, 892 crore in the last seven years, hoping to cash in from the bullish growth prospects. Funded mainly with borrowed money, these companies are now finding it difficult to service debts as new assets are grossly underutilized due to lack of demand. Consequently, banks are now sitting on NPA levels larger than last year.In all, its an uncertain stretch of an otherwise certain highway to progress. The optimistic shall be appropriately rewarded !
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Actively or Passively?https://goo.gl/r600b9Passive Investing or Active Investing, Active or Passive Management – the debate over the merits and shortcomings of active versus passive management that began several decades ago remains ongoing. Reports on the topic by investment professionals and academics continue to be published unabated and seem to be one of the investment world’s more popular literary pursuits.In many prominent quarters, passive management is gaining market share, especially among institutions, for good reason. Long-term results have favored this strategy, most notably among large capitalization stocks and in bonds as well. What’s more, investors have been inundated with advice by the media and academia to invest passively after watching their active managers perform poorly over the last 3-4 years.You do need a minimum standard of education to understand what you’re doing and choose a sensible selection of funds, but the passive route should ensure that fees are minimised, returns are maximised and risk is as high or low as you want it to be. Also, passive investors will develop a much greater understanding of their investments over time, and should find the process far more enjoyable as a result.I have heard, read and experienced that passive management can be effectively utilized by investors, especially when they are considering investments in the highly efficient large cap universe. Clearly, this strategy is preferable to selecting active managers who are ‘closet indexers’ struggling to perform net of fees, expenses and taxes. It is believed that it is also appropriate for those investors who seek broad diversification, are comfortable with the configuration of indexes and can live with their drawbacks.As pointed out by few experts in the equity business, the distinction between passive and active is not very sharp anywhere in the world, but on average you would expect that an active investor would at least be involved at the board level in terms of strategy setting, and would be more actively engaged in receiving and processing information at the board level. Sometimes, it can get more involved than that, for instance, they might be pretty closely involved in setting up a 100 day plan etc.In terms of what we see in India, it is believed by some experts that not much information is available in the public domain, but from the available information, one understands that the investors do take board decisions, however they pretty much leave it to the incumbent management or the new management to run the business. They don’t do the kind of things that private equity players like KKR or Carlyle do with their investments in the US or Europe. So, it seems to be more of a passive approach.Another point which proponents for passive investing usually point out is that typically 80-90% of the returns comes from asset allocation, and the balance comes from stock selection. In layman terms, this means that if you happen to be in the right asset class (for example, equity) at the right time, you can literally close your eyes and buy any equity and you should register gains. Furthermore, there is no guarantee that the returns which come from stock selection will be positive but it is almost a given that the expense ratio for such funds will be higher than that of the index funds.At the same time, there may be an important role for active management as well, even beyond the inefficient markets referred to earlier. Indexes are far from perfect and may not accurately reflect a manager’s strategy or target universe or, for that matter, the investor’s objectives. Moreover, the performance of active and passive strategies runs in cycles.Active managers might also be able to exploit what promises to be a different and undoubtedly more complex economic and investment environment than anything we have witnessed in our lifetimes.The active versus passive debate does not yield a clear-cut solution that would eliminate one or the other. There are just too many variables on both sides that raise questions while offering no unambiguous answers.So let’s just leave it to time and we may be quite surprised to know in a few years down the line that we were all the way treading the wrong path – actively or passively.
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Unilever reiterates India growth storyhttps://goo.gl/r600b9The Anglo Dutch consumer products company’s announcement this week to invest $5.4 billion in the shares of its Indian subsidiary Hindustan Unilever (HUL) once again reiterates the faith of global businesses in Indian economy and, more specifically, in the Indian middle class.Unilever’s plan to invest $5.4 billion or Rs 29, 000 crore, the largest ever share purchase offer in India by a parent company, is for buying 487 million shares of HUL at Rs 600 per share, a price 25 per cent higher than the average market price of the previous three months. The move clearly re-establishes the fact that foreign investors are still very bullish on India growth story. They also believe in the phenomenal purchasing power of the Indian middle class – a young and upwardly mobile population that is expected to touch 300 million in the next five years, according to a study by the National Council for Applied Economic Research (NCAER).HUL being the largest FMCG (fast moving consumer goods) company in the country with products ranging from shampoo to soap and toothpaste to tea, it is right at the top to cash in from the emerging middle class boom. No wonder, the Unilever CEO Paul Polman, while making the announcement, was explicit that the company’s strategy is to invest heavily in emerging markets and India is one of the most important countries in this basket. If successful, the share purchase will see Unilever’s stake in HUL going up by 22.15 per cent to 75 per cent.Surely, the stagnating growth in the developed economies, especially in the American and the European markets is making global players turn their focus on emerging markets like India and Unilever is not alone. In the last five years or so, many multinational companies like GlaxoSmithKline, Reckitt Benckiser, Cadbury, Kodak, Panasonic etc, have either increased their shareholding or have acquired 100 percent of the Indian company.Some observers, however, saw an additional reason behind Unilever’s move. They are of the view that the share purchase plan is an effort to drive the share price up as HUL’s shares, considered to be bluechips, remained subdued since the beginning of this year as investors were perturbed by the company’s increased royalty payout plan. Analysts also believe that Unilever’s plan to acquire more shares in its Indian subsidiary, though looks expensive, will ultimately pay off as HUL’s valuation is expected to rise steadily in the coming years. Moreover, higher dividend payouts will also flow in into the parent company. This is also the reason some market experts are advising shareholders to perpetually reap the benefit from the company’s upside and not to go for one time profit by selling out. Sounds a good advice as Indians should believe in country’s growth story more than the foreigners.
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China-India’s PE affair https://goo.gl/r600b9INSEAD’s, the world’s leading business school, study of private equity in the markets of China and India in the recent past have revealed that PE performance in both these countries is less linked to public equity trends than in Western markets, but originates more from company and deal situation specifics.I would believe that PE investing in China is growth capital investment; providing a growing company with capital to build factories or expand its distribution channels. It works in China unlike PE investing US or Europe. Aptly put in a recent report on China’s PE, in the country, ‘PE firms support winners. In the rest of the world, PE firms generally try to heal the wounded.’In India, the PE market is fragmented, often involving family owned businesses and minority stakes, and with little to no opportunities for leveraged buy-outs. Caution is a good word mainly around governance, income tax and general regulatory issues, which remain as major challenges in the country.Coming to PE exits in these two countries; in China majority of exits happen through public markets. Here private equity investment gives local companies a chance to jump the IPO queue because an outside investor is seen as an endorsement of the firm. In India, on the contrary, mergers and acquisitions have dominated exits with more than two thirds of deals exited this way.The INSEAD study states that while exits are clustered around times of strong stock market performance in China, in India exits are spread out more evenly over time. Definitely, there is a clear trend toward a shorter holding period for private equity investments in both these markets. In China, the holding period from the initial investment to the first exit had shrunk to just under two years and in India to just over two years prior to the financial crisis, although holding periods may have lengthened since then.But unlike China, PE exits in India continue to be stricken with difficulties; the state of the capital markets adding pain to the IPO avenue.Both these markets, I believe have a strong character to it, in their differences, be it investing or exiting, but definitely for the world of PE, these two (along with Brazil) will be where their money will vacation.
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