Tails of the unexpected

It took 33 trading days for the Sensex to rise from 10,941 on March 20 to its closing peak of 12,612 on May 10. But in just seven trading days, the Sensex returned to 10,939, falling 826 points on May 18 and 453 points yesterday. We all knew this linear trend had to reverse some time in a market that has jumped four-fold since 2003, doubling in the past 12 months alone and delivering 60 per cent compounded average annual returns over the past three years. But the last two days’ 10.5 per cent fall has been unexpected. To put that in perspective, this 1,279 point Thursday-Friday fall was the value of the Sensex 16 years ago (on September 10, 1990 the Sensex stood at 1,283).

Opinion in The Indian Express, May 20, 2006

Silver lining to cloud: good time to buy

NEW DELHI, MAY 18 : Of course, the conclusion is neither straightforward nor unlayered. But it is directional, it is strategic, it is definitive. For, when you address the fundamental principles of investing in shares or riding it passively through equity funds, the age-old dictum, buy-low-sell-high, comes into play. And at extreme situations like today’s, when the Sensex fell a record-breaking 826 points, closing 6.8 per cent lower at 11,391, you don’t think, you buy.

Story in The Indian Express, May 19, 2006

Turning Property Into Profits

Would you pay 500 times a company’s earnings to buy its stock? That is, for every rupee the company makes, would you pay Rs 500? To put it in yet another manner, if the company continues to make Re 1 of Earnings Per Share (EPS) every year till perpetuity, would you be willing to wait for 500 years — something like six to eight generations — for returns to accrue? Your answer would probably be, “No way, not when I can get hundreds of pedigreed stocks available at less than a 10th of this value!” You would, therefore, not buy Unitech (PE: 353), you would not touch Mahindra Gesco (305), you would not go near Ansal Properties (113). You would ignore all realty stocks, including DLF Universal’s forthcoming 500 PE IPO.

Opinion in The Indian Express, May 18, 2006

Give us a smash, not a lob, Mr Damodaran

That mutual fund distributors must be regulated is a foregone conclusion. This newspaper has been reporting, analysing, commenting and arguing for the need to regulate this sector of the huge and growing financial services industry for a long time. It included a series of reports, last July, on how mutual fund agents were getting investors to needlessly churn their money. Although it has taken almost a year for SEBI to react, last month it ended this dirty game by changing the rules to stop amortisation of new fund offer (NFO) expenses in open-ended schemes. But that’s just one solved problem; several others remain.

Opinion in The Indian Express, May 12, 2006

Caste myopia

To ascribe a precise state of consciousness to a particular community, race or religion and fix it into rigid clusters of misery is a needlessly short-sighted look at a vision profound. And India has been suffering from this myopia for centuries. It is today a part of a constitutional mechanism that seeks to “uplift” the socially downtrodden through a series of measures, including reservations, so that India moves towards being an egalitarian state, a nation where equal opportunities are not a theoretical construct but a practical reality.

Opinion in The Indian Express, May 07, 2006