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REAL ALTERNATIVES

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... is akin to developed countries with more than 50% coming from Services sector ... Source : Citigroup Research. PRICE EARNINGS RATIO. FII INFLOW. BACK ... – PowerPoint PPT presentation

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Title: REAL ALTERNATIVES


1
REAL ALTERNATIVES
  • Case for investing in Indian Equities
  • A presentation by Rakesh Jhunjhunwala

2
AGENDA
  • Indian Equities on a Strong Wicket
  • Fundamentals
  • Valuations
  • Party spoilers
  • Why Equities will deliver superior post-tax
    returns
  • Equity mindset inevitable
  • Long-term perspective
  • Human psychology course of markets since time
    immemorial

3
FUNDAMENTALS
  • Growth Enablers
  • Liberalization catalyst
  • Interest rates
  • Multiplier Effect
  • Emerging Market benchmarks (RoE, CARG of EPS)
  • Micro Trends
  • RoE Du Pont

BACK
4
Indian Equities on a Strong Wicket Valuations
  • Paradox
  • Emerging market benchmarks
  • FII flow Dollar displacement

BACK
5
Why Equities will deliver superior post-tax
returns
  • Stock, bonds and gold
  • Sensex returns
  • Tax paradise
  • The power of compounding

BACK
6
EQUITY MINDSET INEVITABLE
  • Huge domestic savings
  • Low equity exposure
  • Modernized trading systems
  • Good regulatory environment

FLOW OF MONEY INTO INDIAN EQUITIES, INDIAN AND
FOREIGN, IS INEVITABLE
BACK
7
GROWTH ENABLERS
BACK
8
LIBERALISATION CATALYSTS
  • Customer is king
  • Increased competition leads to quality and
    efficiency
  • Inflation under wraps
  • Efficient allocation of capita
  • Improving ROI and capital efficiency
  • Improving consolidation in most industry segments
  • Government to act as a facilitator rather than a
    business manager
  • Privatisation and PSU disinvestments
  • De-licensing and appropriate independent
    regulators across sectors

BACK
9
INTEREST RATES ALL FALL DOWN
10
FALL IN INTEREST RATE FROM 2001-04
  • Lower interest rates have an anti-gravity
    (growth) effect
  • Prepones consumer spending by greater
    availability and lower cost of credit
  • Encourages capital spending, especially
  • Enhances corporate profitability
  • Boosts value of Capital Assets
  • Increases viability of infrastructure projects,
    enabling debt funding of infrastructure
  • Improves Government finances by lowering the
    deficits and increasing maturities

BACK
11
MULTIPLIER EFFECT
12
MULTIPLIER EFFECT
  • All change is inter-related, and for India all
    components of change exhibit dynamism and
    momentum
  • Indias GDP composition is akin to developed
    countries with more than 50 coming from Services
    sector
  • Capital spending along with consumer spending
    will compound GDP growth, which will be leveraged
    with increasing efficiency and productivity
  • Resurgence of all sectors reflects in the breadth
    of equity impetus
  • Its like a pond that doubles every day, and is
    half-full on the penultimate day though it
    becomes full on the ultimate day

BACK
13
EMERGING MARKET BENCHMARKS
BACK
14
MICRO TRENDS
  • Biggest micro trend is the expansion of mindset
    and horizons
  • Indian companies being globally cost competitive
  • Pharma, Software, Tisco, Guj. Ambuja, Tata
    Motors, Hindalco
  • Indian companies acquiring companies globally
  • Ranbaxy, Tata Motors, Tisco, Bharat Forge,
    Kirloskar Brothers, Amtek, Sun Pharma, etc
  • Indian companies gearing up to global size
  • Infosys, Tata Motors, Bharat Forge,
  • Indian companies becoming global sourcing hubs
  • Pharma, Textiles , GE, Sundaram Fasteners, Toyota
    Kirloskar, Cummins, Hyundai,
  • Indian companies expanding through internal
    accruals and focusing on superior cash flows

BACK
15
DU PONT ANALYSIS
Source Morgan Stanley
BACK
16
THE LONG TERM PERSPECTIVE
Bull markets are born in the depths of
depression, and are reared on declining interest
rates and rising corporate profits. Dr. Marc
Faber
Source Bloomberg
17
SENSEX POSSIBILITIES
BACK
18
VALUATION PARADOX
Sensex and PE Ratio, Bubble or. . .
SENSEX
PER
Sensex PE Ratio and Interest Rates Inverse
Correlation or Convergence?
INTEREST REATES
PER
BACK
19
EMERGING MARKET BENCHMARKS
PRICE EARNINGS RATIO
Source Citigroup Research
BACK
20
FII INFLOW
BACK
21
POTENTIAL PARTY SPOILERS
BACK
22
LOW EQUITY EXPOSURE
BACK
SOURCE RBI
23
STOCK, BONDS AND GOLD
BACK
SOURCE WORLD GOLD COUNCIL
24
BSE-SENSEX 17 CAGR IN 25 YEARS
BACK
25
THE POWER OF COMPUNDING
BACK
26
If you sell your investment in less than 12
months (short term), you pay 10 tax!
EQUITIES A TAX PARADISE
1
  • If you sell your investment in more than 12
    months (long term), you NO tax!

2
3
And even the Dividends are TAX FREE!
BACK
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