Monday, September 27, 2010

India Just Broke Its Record For Most Foreign Investment In A Single Year

I'm predicting a short term correction followed by a gigantic rally and then a big thud. All this short term mania has to end up in the dumpsters. The greater fool theory is in the works now. Its a matter of time before the chickens come home to roost. Be very careful for we all know Bulls make money, bears make money, Pigs gets slaughtered. Somebody has to lose in this game, just make sure you are not the last man standing. Comparing the S&P 500 with the Sensex is really poor journalism. The Sensex is only 30 stocks compared to the blue chip 500 in the S&P. The current sensex rally is driven by few chosen stocks. Even bellweather Reliance has not participated in the rally. State Bank of India is up 50%. Anytime a big gorilla like SBI rallys 50% there is a clear indication of the greater fool theory. Only here the FII's are playing the game hoping the Indian retail investor will participate thru the Mutual funds who they can then dump on. Last time this ended badly the Japanese investors were the last ones to enter and they must have been left holding the bag. Not to mention other Sovereign wealth funds which must have been beaten down to the core.

Business Insider reports

India just broke its single year record for foreign investment and it's only the end of September.

The mark, set today, is $17.89 billion, according to the Business Standard. That beats 2009's total of $17.86 billion. The specific class of investment is foreign institutional investment, which includes equity funds.
The pace appears to be picking up too, with $300 million invested in the country for the week ending September 22.

The question then is whether or not the Indian economy, and its Sensex exchange, is in a bubble.
Currently, the P/E ratio of the Sensex is 19.1, which doesn't seem ridiculous. The U.S. S&P 500 is trading just above that right now.




21 comments:

Anonymous said...

i think that even if we consider in a population of 130cr indians if only 25 percent are cash rich that leaves us with something around 30 crore individuals who are loaded with obscene wealth .. which is more or almost equal to the USA population .. imagine what we are sitting ON or UNDER !!!

Vik said...

its like looking at the glass half empty or half full. The other 1 cr people will demand better standard of living and cause social tensions if they are not given their due, the issue is how does india address it. by just making few people rich, they cannot win elections

Anonymous said...

its like looking at the glass half empty or half full. The other 1 cr people will demand better standard of living and cause social tensions if they are not given their due, the issue is how does india address it. by just making few people rich, they cannot win elections..

i do agree with ur point but i also can see the succumb culture being made into a reality like it was or maybe still is in patriarchal societies like in S.africa where a minimum whitw population ruled the black for quite some time and is still ( again maybe ) though on the face it may appear to project otherwise.. what say VIK ??

Anonymous said...

PE of 19!!! Where do you guys get your info from??

Sensex at 24 PE!!

shailesh said...

India’s rich are getting super-rich

Reflecting the country’s growing economic prowess, India’s wealth generation has outpaced the global average by nearly four times. The individual wealth in India now stands at Rs 73 lakh crore and it is estimated to double over the next three years to touch Rs 144 lakh crore.

The wealth of the High Net worth Individuals (HNIs) across the globe is estimated to grow from USD 39 trillion in 2009 to USD 48.5 trillion by 2013, reflecting a growth rate of 5.6 per cent.

-========
Well above article is typical media showing India Shinning, and I have no doubt Financial companies having hand behind getting such article published. You have to doubt the numbers.

Even considering numbers are accurate, 73 lakh crore, though sounds big equates to only $1.6 trillion. So out of global pie of $48.5 trillion, India's share is 3.2 percent. Calling India rich with 3.2 percent of worlds HNI wealth, would be kind of premature...

shailesh said...

Greed returns to real estate; is there a bubble lurking?

in the Central part of Bombay, if you look at South Bombay upto Bandra, pretty much anybody who needs to move in from an old premium building to a swanky looking new building has options available in Lower Parel, Prabhadevi belt. So, you are having something like catchments of about two million households trying to absorb a supply of a bout 7000-8000 new apartments that are coming in today.

The fact is that the 7000-8000 apartments that come into the market have all come-in in the last six-nine months. So, there has been tremendous of supply that has come in. But fundamentally it’s catering to about two million households who are there in South Bombay and who would want to move into a swanky new building. My sense is that fundamentally, the sales velocities will come down, but I don’t there is a huge price risk at this point of time.

Anonymous said...

2008 Crisis and the amount of money sloshing in India due to Liquidity Injection by RBI

A very interesting read into what is causing the bubble/inflation to expand..

Desi Batman said...

With lots of foreign money flooding India's shore, inflation has hit the roof. Few questions:

1. What happens if more money is poured in next year?
2. What makes India a safe destination for investors to bank their money?
3. What happens & if it happens if foreign is withdrawn from India?
4. Why hasn't rupee devalued based on current inflation rate in India?

Desi Batman said...

@ Anonymous 9:53 PM

i think that even if we consider in a population of 130cr indians if only 25 percent are cash rich that leaves us with something around 30 crore individuals who are loaded with obscene wealth .. which is more or almost equal to the USA population .. imagine what we are sitting ON or UNDER !!!


Rich can be richer only if poor becomes poorer. It is relative. Get it? No? let's say in town of 1000 people everybody has Rs. 10.
calc: Total wealth = 1000 * 10 = Rs. 10,000
Now who is rich? No one! How do you define rich? yes - by number of people who have less.

Now let's say 500 people each have Rs. 15, therefore remaining 500 will have Rs. 5 each.
calc:
Rich: 500 * 15 = 7500
Poor: 500 * 5 = 2500

Time goes by, this equation has to change for rich to get richer- how? correct - need to have more poor.
calc: Rich 500 * 18, then calc for yourself for poor. Also possible that just 100 people have Rs 19 each (100 * 91 = 9100). Rest 900 people can have Re 1 each!!!

India has many many poor people already and they cannot get any poorer, therefore more bet has increased to middle class. Rich are squeezing these middle class, what is next then? Richer to get richest, more people are thrown into poor class, this fire will catch up with today's some of rich class. Time is healer and dealer, just wait. You will be either of side of fence before you know it.

Therefore saying 30 crores have obscene wealth is just in today's time, IT IS NOT TRUE given 5 years to 10 years down the line.

DhImAn said...

Batman, Kudos to you. You have hit upon the key point that should be self evident in the financial world, but most people miss it. Perhaps it is blindingly obvious so people don't pay attention to it, but they should, as you aptly point out.

The point is that it is a zero sum game.

Laaloo Prasad yadav said...

Dhiman and Batman,
Whatever both of u said in the above post, gives only part of the truth.
It is not necessary that to increase number of rich people or to make rich to richer, number of poor people have to be increased. No Zero Sum dude.
How can u ignore the wealth generation. ( I don’t mean currency printing). Here wealth means, useful goods India producing. Productivity of India. And that is increasing year by year. If u look at current middle class, they have stuff which they haven’t even dreamt 20 years back. And they r living more comfortably. Pls don’t give emotional arguments here. Look at the reality,.
Rich are getting richer, not just because they grab money from poor or middle class. The new wealth that is being generated is distributed unevenly. Few people get bigger piece and very few get the biggest.
Ion the rich getting richer scenario…
squeezing the poor/middle class component is smaller than uneven distribution of new wealth.

Laaloo Prasad yadav said...

In the rich getting richer scenario…
squeezing the poor/middle class component is smaller than uneven distribution of new wealth.

DhImAn said...

You are wrong, Laloo. Big picture: Finite planet. Finite resources. Finite people. Finite everything. How can it not be a zero sum game?

You're missing the forest for sight of the trees.

Laaloo Prasad yadav said...

Dhiman,
We are talking about available wealth for consumption. It u consider all these so called finite earth.. then every one is rich.. i am sure, bellow the land u r stepped on (approx 1 X 1 feet) there r enough riches that can make u richer then mukesh.

lets be practical my dear consultant.

DhImAn said...

I don't get it.

When I take a practical approach, I get a pseudo-philosophical argument like some absurdity about all the land under the 1 sqft you stand on or some such thing.

When I take a quasi philosophical approach like "Why do you want a flat in the first place?" I get arguments telling me that philosophy is useless, everyone is just beholden to their greed and lust.

As a practical matter, Mr. Yadav, this is a zero sum game.

Let me flowchart it for you.

Start:

The sum total of all goods that can be considered wealth is finite. Regardless of whether you stand on it or not, or whether it is your own or not, etc. There is not an infinite supply of "things" that we consider "wealth".

So if population is constant and "things" are constant and some people are getting more "things" than others, then those others are getting less "things".

The same applies whether population is growing or shrinking as well. The distributions may change, but the nature of the game doesn't.

End

Now, Mr. Yadav, please make a clear statement about what you are saying. Are you saying that everyone is rich already? Your statement: "If u look at current middle class, they have stuff which they haven’t even dreamt 20 years back. And they r living more comfortably" implies this.

Then you make the statement "We are talking about available wealth for consumption... It u consider all these so called finite earth.. then every one is rich... lets be practical my dear consultant" which implies the exact opposite.

So you seem to be a bit muddled in your head, just as your namesake is. Get your position straight, sir, and then we can discuss things.

I am humbled by your incoherence, Mr. Yadav. I couldn't have achieved that level of it in my deepest states of inebriation or stupefaction.

Laaloo Prasad yadav said...

Dhiman said
I don't get it.

I say,
U didn't get it.. .. why because,... U don't want to get....

U only want to get what ur mind says...
what to do.. its the trap put by ur own mind and u fall in to it from time to time

DhImAn said...

Mr. Yadav, you are right, I neither get nor want to get incoherent arguments.

Thank you for pointing out the traps of my mind.

Now, if these mental traps of mine are real and you can see them so clearly, are you going to help me come out of them by making some assertions and proving them, or are you just going to stand outside and engage in idle talk?

Laaloo Prasad yadav said...

sorry Dhiman,

I can't help over electronic media. Either u help urself or see some specialist.

all the best

Desi Batman said...

@ Laaloo Prasad yadav 9:13 PM

Whatever both of u said in the above post, gives only part of the truth.


So you agree to at least whatever we mentioned. So far so good!


It is not necessary that to increase number of rich people or to make rich to richer, number of poor people have to be increased. No Zero Sum dude.
How can u ignore the wealth generation. ( I don’t mean currency printing). Here wealth means, useful goods India producing. Productivity of India. And that is increasing year by year. If u look at current middle class, they have stuff which they haven’t even dreamt 20 years back. And they r living more comfortably. Pls don’t give emotional arguments here. Look at the reality,.
Rich are getting richer, not just because they grab money from poor or middle class. The new wealth that is being generated is distributed unevenly. Few people get bigger piece and very few get the biggest.
Ion the rich getting richer scenario…
squeezing the poor/middle class component is smaller than uneven distribution of new wealth.


It's an interesting topic you bring up! 'WEALTH', this is most loosely term used by many including me. People define and interpret in their own way and in their own context. If you are referring to wealth as money, then you are completely out of reality.

Wealth is NOT money and we are here talking about trading 'stuff' with money. Money is zero sum game. For someone to build wealth, someone else must be in debt.

In past 20 years I have seen rich getting poor and poor getting rich. Few richer getting richer. Do you imply that we now have less poverty than before? My friend, you are wrong! As I said earlier, all you see is more middle class acquiring 'stuffs', if that is so somewhere someone is paying the price for that... there is no free lunch sir.

Bad news from the Census: more poverty, especially for kids

'More poor' in India than Africa

Half of India’s population lives below the poverty line

I also believe in 'Energy cannot be created nor it can be destroyed, the only thing that can happen to energy in a closed system is that it can change ' Same goes for money aka your wealth.

Anonymous said...

Wealth is not gold. Wealth is not Rupees.

Wealth is human effort - working hard to make each other's life better.

Indians are poor because they are illiterate and unable to be productive. They have a useless parasite govt. Much effort is wasted makings things over and over again because they were not done right the first time. People live like Chimpanzees here.

Americans, Japanese, Europeans etc are wealthy because they are highly capable and are highly productive - and because, unlike Indians they understand what wealth means and dont do shoddy/no work

Please read Adam Smith. And stop hiding your ignorance behind rude words.

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