DISQUS

Let me start off by apologising.
Tushar,

Apologies to both you and Bhupendra.

Actually what happened is that one of our content guys was posting press releases about MoneyVidya.com. He didn't pick up that this was actually a *guest post*, and not an article by Bhupendra, and as this press release was going out, I unfortunately failed to pick this up either.

We tried to delete / edit the press releases as soon we saw the error, but some press release sites are taking time to remove the release as requested. Please bear with us while we continue to try to resolve the issue. If you find any replicas of this press release that we've missed, please let me know and we'll do the needful ASAP.

@Deepak - Yes I did use historical NSE data, but wasn't aware that it was flawed (thanks for pointing this out). You're right about us not having enough cycles to make comparisons. Its interesting that the Sensex data shows PEs of around 10. When did this happen?

If you look at my more recent article, http://www.moneyvidya.com/blog/is-the-stock-mar... I learned from a Morgan Stanley research report that in the last couple of bear markets, Sensex PE went down to lows of 13.6 (September 21, 2001) and 15.1 (December 5, 1996).

I understand that there are examples in the developed world where PEs must have fallen to drastically low levels. Is it fair, however to compare developed economies' PE lows to developing economies' PEs? Surely the mean PE for developing economies should be higher, given higher growth rates of national income?

hi ankit, thanks for your comment - yeah i'm pretty sure about the 20% figure. I sourced it from DNA Money (I've linked to the article above).

Hi Deepak, thanks for your comment. Agreed. I do expect trailing EPS to go down further, which is why said that 'around' now, but not 'right now' is the right time to invest. If we assume a EPS drop of over 10% as you suggested could happen, to 200, but are able to invest at Nifty = 2500 that will give you a PE of 12.5 which isn't too expensive. If EPS falls by 20% to 180 then at Nifty 2500 the implied PE would be 13.9 - not exactly cheap but compared to our long term historical average of over 18 not exactly disastrous. If EPS goes south from there then I guess we're in the toilet anyway.

Its a little early to call but my feeling is that the technical rally that saw us climbing up from our low came to an end last night. As I write this comment the Nifty is already down almost a 100 points. If I see that the Nifty begins testing 2500 again I would slowly start accumulating, despite the downside risk on EPS.

@Ajay - yes you're right we could see a deeper drop - as I pointed out in the article, I believe that it all depends upon FIIs - if they keep pulling out due to liquidity pressures, more so than they have already, then we're in trouble, and we will see a drawn out bear market.

We just like to point out stuff that doesn't add up.

:-)

Well I can understand that they have to put up a uniform face, and I haven't got any real problems with that, except that they're not really answering the question at hand: What is the full extent of your Mark to Market losses from your exposures to Credit Derivatives? Has it gone up from the $260mn that you reported earlier? Have you squared off these exposures? Telling me things like 'ICICI is well capitalised' and that the 'RBI has retained prudent credit practices' doesn't really tell me anything, does it?

Sree - I'm really not sure on what basis you've made the assertion that their 'brains are like criminals'. What I do know is that its a fairly nonsensical statement.

kpst - thanks for bringing the error to my attention - have made the correction, and added another para in as well...

@Akshay - both TOPS and Eureka were down, but did they underperform the market? Specifically did TOPS underperform? I also think that looking at a 1 month performance doesn't say much, one way or the other in terms of benchmarking performance - which is why I've only looked at those TOPS funds that have a 3 year track record.

@Akshay - thanks will correct typos (Clarke etc.)
@Karan - was going to write about the Alpha Network (read my mind) but thanks for the tip-off on the Trade Idea monitor...

you know, you guys are posting your comments to the wrong post

I'm not sure what you mean by 'delude' others?

Just wanted to point out that as far as I'm aware, the Eureka Fund is a traditional fund, not driven by TOPS. Moreover, the estimated AUM for MW is not $7bn - the current figure stands closer to $15bn. In terms of a search for novelty and exclusivity - surely its easier to do so in a less developed market, with fewer players seeking alpha, than a more developed market such as the US / UK were every strategy has already been 'done'?

In fact - take another example - online brokerage. If you were to use an Ameritrade / E*trade or Charles Schwab and compare it to the platforms that we have in India - say Reliance Money - you would immediately see the difference. Compared to Reliance Money's interface and tools the American platforms are far superior. Indeed if Reliance wanted to do so, it could probably invest a few crores of rupees and build a wonderful platform - indeed go a further step in terms of localization. In order to do so, it wouldn't really have to think much - it wouldn't have to invent anything. For a lot of improvements, it could just look at the American platforms. Of course, it won't do so at the moment. Why? Because right now people will sign up with Reliance Money simply because they're a known brand and are offering cheap commissions. *Not* because they've got the best online brokerage interface, not because they have superior service. The sign of a more mature (to be used interchangeably with sophisticated) is when companies are having to innovate with their product to *hold on* to their customer base - to retain them. But right now, they don't have to - simply because they're too busy opening new brokerage accounts - people are lining up to do so.

@Krishna and @Sangfroid - when I say that India is not 'as sophisticated a market' - what I was mean is that in terms of pure technological innovation, and availability of goods and services we are behind countries such as the US, UK or Japan. When you walk into a supermarket in the US - you see tens of brands of tissue paper - single ply, double ply, multiple colours, different shapes, scented, textured etc. etc. Therefore it *is* possible for many basic goods and services to create a differentiated, more innovative product, whereas in countries mentioned above, a lot of things have already been done.

This is exactly why the big companies - the Tatas, the Reliances etc. - are getting into every sector. The market in India (urban and rural) is at a stage where things that are no longer considered remarkable in the west - say cable TV for example - are still considered remarkable. Did Tata or Reliance have to invent the set top box? Not really.

This is not to say that there isn't innovation in India - clearly I think there is. That innovation as you rightly said Krishna, for products such as cellphones isn't necessarily around building a super sophisticated PDA phone - but more around pricing, efficient distribution, and localisation.

SMS GupShup, an India based startup has 7mn unique monthly visitors, pretty much all from India (the number of Twitter accounts from India stood at just over 1600 in end-2007). The service is completely free - and despite having to deal with much more traffic to its site and number of messages per day (approx 10mn per day) it hasn't broken down. Check out my related post: http://www.moneyvidya.com/blog/?p=266

I think that the alliance between Tesco and Trent, while essentially amounts to a franchise agreement and not a joint-venture is good for both parties - especially for the latter, as I point out in my post (check it out at: http://www.moneyvidya.com/blog/?p=250). While Trent has to pay a fee for access to Tesco's expertise (IT systems, infrastructure mgmt etc.) I think that this is a small price to pay for things that are essential requisites for cost efficiency in this space.

As you pointed out in your article - Tesco also benefits, by learning how to operate in an Indian environment before jumping in independently into this format. You might also be interested to read my analysis on what impact the arrival of large format organised retail has on consumer goods manufacturers margins: http://www.moneyvidya.com/blog/?p=258

Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com

@Krishna - You raise a very valid point about each investor being unique in terms of investment time horizon, and return outlook. I would go on to say that different investors have different risk appetites. A good social investing site would be one where by looking at user's profile or his actions on the site, you could quickly understand these things about a person - and therefore evaluate whether you as another user should listen to what he is saying.

@Manish - Agreed that the Wisdom of the Crowd doesn't work every time. But it is my belief, that if a tool is built in such a way that (subject to enough people providing and opinion) those that have demonstrated a superior track record in terms of forecasting get a greater weight than those that have a poor record, then it would work more often than not - this is the basis of Motley Fool's CAPs. Another example - Marketocracy.com (I talk about it here in my Book Review of Wikinomics: http://www.moneyvidya.com/blog/?p=67). Marketocracy runs its fund based on the 100 best performing fantasy portfolios on its site. In its 6 years it has generated cumulative returns of over 80%, while the S&P; 500 has returned 30% for the same period - this, in spite of the internet bubble of 2000 and the subprime mess of 2007/8(and 9?). So it is taking Crowd Wisdom' into account but putting greater stock into the higher performing crowd.

@Krishna - As it seems you're right - thank you for pointing this out; I was under the impression that both domestic brokers and FIIs could issue P-notes to unregistered foreign investors, but I was wrong. (although I'll point out that the term FII is reserved for those registered with SEBI, therefore there is no such thing as an unregistered FII).

Rohit, I think perhaps the answer to that question is that at this stage of the web - if we're talking about mass products, Indian companies don't feel that they need to innovate yet - they're still focusing on the mantra of 'more customers'. This is exactly the reason why despite the fact that we have Naukri, Clickjobs, Moster, TimesJobs, others like HT's Shine.com continue to enter the market. Only when the market gets saturated will there be a need for these companies to try to develop their services so that they can compete for each other's customers.

While I resonate with you fully on this post, I do feel however that even those that are at heart the 'iterative' types, should spend some time working - not necessarily for too long, but long enough to understand what it means to work in a professional environment - it will possibly make them better managers of their own business, especially when it (hopefully) becomes a medium organization itself. Don't stick around too long, however, otherwise you'll risk becoming cynical, comfortable, married-with-kids - and generally risk averse!

Gautam Kshatriya
gautam.kshatriy@moneyvidya.com
http://www.moneyvidya.com/blog

I don't know how feasible this is but if you work for a large firm and you're a highly rated employee it might just be possible for you to negotiate a sabbatical (unpaid leave for 3-6 months), perhaps even a year. This will give you the chance to really plunge into your idea full time. At the end of the unpaid leave you'd (hopefully) be in a better position to decide whether your project is really worth quitting your day job for...

Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com/blog