Monday, November 2, 2015

morning thoughts...

The markets are expected to remain volatile in the week with result season.
During the economic boom of the 1990s and 2000s, it became fashionable to talk of India's forthcoming "demographic dividend". This was quite a turnaround from the worries of bulging population in select Indian states. The experiences of East Asia and the demographic dividend it benefited from became a reason to be positive about India's future. 
Working-age population in India rose at the same time as the ratio of dependents to workers fell. An associated rise in the rate of saving allowed scope for more investment. It was hoped that these savings will pay for the growth in manufacturing which would employ millions and lift people out of poverty. The timing of India demographic divide, as acknowledged in the BRIC report, was particularly encouraging. India's labour force was due to soar as China's began to decline. 
Entrepreneurship and startups have been gaining much interest in India. In a very brief period, many people in the country have moved from being job seekers to job creators. Factors such as availability of workforce, encouragement to entrepreneurship, urbanization and availability of seed capital is fuelling boom of the start-ups. These start-ups generally prioritize scale, top line growth, huge market share, over fundamentals like sustainability, profitability, and margins. 
The number of startups present in India now over 4,000. As these companies attempt to grow their businesses, they need more funds. These entities are believed to be important contributors to India's growth going forward. Hence, considering the capital requirements, SEBI had relaxed some norms to make it easier for startups to raise money from the home markets around four months back. 

The US economy may have gone nowhere since the financial crisis in 2008. But prior to that, there was a reason why it became a force to reckon with in the first place. And that was because of its focus on innovation. So a country's ability to innovate is what will take its growth to the next level. Does India score well on this factor? Sadly, no. India's rank on the Global Innovation Index slipped from 23 in 2007 to 81 in 2015. One of the measures to gauge the level of focus on innovation is R&D expenditure
There has been a continuous decline in R&D spend of India Inc. since 2010. These companies spent Rs 10,000 in R&D for every Rs 1 crore of sales 10 years ago. It is down to Rs 5,000 now. The 2008 financial crisis has been one of the big culprits. But the slowdown in the Indian economy has also contributed to this. In an attempt to cut costs and spruce up the balance sheet and overall financials, the spending on R&D has also been curtailed. Certain sectors typically spend more on R&D than the others. Pharmaceuticals, automobiles, electrical firms are some obvious examples. But even in the case of these the R&D spend as a percentage of sales has come down. Lack of skilled manpower has also hampered the focus on innovation. For Indian companies, overcoming these challenges will not be an easy task. But it is necessary if these companies harbour ambitions of becoming an economic force to reckon with on the global map going forward. 
However, even the relaxed norms have failed to entice this group of entrepreneurs. According to an article in Mint, in the last four months, not a single entity from these startups have approached the regulator for raising funds from the domestic markets. In fact these startups prefer to access funds from western counterparts which could offer premium valuations for their business. Further they have quite relaxed norms as compared to India. On other hand these firms have been also lobbying to obtain further relaxation in the norms in India based on future growth potential. 
No doubt some of these would be promising start-ups and thus they should not struggle for want of capital. However SEBI has drawn a well-defined line to balance the needs of startups and also protect investors' interest. Though these norms may not go well for the startups, we believe it is a necessary check to protect the interest of retail investors to some extent. 


Monday wealth gains

Buy mphasis bfl , yes bank
Buy bajaj auto 2500 pa , titan 360 ca
Sell nifty , bank nifty on rise and buy on dips