Future of Indian capital market

Due to reduce in petro price future of Indian capital market is very bright
Lower oil price reduces cost of the products and improves profitability of
Indian companies

Indian Growth Rate Slows Down

Growth rate of India is now 7.9% from 9.2% in first quarter. Potential reasons for this slowdown: Impact of increasing interest rates Declining demand in every sector Impact of increasing oil prices can be seen in increasing input cost Due to this output cost should increases and as a result this will also affect to growth rate Further impact should seen in second quarter also. Area wise growth rate are as follows:
Area	2008.09	2007.08
Electric	2.6%	7.9%
Hotel and Transportation	11.2%	13.1%
Mining	4.8%	1.7%
Insurance and Finance	9.3%	12.6%
Agriculture	3%	4.4%
Manufacturing	5.6%	10.9%

Investment Idea: Axis Bank Ltd.

equity share capital: 355.71 cr
sales: 7005.31 cr
operating profit: 4270.75cr
gross profit: 2225.92cr
net profit: 1071.03cr
operating margin: 60.96%

Indian capital market is in trap of FII

Indian capital market is now in the trap of Foreign Institutional Investors (FIIs) because whenever FIIs sale, the stocks market dips and whenever they purchase, the stocks market rises. In this year, Indian capital market rose to 21206 and the fell to near 12000 points. It means 9000 points up and down in a six months. Now BSE index is moving 300 to 500 points up and down normally, this is 3 to 5 % up and down which is not normal in this time. Many stocks are trading below 40 % on their peak level and most of the IPOs are trading below their issue price. Most of the investors are loosing their valuable funds in this time.

Confidence of most of the investors is depressed and they are withdrawing their hands from the market. This is not a healthy symbol for Indian capital market. When Indian capital market were on the peak level, 22% of total value of Indian shares were in the hand of FIIs. At the time of boom, flow of investment was rapidly increasing. Now we can see that FIIs are withdrawing their funds from the market and Indian markets has entered the phase of depression. From January 2008 to July 2008 FIIs purchased Rs. 4568756 Cr worth of shares and they sold 520562 Cr worth of shares. It means they withdrew Rs. 61806 Cr from Indian capital market and now Indian capital markets are under pressure due to selling from FIIs. When FIIs purchase, market moves upward and when they sell, market moves downward. This is clearly shows that Indian markets are in the trap of FIIs. This is not a healthy symbol.

Their is a need of effective control on the investment of FII. Govt must encourage FIIs for long term investments rather than short term investments. Three year locking period must be imposed on FII's investment. Otherwise we can not save the confidence of Indian investors and we cannot protect their funds from sharp ups and downs.

Short term and Medium term Outlook for Investments

Future of Indian capital market in short term looks good and it is perhaps a good time to invest some funds for short period due to:

1 down ward trend of crude prices
2 down ward trend of commodity prices
3 increasing flow of FII funds in India
4 increasing flow of funds in the country due to higher rate of interest in India
5 short sale covering
6 attractive price earning of Indian companies
7 many good stocks are available at 40% of their peak level
8 43% higher direct tax collection from previous quarter
9 better 1st quarter results of major companies
10 constancy in inflation rates
11 after olympics increasing flow of raw material of various commodities from China
12 shifting of funds from gold and silver due to sharp down fall

But medium term investment is not looking attractive because of:
1 three fold increase of the price of crude can hit the bottomlines of the companies
2 increasing cost
3 increasing operating cost and decreasing profit margins
4 weak position of the US economy
5 weak position of financial institution of the USA due to sub prime crisis

Macro and Micro factors

There are certain macro and micro factors to be kept in mind while doing the investment.

Macrofactors: “These are subject to all the industries”

1. Growth rate of the country

2. Expected growth rate in the future

3. Inflationary condition

4. Fiscal Deficit

5. Revenue Deficit

6. Political ideology

7. Political stability

8. Infrastructural facilities

9. Economic policy

Microfactors: “these effect to individual industry”

1. Sales

2. Growth of sales

3. Prospects of industry

4. Operating cost

5. Operating margins

6. Future plans

7. Future growth

8. Price-earning ratio (Market Price / Earning PS)

9. Gross profit ratio

10. Net profit ratio

11. Earning yields

12. Dividend yields

13. Reputation of group

14. Attitude of management

15. Previous trends

Investment Opportunity

My Pick today is ICSA INDIA LTD. The company secures a work order approx 225 cr in the month of July 2008. They have strong order book position and only 11.2 PE with 65.92 % return on equity strong investment opportunity in short, median and as well as long term. Below are some facts about it:

# Name of company ICSA INDIA LTD
# Engaged in IT sector
# Face value Rs2
# Total Equity share capital 8.8 cr
# Sales 670 cr approx
# Gross profit 164.25 cr
# Net profit 126.51 cr
# EPS 28.75 Rs
# Market price as on 1st aug 2008 is Rs 337.95
# PE Ratio Just only 11.2
# Last divdend 38%
# returns on equity 65.92
# Operating profit margin is 25.8%
# 52 weeks high /low 648.8 /251.16