> the Indian economy's apparent boom
> is not what it seems and does not benefit the majority
> of the population being built largely upon speculative
> capital that could flee in the blinking of an eye.
It is generally accepted that Indian financial markets are lacking in depth. Indian stock markets are booming for about a year now, but the economy is not exactly booming. However, the economy has grown steadily at an annual compound growth rate of 5.6% since 1980. This is a good growth rate. It's not built on the speculative capital flows. At that rate of growth, the GDP trebles every 20 years. India should have the GDP of $ 1.5 trillion by 2020 if this rate of growth is maintained.
> My impression is that this is a caricature and,
> factoring in the usual capitalist enforced
> inequalities, some real (and really distributed)
> economic growth is occurring.
A survey of Indian household carried out in 2000 showed that 2.5 million households owned cars and 22.5 million households owned two wheelers, i.e. 25 million households or 150 million people.Then there were about 300 million TV viewers in 2000. You can say these are the main beneficiaries of economic growth in the recent years.
See the article below from the Economic Times for a comparative picture of Indian stock markets.
Ulhas
The Economic Times
Wednesday, April 14, 2004
Value pack: India beats the emerging market peers in PE, m-cap ratios
ARSHDEEP SEHGAL
TIMES NEWS NETWORK
NEW DELHI : If you thought the Indian stock markets were cheap at the levels they are now, think again. Indian market valuations are currently higher than what some emerging markets are attracting. On parameters such as price-earning (PE) multiples and market capitalisation ratio to GDP, Indian stock markets have marched ahead of a large number of emerging markets.
For instance, while Indian markets are quoting a PE multiple of 18, Russian and Korean markets, which were among the best-performing markets in '02, are available at a PE multiple of 11.1 and 15.7 respectively. A PE multiple is the relationship between a company's earnings and its share price, calculated by dividing the share price of a stock by its earnings per share for a 12-month period. Analysts argue that with India being valued at a higher PE multiple than some other emerging markets, investors could perceive investing in other emerging countries cheaper than investing into India .
Amongst other emerging markets, only four markets are quoting a higher PE than India . Israel is on top with a PE ratio of 34.3, followed by Chile with 32.5. In the Asian region, the Taiwan market attracts the highest PE multiple of 28.8. China and Malaysia are a shade above India , with PE multiples of 18.8 and 18.7 respectively.
If Indian valuations are compared with other emerging markets on price to cash-earning ratio, only Israel is valued higher than India . While India has a ratio of 13.8, Israel has a higher ratio of 20.4. The price to cash-earnings ratio is a measure of the market's expectation regarding a firm's future financial health. It is calculated by dividing price per share by cash flow per share. This provides a relative value, similar to the PE ratio. A fund manager says, "Indian corporates are giving one of the best returns on equity capital in the emerging markets. This is one reason that despite higher multiples, foreign fund flows in the Indian markets are higher."
On other important parameters such as market capitalisation to GDP ratio, the Indian market has risen above an average of 28 emerging markets. The market cap of the Indian market is equivalent to 50% of the country's GDP. But given the fact that some large companies in India are still unlisted, this ratio could have been even higher up. This list is topped by South Africa with a market cap to GDP ratio of 176. A majority of the countries that have higher market cap relative to GDP are smaller markets such as Brazil , Chile , Malaysia and Jordan . On the other hand, the Chinese market cap relative to GDP, stands at 38%, while Russia 's stands at 43%.
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