Category: Knowledge Series

Why do continuous loss-makers command a high future earning ratio?  Some stocks are worth buying based on their strong financial fundamentals, future business potential and empirical evidence of their business sustenance. Advisors recommend such stocks with an expectation of a stake sale premium when one private equity or strategic investor sells its holding to another buyer at a premium. That is no less than speculative pricing, an inseparable part of the equity market.  While the former is a safe bet, the latter is not always. Stocks of companies with private equity investments usually command a high price-earning (PE) ratio for no justifiable reasons. Such stocks move up based on newspaper reports of stake sales, which the “suitor” denies subsequently. They hit the limelight be...

Wait and watch defensive stock Deepak Nitrite already has a price-earnings ratio of 32 times over the earning of 2022-23, its stock may not be very lucrative unless something drastic comes to shareholders. The earning ratio is above the Sensex average. The indices are already ruling high. The chances of anything drastic seem weak in the long run. Its equity base is low at Rs 27.5 crore. With a book value of Rs 300 on a Rs 2 share, a bonus is not a remote chance.The financial result last year showed some pressure on its net margin. Naturally, return on equity also had a corresponding beating. The efficiency of capital deployment also decreased.   A diversified product portfolio and leadership are some of the products that ensure it is a safe business. Though its PE ratio is...

In May 2020, barely two months after the lockdown began, I wrote in a column published by a Malayalam daily that India would enter a prosperous time after the pandemic. The following quarter saw an expectedly significant contraction in India’s GDP. The following quarter saw a GDP growth of 7.5 per cent on a year-on-year basis. That showed the economy could rebound sharply soon. The nationwide lockdown, factory closure for many weeks and massive job losses wouldn't have meant anything else.  The government acted on time with the launch of many schemes under AtmaNirbhar Bharat. The Reserve Bank also acted harmoniously with the government announcements. The combined action made Rs 27.1 trillion available for keeping the economy stable and on the path of revival. According to gov...

How does it work? Cheetah may regulate the overgrowing herbivores in its enclosure and save the vegetation to a limited extent. Global warming and climate change have already endangered many herbivores and reptiles. Cheetah alone cannot balance the biodiversity even after putting in an enormous challenge to save the wild cat from extinction once more.    Life of a single species on earth is impossible because biodiversity is the dynamic nature of the planet. Lives thrive on earth because of this inherent nature. One depends on the other for a living; we call it interdependence. The logic is simple. A positive does not have an identity if a negative does not exist and vis-à-vis. There is no balance without a counterweight.  Life and creation go on smoothly with a ba...