I am personally a great believer in Technical analysis. The trouble with Technical Analysis though is that, it gives a Sell signal sometimes when it is too late. Especially in times of 'Parabolic Frolic'. Hence for whatever it is worth, I decided to look at the fundamentals of the India Inc. today. I was mainly concentrating on the Major Sensex companies, to see whether,
my notional belief of market being expensive is really true or is it just my misinterpretation that market is expensive. To my surprise, some interesting facts came out.
I was basically concentrating on the following parameters for Benchmark - EPS for Trailing Twelve Months (this is one real indicator), EPS Growth QoQ and EPS growth YoY (This shows how the company is performing in past twelve months and is likely to perform in next 3-4 months. Just an indicator). (Price/EPS) will eventually give the much talked about P/E ratio.
Looking at these numbers - Some interesting facts came out. I am just noticing the sailent features
1. Reliance is quoting at 29.1 times its EPS for TTM and YoY and QoQ growth is 41.0% and 17.0%.
2. ONGC is quoting at just 15 timees its EPS
3. Bharti and RCom are quoting at 40.0 and 53 times their EPS, but this is for quarter ended june. Interestingly their QoQ growths are 10 and 22 percent respectively.
4. L&T is quoting at 62 times its earnings and its YoY and QoQ EPS growth is Negative. Yes Negative!!!!
5. ICICI Bank is quoting at just 20 times its earnings and its YoY and QoQ growth is 6 & 5 percent.
6. HDFC Bank is quoting at 38 times its earnings and its YoY and QoQ growth is 8% and 25% only.
7. I have not completed others yet, will do those when their September earnings are out and revisit Bharti and RCom.
8. Reliance capital is quoting at 50 times its EPS, when its QoQ growth is negative, yes negative, but YoY growth is definitely positive.
9. Quick look at RNRL, it is quoting at 276 times its earnings.
10. The IT stocks are 'still' quoting at about 25 times their earnings. However, it should be noted that 'save Reliance' these are the only stocks that are giving both QoQ and YoY positive performance for past 3-4 quarters (albeit smaller).
Looking at these numbers, it is evident that the 'value' of the stocks is certainly going ahead of whatever these stocks are worth. Contrary to popular belief that our market is quoting at 20 P/E, we are quoting well above that, almost similar to Nasdaq 1999-2000, pre bust valuations.
Most notable are the so called 'Winning Horses' or the Capital Goods and the Power companies (details in Part 2)
I don't know when the day of reckoning arrives, but when it arrives, we are going to see a whole lot of sinners then.
While, I have only focussed on the QoQ and YoY numbers, I have not taken a closer look at some 'interesting' parameters like 'Other Income'. If these 'parameters' are accounted for, we are certainly overvalued even more, even assuming a twenty percent premium for 'Emerging Market' story, one can easily expect where the stocks are headed, once the judgement day arrives.
After taking a look at this - I have decided to trim down some of my Axis Bank and may be Suzlon. (I have very miniscule, but a bird in hand is better than two in the bush.) I have decided to take money out of my MFs (over a week). There may be a 10-20 percent upside, but the downside risk is too much to be playing with.
A request to SEBI - I believe SEBI should make it mandatory to report EPS numbers, for investors to be aware of real performance of the shares. Otherwise in the clamour of beating the street, ordinary investors are never made aware of the 'bare basic facts'.
I have used data on stockhive for my reference. It is a very good site for the investors looking for good solid information about the company they want to invest in.
PS: I have no idea why someone would want to bid for a 20 percent (yes that is percent) out of money 4500 puts? Taking a clue, it might be worth trying that stunt!
Disclaimer: The ideas expressed are purely personal and a result of my own studies, they do not constitute 'Investment Advise' in any way.