Senseless shootings are killing the societal fabric

After spending an entire day trying to wrap my head around the shootings in the Gurudawara in Wisconsin, I have made a few observations and what better place to share them than right here on my blog. I have read all news sources that are relevant to me, namely, Bloomberg, Globe and Mail and CNN. I have also read comments of readers at the end of the respective articles.

First of all, fewer than 20% of the comments were empathetic to the victims and their families. Most of the people on these threads are looking to pick fights - one of them with me over my comment in Bloomberg.

Secondly, there are people looking at this from many different perspectives - NRA, Americanism, US-Canada relations, high unemployment rate in US, US-Greek psychological differences in dealing with recession - were some of the common themes.

Based on my own observations, I find that very few people talk about the issue at hand - may that be a meeting at the office, or a tragedy that strikes. Mostly people use a red herring to deviate from the discussion at hand and change it to something unrelated and fuel the debate to make a mountain of a mole which was not even part of the actual issue at hand.

The actual issue at hand is that someone came in a place of worship - may I add this place of worship could have been a Mosque, Hindu Temple, Catholic Church etc - and open fired at innocent people who were rejoicing the birth of a baby in their community.

Whatever the reason may be for this inhumane act, the bottom line is that 6 innocent people lost their lives and more than 30 are in the hospital of which some are in critical condition including the community hero - a police officer - who engaged the domestic terrorist and was wounded.

Now, that we know what's the topic at hand, the first gut reaction for many is finger pointing. I disagree with all of them who think so. The first reaction should be to reach out to the Oak Creek's Sikh community and offer help in whatever fashion one can. Offer support in whatever fashion one can. It is not always monetary; just a phone call stating that you are there in their time of need is sometimes worth more than a few dollars of donation. I think this reaching out to our fellow humans is lacking in most of us and this needs to change.

Our social fabric has become so rigid and at the same time immune to tragic events that we simply do not care about those who have lost loved ones. It is not a case in point of just reaching out to the Sikhs, Muslims, Jews and other religious communities. Rather we should reach out to that 15 year old boy in our neighborhood who you think can use your guidance. We as a society, not just a community, need to reach out more than we do already. We don't need fancy names of organizations to bring about a positive change in our societal functions, we need you and me, mom and pop, the average Joe to do our own part as responsible global citizens to make sure no child is left behind.

There is a popular saying - An empty brain is the devil's shop. We need to make sure that there is no empty brained child in our respective neighborhood. Just playing ball with a lonely kid at your neighborhood park can do the job. We as a society need to be more proactive in our own streets, in our own neighborhoods, in our own schools and in our own offices.

This is not just an American problem, this is a global problem. We just don't realize it because the core or root cause is often muted by the roar of finger pointing. It is time to reflect over the recent incidents and start to act in a manner that does not leave any child behind. We need to create a sense of belonging for every child that comes in this world. Each child is a miracle, including those who grow up and shoot people in movie theaters, schools and religious institutions, and it is the job of society to make sure that these miracles don't go to waste

Workday - a new kid on the block!

Introduction

Workday is the leader in enterprise-class, software-as-a-service (SaaS) solutions for managing global businesses, combining a lower cost of ownership with an innovative approach to business applications. Founded by PeopleSoft veterans Aneel Bhusri and  Dave Duffield, Workday delivers unified Human Capital Management, Payroll, and Financial Management solutions designed for today's organizations and the way people work. Delivered in the cloud leveraging a modern technology platform, Workday offers a fresh alternative to legacy ERP. More than 280 customers, spanning medium-sized organizations to Fortune 500 businesses, have selected Workday.

Workday was started in 2005 by Aneel Bhusri and Dave Duffield.  Based on an interview with Aneel Bhusri, CEO of Workday, he suggested that Workday could be an even larger enterprise than their prior baby – PeopleSoft.  The difference is that Workday, unlike PeopleSoft, is based off of cloud computing.  HR, Payroll and accounting which are the main genres of Workday, when combined together is approximately a $50 billion dollar software market. 

When looking at any new or upcoming company, we need to go back to our Economics 101 lecture, and see how easy or difficult is it for new players to enter the market.  When it comes to HR and payroll software services, it is very hard for new players to enter the market.  Enterprise companies such as Workday, require a hefty amount of capital to get the enterprise off the ground mainly due to the expertise and time involved.  Moreover, for a large customer to accept the proposal to adapt the new software, the software service should be extendible to all parts of the company. 

For example, if a company has presence is over 50 countries, then the software service for HR and payroll should be able to gather, store and compute salaries, benefits, taxes, etc. for employees in all the 50 countries.  This in itself is a massive undertaking and requires a lot of man hours and expertise in understanding taxes, HR regulations and other relevant laws and it is imperative to convert these requirements into a working software service which Workday has been able to achieve.

But before we go any further in disucussing Workday, lets delve a bit into what cloud computing really is!

Cloud Computing

In the IT space, this terminology is becoming increasingly popular.  So without further ado let’s get into the crux of the matter.  In the “early ages” one would buy a disk and install the software on their machine and then work on that machine to get the desired results.  Let’s go with a simple example of Microsoft Word – software being used to write this article.  Earlier you would go to a store, buy a box which has the disk which you will take home and install Microsoft Word on your computer.  Well those days are gone!

Now you can log on to the Microsoft website, you can open Microsoft word on their website, work on your document and store your document on Microsoft’s server.  So instead of running the software on your own machine, now you can run Word “in the cloud”.  So the software runs remotely instead of locally.  The information is stored on one the servers that are called “general purpose” servers.  Some companies only offer general purpose servers which are kept in a large warehouse, and these companies rent out their server space to users.  For example, Amazon uses these general purpose servers for its purposes.

Now that we know the bare basics of the cloud computing, we can look at who benefits from using this type of infrastructure.  It is used to solve enterprise-class problems, especially for companies that have millions of customers and thousands of employees where data management and computations involved are very intensive.  So is cloud computing cost effective?

The answer for cost depends on factors such as economies of scale, economies of scope etc.  To elaborate on this lets take an example of a company that has a 1000 customers.  So to manage this the company implements an enterprise solution – let’s call it plan “A”.  Then the company grows to 50,000 customers, where it’s still using “A” but due to a larger load “A” starts to slow down.  Now the company has grown to 500,000 customers.  At this point “A” is no longer a valid option because it’s not strong enough to handle 

the work load so the company has to switch to a better system, let’s call it “B”.

The company will now not only have to invest in the new service provided but there would also be costs associated in transferring the entire company and all its customers from “A” to “B”.  The other option this company could have opted for was to get “cloud computing” and for simplicity sake, let’s call it “C”.  Cloud computing could have been put into use from the very beginning when the company was only working with 1000 customers.  But as the company grew, instead of changing its entire system, it could have just added more space to its servers.  So to make sense of it all, the following equation can potentially be true:

Cost [A] + Cost [B] + Cost [Migrating system from A to B] > Cost [C].

How can this be tied into the real world?

In the genre that Workday has entered, there are two rivals who are always looking for opportunities to pip each other.  The reference here is of course towards PeopleSoft Oracle and SAP.  Both of them have been in this “line of business” and are always in neck to neck competition with each other.  What is important to note, which has been mentioned earlier, is that PeopleSoft was developed by the same guys who have now started Workday.

In December of 2004 when Oracle completed the acquisition of PeopleSoft, it made Oracle the second largest seller of business applications software behind SAP AG.  Looks like six years later, Oracle is still lagging behind SAP in terms of its market position in this genre.  However, recently Oracle has gone on the offense by acquiring firms such as Sun Microsystems and more recently Rightnow CX, which is a cloud-based customers’ service experience suite.

This gulping of new assets by Oracle has caused SAP to acquire SuccessFactors which is a software-as-a-service (SaaS) firm.  The time gap between Oracle’s and SAP’s acquisitions was a mere 6 weeks.  It is true that Oracle has been able to get much better bargains than SAP since Oracle paid less than half for Rightnow compared to what SAP had to pay for SucessFactors’ acquisition.

Now SuccessFactors is arguably the best software-as-a-service (SaaS) company that deals with HR services and rivals companies such as CornerStone On Demand, which is considered a leader with a strong ability to execute, and, Taleo which is in the same quadrant (refer to Gartner’s quadrants) as both SuccessFactors and CornerStone, but is lagging in both its leadership and its ability to execute to both SuccessFactors and CornerStone.

Each of the companies listed above provide services that enhance management decisions especially in terms of attracting, retaining or hiring human resources, along with other enterprise requirements.  Now if we look at PeopleSoft and SAP as the only entities in this genre, we will be able to tie this back to our formula which consisted of “A”, “B” and “C”.  To put things in the right perspective, both PeopleSoft and SAP are in the “A” and “B” categories.  Their competition is based on what services they provide to their customers but falls short of reaching the capabilities of “C”.  We will delve into this last point little later.

As an ERP vendor, PeopleSoft provides variety of software applications such as Customer Relationship Management (CRM), Higher Education, Human Resource Management System, Supply Chain Management, Project Management and Materials management and others.

SAP means System Application and Products. By employing SAP, a centralized database is created for all the applications that are currently used in an organization. All work in the functional department of the organization is handled in a versatile manner by this application.  SAP provides Business Information Warehouse, Advanced Planner and Optimizer, Supply Chain Management, Human Resource Managed System, Product Lifecycle Management, SAP knowledge Warehouse, Supplier Relationship Management and Customer Relationship Management.

We have established that both PeopleSoft and SAP are ERP (Enterprise Resource Planning) software applications.  So the bottom line for both these giants is the same.  But SAP provides far more applications and products than PeopleSoft.  Also one can safely say that PeopleSoft, is a definite asset to Oracle, but it has not yet been able to compete with SAP on all ERP applications.  Is it because Oracle has not been able to develop its PeopleSoft brand or is that that PeopleSoft is not adaptable to changes and additions is a debate for another time.

Where does Workday fit in?

Now the one firm we don’t see in any of the four quadrants is Workday.  One of the most important elements of any start-up or existing company is its management.  To give you a proper perspective, private equity (PE) firms look at the experience of the management before valuing the company, even though the management is not a tangible asset of the firm.  So based solely on that logic one can dare to think that there is a high probability that Workday would be able to make its name at least in the mid-market category if not the large-cap market.

Workday’s growth is exponential which is currently trending at 90% a year on average based on the past six years.  One also has to look at the type of customers that Workday has been able to get to better judge that growth.  As of now, Workday has customers such as Lenovo, GMAC Insurance, AAA and Sony Pictures just to name a few.  It is also interesting to see that RightNow, which is Oracle’s recent acquisition, is one of Workday’s clients.  What this means is that Oracle might be expanding and trying to compete with SAP, however, as of now it is not in direct competition with Workday and is in fact partially dependent on Workday’s enterprise software service.

Since Workday is the new kid on the block it has to offer some differentiation from its competitors.  It has been using three main selling points to counter competition – cost, usability and pace of innovation.  Over a 5 year period Workday consistently comes to about half the cost of SAP and PeopleSoft Oracle in any application across the board.  Moreover, Workday looks like a consumer internet application and therefore it does not require as much training as is needed for using software from its competitors.  Most importantly, due to Workday’s cloud model it is able to come up with a new update every four months, which makes Workday more adaptable to the needs of its customers.

PeopleSoft is easier to use and train people on than SAP.  Moreover, SAP is costlier as compared to PeopleSoft.  So even though SAP provides more functionality but it’s neither easy to use, nor flexible or cheap as compared to PeopleSoft.  So going back to our “A”, “B” and “C” example, we can put PeopleSoft in the “A” category which is great for smaller enterprises and has lesser options.  SAP would go into the “B” category, which can handle more volume and has more applications to ensure it can better match the customer’s needs.  Finally Workday would be “C”, where if the company starts off with Workday’s solutions, it would not need to change any applications and would be able to expand and or contract simultaneously with the customer’s requirements.

It is also important to note that SAP, Oracle and Workday provide analytics as well which allow their customers to better forecast their human resources needs for the future.  Business Intelligence, which is something that SAP is lagging behind Oracle, allows customers to compare labor cost by unit, by market, by role and over a period of time.  It also allows customers to forecast future salaries in the countries they operate in and also allows customers to forecast minimum wage in different regions around the world.  BI is also an excellent tool that allows management to forecast employee turnover which can be a definite asset for the management if it wants to input strategies to retain valuable employees. 

One should also note that it is not that just a few types of companies that require this type of software, rather every type of industry needs this type of enterprise software that Workday is offering.  Business Intelligence is a very vast field, so we will delve into this topic more in forth coming articles so you can link different analysis.

What’s in it for me?

After all is read and understood, the question lies – what’s in this article for you?

Coming to the bottom line, Workday is planning on coming out with its Initial Public Offering (IPO) sometime this year.  The IPO is expected to come out in the middle of 2012.  Now you can start to think like a potential investor and how this specific stock might help or hurt your portfolio if you decide to own it.

You can go through the entire process of analyzing this firm by looking at its financial statements and by looking at various key ratios that you are habitual to.  But among other things, you must also try to find out how satisfied are Workday’s customers?  What are the future moves of the management?  How long have the customers signed contracts for with Workday?  What is the size of the average client of Workday?  Including, but not limited to, are there any potential buyers of Workday in the future and if so, can you expect to get a premium by the acquirer?

Workday is the new kid on the block for all practical purposes but the question lies; does this kid have what it takes to compete with the big boys?

Are you Rational or Impulsive?

For those who are worried about the volatility in the market here is some info that might help you. India, or should I say Asia looks towards US data to value their own market(s). US on the other hand is looking at data that is coming from Europe, which does not look optimistic to say the least. Now that we are clear on the cause and effect relationship from different parts of the world, its apt for you to know how traders are putting their own biases on market valuations.
The most important aspect for any investor is to look at the bottom line of the specific company that they are investing into. The way you would do that is to see who is in the management of the firm, and their past performance; who are their customers and where those customers are located on a global scale; how are those customers performing in their respective nations/regions. You can obviously dive deeper into your own analysis based on your requirements - I have only mentioned some pointers.
Now, what some traders are doing is that they are hedging their positions by using synthetic "instruments" to make money both ways - market up or market down. However, this will also cause them to put a cap on their potential profit. On the other hand, what some traders are doing is that they acting like a novice investor where they are selling based on news from different parts of the world and are therefore making bearish speculations. One example is traders selling US treasuries because the Japanese are not going to announce sale of Yen before they actually put it out in the market to keep the element of "surprise", which is the only factor that makes a market to spring and act like a cat on fire.
One of the ways of making sense of this all, is to buy and hold. Buying and selling or just selling your current holding could give your portfolio unwanted losses. Its best to keep your investments simple. The more your complicate your view, the more foggy the results will seem pushing you to make decisions that may not be in your best interests.
Now that the basic theory is out lets talk fundamentals. US markets, may that be S&P 500, NASDAQ or Dow Jones are expecting a negative day tomorrow, because of the excessive fog that is set in the minds of investors. But very few of us are looking through a wider lens, which is that 76% of S&P 500 stocks beat analysts' expectations in Q2. All sectors have grown and the P/E ratios look very attractive for most stocks. That means that fundamentals of the companies themselves have not diminished, only some of our mind sets have.
As for Indian companies that do regular business with these American firms, as far as profit is concerned, it is safe to say that they will get paid for their services/products. The only cause of concern would be the exchange rate which you can look at at your own. So selling a stock of a company just because the market is going down could be the wrong decision.
What's the point of all this? Don't sell just because others are, in fact see if it is a buying opportunity. Make rational decisions not impulsive ones. Most importantly, don't get emotional about the stock(s), it is not your baby, it is for your baby!

P-Notes shakes Indian Markets...but is that wrong?

Also known as Participatory Notes, P-notes by their nature are opaque to Indian regulatory bodies. This was an investment instrument which was favored by foreign institutional investors (FIIs) due to this very nature. There was a lot less scrutiny on where the funds were coming from and who the real investor was. P-notes are a cousin of exchange traded funds (ETFs) which also do not make it easy for regulators to know who is invested into it and what the source of funds are. The brokerage houses did not need to know much details on the source of funds. It was also used by high networth individuals (HNIs) who were evading taxes in their home countries such as US, Canada, UK and the like.

Most of the institutions that were issuing these securities are registered in tax havens. The large players in this trade include Goldman Sachs, Morgan Stanley, CLSA, Citigroup and Merrill Lynch.

So what happened, why are these P-notes starting to hit the Indian markets you ask?
The answer is that now the regulatory bodies are starting to question the source of funds and the investors' motivations.

Since now the Indian regulators see that they don`t need P-notes to upsell India to the world, they are now getting stricter. So much so that in 2007 the Securities Exchange Board of India (SEBI) banned any further issuance of this opaque investment vehicle.

One would have to think that the sell-out that the market is experiencing now, in early 2011 is inevitable. One way of looking at this sell out that has caused the SENSEX - Indian 30-stock sensitive index - to fall the most in last 5 months, could be profit booking.

So in essence even though the markets have tumbled a bit in early January of 2011, the thought that it would continue does not hold much fundamental value. If a certain type of investment vehicle is no longer issued, it means that now new money is coming in the economy through this. The only side to securities that are not longer welcome, is down side.

This could be a good time for savvy investors to start to buy in since the blue chips would have lost some value in this "limited" blood-bath.

Who or What led the financial crisis?

There seems to be a lot of finger pointing at those who are perceived to have let us down, especially those of us who are financial professionals. Most recently Goldman Sachs was on the hot seat where there was a lot of finger pointing by the Obama administration towards the so called "greedy bankers". It seems that the people on main street are following the news and media in forming their own beliefs without actually understanding what's at the heart of the issue. The media has failed to pick up on a few missing links, and the investment banking professionals have not bothered talking about it. Its imperative to know about the missing links to understand what went wrong and who or what led to the financial crisis. It seems that every Tom, Dick and Harry has gotten a license to talk down the large corporations while holding their own esteems high up in cloud 9.

Whenever there is a systemic failure, it is given that there is more than one factor at play, which unfortunately people are just not realizing. It seems that people find it easier to blame one large corporation without knowing any facts. I am referring to Goldman Sachs ofcourse. Ever since the Obama administration has attacked Goldman for betting against their own clients, the common person is up in arms about the firm and relieving part of his/her anger; now that their ignorance has found the Socrates of the 21st century. There are also allegations that even in this dismal economy, Goldman along with its other competitors on Wall St. are paying hefty bonuses to their employees.

Lets first take a look at the recent events of Securities Exchange Commission (SEC) which has pointed fingers at Goldman Sachs (GS&Co.) regarding the ABACUS 2007-AC1 transaction. It was a package that contained toxic assets. The structured product was selected by ACA Management LLC (ACA) whose expertise is in analyzing credit risk. ABACUS was the name given to the marketing materials. Basically the product was a synthetic CDO - Collateralized Debt Obligation. In layman's terms, it had bad mortgages packaged into a financial instument. Now at the time of sale, Goldman knew that the assets were not of the highest quality and they also knew that they were not dealing with an amature person on main street - afterall, they were selling the product to a firm that is an expert at analyzing credit risk, which would imply that they were aware of the market conditions and of factors that would make a mortgage product good or bad.

After the product lost its value, ACA Managemetn LLC, acted as if it was a puppy who was pushed around by a large greyhound and therefore got bruised at many places. That is like saying, that if a customer walks in a convenience store, asks for rat poision and buys a bottle of rat poision, goes home eats the contents of the bottle, gets sick, and then comes back to sue the store for selling the customer rat poision. It makes absolutey no sense. The fact whether Goldman was also dealing with Paulson (Hedge Fund) and taking the exact opposite side of the CDO's that were sold to ACA Management LLC, changes absolutely nothing. ACA had already done their due diligence. After their team was sure what side of the market they wanted to go long on (the side of the market that they felt will make them money), they went ahead and bought the structured product from Goldman.

The SEC, in this regard, should sue every person selling and buying stocks on the NYSE, DowJones, S&P500 and the like. People who think they will make money by buying a stock 'XYZ' will buy it and simultaneously, there will be someone else in the market who might think that the stock 'XYZ' might go down in value in the near future will sell it. That's how the markets work. Someone has to sell or bet in the opposite direction for someone to buy the same product.

Now coming to the point of hefty bonuses, its a common concensus that the bail out funds given to these large banking institutions are being used to pay the large bonuses. This notion could not be farther from the truth. In reality what has happened is that competition has been reduced significantly. Lehman Brothers, Bear Stearns, Merrill Lynch (now owned by Bank of America) and the like have closed down. All the clients that were earlier with these and other mid sized firms which have closed down as well have all concentrated with the firms that are left standing. What this has done is expanded the remaining firms in the financial industry by engulfing massive sized accounts. As everyone already knows, the larger your customer base is with lesser competition, the larger are your revenues, since there are less price wars. So this soaring number of new clientele quarter over quarter, has in effect caused the bonus figures to balloon.

Now lets look at the who is really responsible for this meld down. EVERYONE! Americans have had one of the lowest savings rate in the world. Who is to blame for that? Not taxes! Rather the spending habits and the impulsive shoppers that fill the malls all over America. Shoppers who don't have cash, and therefore use credit cards for buying the latest fad. Media is quick to blame the banks for giving mortgages to those who could barely afford it. However, is it also not the consumer's responsibility to give themselves a reality check - Can I afford this monthly mortgage payment with my income?

Moreover, in 1993, a key piece of regulation that effectively separated depository banks from investment banks, was repealed which was known as the Glass-Steagall Act of 1933. What this led to was absolutely no specific piece of legislation that was to look over the investment banks. So on one hand, congress removed the most significant piece of legislation, that helped regulate investment banks, and on the other hand, most recently the senetors had the audacity to compare investment banking to the gambling business.

The financial industry does not support the idea of patents, so the only way to keep competitors from copying one investment bank's products are to designed their products with the mind set that others cannot copy the product fast enough and in the mean time the original idea can make money for the bank. In order to achive this feat, it is imperative that the products designed are highly complicated. Just because the US senators are not able to understand the complex structured products, does not mean that the product is mimicking the casino business. If there is a disconnect with the understanding of a financial product, it would be in the Senators' best interest to learn about finance so they can better undestand for themselves and can then pass on the message in a more informed manner to their constituents.

In all this, its not to say that the investment banks were merely bystanders in this crisis; after all they are the ones right in the middle of this 'mess'. There are some bad apples in the industry, but that's not to say that investment banks themselves are bad. When put under proper regulation, while bankers and consumers both are acting on not just bottom line but also on ethical standards, it is these firms that can bring back the halo to New York city, where it deserves to be.

The Hype about Indian markets being overvalued!

For the past few days, western media has been bombarding the issue of Indian stocks being over valued. They sometimes even go as far as suggesting that the emerging nations are just as poor at they were back in the day when the term BRIC was coined by Jim O'Neill of Goldman Sachs. Its hard to understand the logic of such suggestions by he large media houses. The very suggestion that India is exactly at the same level of poverty as it was earlier in the decade could not be much farther from the truth. From the skyline of large metropolitan cities of India to the tech-savy villagers who are now connected to the world of commodities' trading speaks volumes about the development in India.

India's growth unlike some other parts of the world is to a greater degree organic. Therefore, its not artificial growth. For example, China's growth in 2009 was to a large extent artificial because most of the cash in the economy was injected by the government of China to keep the otherwise dead economy in the region going. In other words China had opened the gates of government spending to inflate its year end GDP growth number. However, India's growth was mostly because of growth in India's private sectors. Indian based firms are now being welcomed by governments of other nations to set up shops in their respective countries in the hope of decreasing unemployment in their respective nations. For example, several USA state governments are trying to bag Indian firms to set up offices in USA in the hopes of creating jobs in those states.

As for the poverty in India, one can look at the figures from Statistics Board in India and see that literacy has cumulatively gone up, average income has gone up, human rights awareness has gone up, infrastructure has certainly increased and capital markets in India are the most mature in all of Asia - BSE is Asia's oldest stock exchange. However, there are still many fund managers who believe that there is not much past information on BSE's indices, because they themselves have not done their own research and for the most part are only following a bias opinion.

On average there are improvements which are mostly centric to the large cities of India, one must not forget that there is a trickle down effect which can be seen in teir-2 and tier-3 cities all the way down to the small villages (as indicated above) of India where farmers communicate using their Blackberrys.

Now lets look at the valuation debate. One article suggested that Tata Motors was trading at a P/E of 27 whereas China's largest automobile producer is only at P/E of 23. It further went on to say that Mumbai's SENSEX was valued at 20x, Shanghai Composite Index was valued at 18x and S&P 500 of US at 14x. And the article suggested that because SENSEX is valued at much higher multiple, that it is a "bad thing". One must remind these so called "financial reporters" as to why investors even use the P/E ratio. The P/E ratio tells the relationship of a stock price to the earnings per stock for that specific company. P/E of one company would be higher than other only if investors forsee an increase in earnings of that specific stock in comparison to its peers. With this reasoning, if SENSEX has a higher multiple than S&P 500 of US, then that would logically mean that investors forsee India's 30-stock index to do better than America's top 500 companies' index.

(Whenever one reads articles published in a commericial magazine or newspaper, its imperative to read between the lines - that should be the Thought of the Day!)

Global Financial Crisis - A win win situation for India

A win win situation:

Essentially there is no negative side to the global financial crisisfor India. One of India's largest expense is energy - oil, naturalgas. 70% of its energy is being imported. With the financialcrisis, these commodities that India is always in a dire need of, are trading at 26% of their original prices. That's a savings of 74% putting a significantly lower pressure on the Current Accountof India for FY09.

Inflation, another huge factor that was putting pressure on the economically weaker Indians is now decreasing at a fast pace. The current inflation has dropped from a range of 7%-8% to 2%-3%. India'sproductivity is still increasing, jobs are being created in most sectors adding to the GDP figures. The reason for that is simple, India has a good mix of state owned corporations and priviately owned corporations which are competing with each other in the domestic market.

An example of this is State Bank of India, which as the name suggests is a state owned bank, is competing with private banks such as ICICI. This is causing Indian banking system to become more efficient than its foreign couterparts. Infact some foreign banks such as those from Canada, will need 10 years to reach the same level of efficiency as Indian banks.

Surprisingly in the IT outsourcing sector, companies such asInfosys are looking to hire more graduates this year to higher meet demand. Other IT majors such as Tata Consulting Services (TCS) are baggingnew deals in this environment where their biggest selling point islowering costs in a market slowdown. So IT outsourcing is even hotter now than it was in the past years for Indian IT firms. To top the desert with cherry, Indian Rupee has now become cheaper for most developed nations making outsourcing to India even more tempting.

Moreover, there is a significant increase in capital investment in Indiaby Indian firms such as Tata Motors, Mahindra & Mahindra, Hindustan Aeronautics Ltd (HAL) to mention a few who are foraying in developingnew vehicles for consumers and defense needs of India. This meansthat within a few years when the development of these forays has reached its potential, India will be less dependent on foreign hardware technologies inadvertently increasing its Current Accountat a even higher level in terms of percentage with other developed nations.

Then why is the market sluggish? Harshad Mehta once said "...stock market is a by-product of the human mind..." What Harshad Mehta was trying to say in this statement was that its not just the intrinsic value of a firm that markets look at, rather market participants bring in their own perceptions. Its these perceptions that become a key factor in the valuation process of a specific investment decision and cumulatively these perceptions make or break a market.

There was meant to be a correction, and that to a major correction globally. However, the correction went over board especially when short sellers started to put downward pressure on financial stocks globally. Currently there are many firms that are trading below their book values due to this over correction.

India's capactiy for productivity has not been affected either in terms of its capital - physical or human. India still is able to grow faster than most developed and developing economies. All of these elements point towards one fact - India is going to come out of this so called "global crisis" as a winner.

Vanmeet Talwar

(These are purely my opinions based on my research on the topic, if you are looking to invest in India please consult with your broker and do not use this as your basis for investing in India. I do not take any responsibility for the performance of your investments)