Friday, June 02, 2006

Wierdness of India Stock Markets

There has been silence on PGSEM blog front so I decided to toss one of the things that is bothoring me for quite some time now to fellow PGSEM students and alumni. Let's see if there is a rational and reasonable answer that comes out from them. I just don't get the point of Indian Stock Markets. I am not making a general rant but I am looking at specific instances. Take the following example.

As of today evening, following is some of the data with respect to certain stocks in Banking sector.

  • ICICI Bank, P/E = 18.82, EPS(2006) = 32.15, EPS(2007)expected = 35.55, EPS(2008)expected = 46.25. Now from this data I can understand that market expects 10% growth in profits in 2007 with respect to 2006 and 43% growth in 2008 with respect to 2006
  • State Bank, P/E = 9.78, EPS(2006) = 81.79, EPS(2007)expected = 86.61, EPS(2008)expected = 96.25. Now from this data I can understand that market expects 5% growth in profits in 2007 with respect to 2006 and 17% growth in 2008 with respect to 2006
  • Corporation Bank, P/E = 9.69, EPS(2006) = 30.99, EPS(2007)expected = 36.77, EPS(2008)expected = 40.98. Now from this data I can understand that market expects 18.65% growth in profits in 2007 with respect to 2006 and 32% growth in 2008 with respect to 2006
After looking at these numbers, I am really confused. Can somebody (who is not really numerically challenged) explain to me why state bank and corporation and stuck at P/E of less than 10 while ICICI bank can command a P/E of 18.

5 comments:

Anonymous said...

i read ur article. u ask about the p/e ratio. i am 59 years old. in my days we reckon price of stock by book value. if price is more thean 3 fold we not purchase the stock. those days. p/e itself base on prise. calculate prise without price factor, book value, constant divident paying, bonus due year. etc. new generation too advanced. rather u ask u can give judegment on pricing of indian stock. ask ur friends. whenever u update ur blog please let me know.

moreover i ask u friday rally is end of down fall?

zain571948@yahoo.co.in

TH Williams said...

ICICI Bank is listed on both the Bombay Stock Exchange (532174) and the NYSE (IBN). IBN currently shows a P/E of 53.

I have studied firms listed on the BSE for many years. I have visited India (6X) and carefully studied the operations of more than a few Indian enterprises. Videsh Sanchar Nigam (VSL), Tata, WiPro and ICICI Bank are all examples of firms rapidly going global while also expanding into all corners of the Indian landscape. In most cases they are beating inefficient state-run firms at their own games. Bank of India service is said to be too conservative while ICICI Bank makes small loans to villagers, for example

Non-Resident Indians (NRI) and large insititutional investors cause most of the wide swings on the BSE, without carefully looking at any fundamentals. Long term growth is assured and major US corporations continue to increase their investments in the subcontinent exponentially. It will take years for this trend to cool down.

India has a homeowner, car owner, middle class larger than the entire population of the U.S..

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

shareinfoline technical analysts keeps there eyes on this bullish Indian stock market to provide best intraday and long term share market calls daily.

Our trading tips covers NSE and BSE.

Check gainers,losers ,news, IPO ,Free tips,trading tricks and all new mutual funds.

We Provide Recommendations on Indian Shares & Commodities via SMS.

We provide intraday and long term share market calls daily with Equal Emphasising on fundamental and on technicals aspects.

Commodity tips said...

Very good post, I was really searching for this topic, as I wanted this topic to understand completely and it is also very rare in internet, that is why it was very difficult to understand.

Thank you for sharing this.

regards:

Commodity tips

x

Get Our Latest Posts Via Email - It's Free

Enter your email address:

Delivered by FeedBurner