Right time to invest in stocks

The recent carnage in the stock market has seen major indices losing more than half their peak values. By the first week of November ’08, the Sensex had fallen by 52.3% from its peak of 21,206.8 in early January ’08. The Nifty lost nearly 53% during the same period. While investors are concerned about the future performance of the stock market, they appear to be less familiar about an interesting fact. The market crash has resulted in stock prices falling below the book value of companies in most cases.

Book value represents the value of a company’s assets net of its liabilities. In other words, it tells what you will be left with, if the company were to shut down, its assets sold and liabilities paid off.

So, logically, a company that is a viable profit-making business will always be worth more than its book value due to its ability to generate earnings and growth. Hence, shares trading below their book value are a sure sign of gross under-valuation and indicate low risk for investors.

An analysis of BSE 500 stocks reveals that one out of every three stocks is currently trading below its book value. A sample of 479 companies with latest book value information was selected for the study from the 500 companies that comprise the BSE 500 index. The stock prices of these companies were then divided by their respective book values to arrive at the price-book value ratio (P/BV).

According to the study, as many as 170 companies reported stock prices lower than their book values. Interestingly, on January 21, ’08, the day when the market temporarily halted trading due to massive losses, only 26 companies out of the sample set were trading below their book values.

The study also revealed that as on November 3, ’08, nine out of 10 companies were trading at P/BV multiples which were lower than their value on January 21, ’08. Real estate companies dominated the list of companies that saw erosion in their book values during the said period. Among the top 10 such companies, five were from the realty sector.

There are two reasons for this erosion in P/BV. Not only have stock prices of companies fallen sharply, but in many cases, the book value has also increased. Every four out of five companies reported a jump in book value between January ’08 (BV in FY07) and November ’08 (BV in FY08). Investors can use the information on P/BV multiple as one of the decisive indicators while taking investment decisions in a falling market.

A P/BV multiple of less than one reflects lower risk for investors in case the company faces bankruptcy. Further, talking about stock recommendations by ETIG, some stocks have seen a considerable decline in their current P/BV compared to that on January 21, ’08.

Aban Offshore, Allied Digital Services, Bank of India, Adhunik Metaliks and Jain Irrigation are some of our recommendations that have seen a drop in their P/BV multiples, which are now between one and three. Moreover, India Glycols and Ratnamani Metals & Tubes are currently trading at P/BV of less than one.

Political aspirations of Indian diaspora rise with Obama win

Democrat Barack Obama's election as the first African American president of the US has ignited hope among Americans of Indian origin who dream of either pursuing political careers or having members of the diaspora represent them in the political arena.

"The election of Obama is encouragement for any American Indian. It shows us that anything is possible. I hope it motivates American Indians to run for elected offices. In fact, it has encouraged me to think of running again," American entrepreneur of Indian origin Chiranjeev Singh Kathuria told IANS on telephone from Chicago.

A physician from Brown's University (Rhode Island) and MBA from Stanford (California), Kathuria made an unsuccessful bid to be a Republican candidate against Obama from Illinois. However, he hailed Obama's victory as "path breaking for second generation immigrants".

"I hope in my old age, before I die, I get to see an Indian American elected as president. It was very enriching, exciting and, at times, a trying experience to run for the US senate. It will be an experience I will always remember," said Kathuria.

Rajwant Singh, national president of the Sikh Council on Religion and Education (SCORE), said: "Obama's election represents dynamic America at ease with its diversity.

"We Sikhs are proud of this nation, and this election brings new hope to 500,000 Sikhs who have been here for the last 100 years. This victory will certainly inspire many Sikh Americans to aspire for the highest office in this country and will not deter them due to their appearance," he added.

While Obama's victory has given a boost to the political aspirations of many immigrants, for minority communities such as the Sikhs, who have been victims of hate crimes post 9/11 because some Americans have mistaken them for Arab Muslims, the victory is a definite sign of change.

Jasbir Singh Kang of the Punjabi American Heritage Society from Yuba City said: "This is a historic day for all Americans. A son of an immigrant has become president-elect. This can only happen in a great country like America.

"This is a great cultural and a historical shift in American politics, and we Sikhs look forward to working with President Obama," said Satinder Singh Rekhi, CEO of a company in California's Sacramento city and chairman of SCORE's board.