Nifty 12 year Analysis

I was looking at Nifty PE ratio historically. There are amazing observations. You can easily predict how markets are going to move in near future / long term. 

If you look at the chart below, it shows 12 years Nifty values and PE ratio as reported by NSE

The chart clearly shows that there only 3 times when PE ratio have gone beyond 25. Once in Feb'2000 when it hit 28.5, Jan-2008 when it went up to 28.3 and recently in Oct'10 where in it went up to 26. If you see in all these situation Nifty peaked out and started going down. Finally PE ratio went up to 10.

NIFTY 12 years Analysis

As of today Nifty PE ratio is in the range of sub-20. That means market is still overheated. Ideally it should be somewhere between 15-20. If thats true, markets are going to correct by another 20%. That will be the time when you can really buy any stock and will give you decent returns.

If you have lot of money to be invested in stock market for long term, please note that market may correct by another 15-20% in near term based on issues like Greek crisis, inflation, fuel prices or any other such reason. If there is any good news in the market it can still go 25% upside very easily.

I think its better to buy in small quantities to avoid risks at this stage. You can alternatively buy selected scrips based on individual analysis. 

Shriram Transport Finance NCD at 11.6%

Shriram transport is coming up with Non-convertible Debentures with 11%+ interest rate. They are collecting Rs 500 Cr and additional Rs 500 Cr ( if required) for 3 years or 5 years.

Why its to good to go for ?

1. They offer annual 11.6% interest. No banks are offering this high interest 
2. Its for 5 years !!! other banks are offering about 10% for about 2 years
3. Its in de-mat form
4. You can sell it if you want money anytime thru broker. They will trade on NSE. In Banks you will loose a percent 
5.  They dont deduct TDS on it ( although its taxable !!! ) 
6. CRISIL rating of AA. Its High Safety ( http://www.crisil.com/ratings/credit-rating-scale.html) 
7. Shriram Transport Finance company (STFC) is extremely good in position. Many banks in fact loan to STFC because they cant get into the business that STFC is in. They loan to truck owners 
8. Its profit grew from 190 Cr to 1229 Cr in just 5 years. It has to be in good position

Only thing you got to remember is, its first come first serve. Normally this kind of good NCD issues get absorbed within a day. If you want details - 

1. NCD form directly from STFC site - NCD download

2. Details of Prospectus - STFC - Investors

Count Dividend or not ?

Normally people talk about appreciation of the stock in share market. Normally no one counts dividends. Here are some stock where their current year dividend ROI is fabulous. When checking the performance do check the dividend how they increase the dividend.

Type of Stock	Name	Price in Rs. 10 years ago*	Current Year Dividend in Rs.	Dividend ROI for this year	YOY Price Appreciation
Mid cap	Blue Star	18	7	39%	38%
Mid cap	Savita Oil	45	20	44%	32%
Small Cap	GIC Housing	15	5.5	37%	24%
Large Cap	HDFC	45	9	20%	35%
Large Cap	ONGC	20	32	160%	33%
Large Cap	M&M	41	11.5	28%	36%

* Adjusted to bonus/ splits etc.

Their dividend is more than any fixed deposit in the world. The YOY appreciation is also given which doesn’t count any dividends. Also the markets are not at its best toady. Do your own calculation on how much total return would be in 10 years. 

Kansai Nerolac

Just last week I received Kansai  Nerolac's Annual Report. I was impressed while I was going thru it. Lately I havent written on any particular company. I thought this one will be a good one.

This company exists in paint segment for almost 90 years. 70% of the shares are held by Kansai of Japan. Its second largest company in paints after Asian Paints in India. Renowned personalities like Dr. J.J. Irani and Noel Tata are part of the board of directors while J.J. Irani being the chairman of the company

Company has 74 sales locations  with 5 plants from spread across India. While company has grown up by 26% it expects the home paint industry to grow by 22% in India because of urbanization. Besides home paints, company is well positioned in auto segment. They are partners with big names in auto industry. Lately they have implemented  Business and IT Transformation using SAP across the board and management expects to see benefits in coming years.

The company closed the year with Rs 2493 Cr. with 206 Cr in net profit. The company declared Rs 10 dividend post bonus. (It gave bonus1:1  last year) Profits have increased more than 2 fold in last 2 years (100% in 2 years) 4 fold in 7 years.

With such a high growth rates and now implementation of new IT strategy, company is bound to grow more. There may be a slight dent on growth because of slowing down of auto segment but in long run, company will grow by leaps and bounds. Currently shares are priced at Rs 870/- with PE of 26. Compare market leaders like Asian Paints at PE of 37. If one has to compare Asian Paints and Nerolac, it has a room to grow by atleast 30% if not more. The growth in the segment will add separately.

Again compared to Asian Paints Nerolac is more investor friendly. They have issued bonus shares twice in last 6 years. Dividend yield of 1.2 on post bonus isnt bad. It should give decent returns in 3-4 years.