Here's a snapshot of how to estimate a risk free rate for India:
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Why net depreciation from capex for computing reinvestment rate
We recently came across a question on Quora about why Prof. Damodaran subtracts “depreciation from capex when computing the reinvestment rate of a business.” It further goes on to state the following: "In his book, [Prof. Damodaran] seems to argue that depreciation is a cash inflow that pays for a part of capex, but I don't … Continue reading Why net depreciation from capex for computing reinvestment rate
Demonetization Blues: Mutual Fund Performance during the latest Correction
What had been a fairly decent year for the equity markets till September 2016 was marred by demonetization in the last two months of the year. The markets gave up most of the gains and ended up marginally positive for the year. Nifty 500 (the index which we feel represents the broader Indian market) reached … Continue reading Demonetization Blues: Mutual Fund Performance during the latest Correction
The Best and Worst of Mutual Funds in 2016
At Capital Surge, we actively track about 50 equity mutual fund schemes by various AMCs. These funds have been shortlisted based on their ratings on Morningstar. Below, we provide a review of the best and worst of mutual fund schemes in 2016. A word of caution – this summary is purely based on the schemes' … Continue reading The Best and Worst of Mutual Funds in 2016
Long term vs. short term investors – a correct distinction?
On 14 October, Samir Arora, founder of Helios Capital, posed the following question on his twitter account: It was a nice way of highlighting the apparent contradiction that a lot of market commentators fall into when categorising investors as short term and long term. In our view, there are simply investors on the one hand … Continue reading Long term vs. short term investors – a correct distinction?
Putting numbers to the Welspun scandal
Welspun India has been marred in a controversy over supply of fake Egyptian cotton to its US customers like Target and Walmart. Given this controversy, investors are running away from the company using adages such as 'there is never just one cockroach in the closet'. Investors using such adages as crutches without considering the monetary … Continue reading Putting numbers to the Welspun scandal
The Biggest Problem with Price-to-Sales Ratio
The problem of inconsistency and how it can lead to erroneous conclusions... Ratios (or multiples) are a popular tool that many analysts employ to identify cheap stocks. Similar ratios (such as a Price-to-Earnings, Price-to-Sales, etc.) are compared across firms and a company with a lower multiple is considered cheap relative to one that has a … Continue reading The Biggest Problem with Price-to-Sales Ratio
Estimating an Equity Risk Premium for India
Note: The concept of implied equity risk premium has been developed by Prof. Aswath Damodaran. In this article, we apply his methods to determine an implied equity risk premium for India. One of the most popular ways of valuing a company is to do a discounted cash flow valuation. According to this method, the value … Continue reading Estimating an Equity Risk Premium for India
Demystifying Internal Rate of Return
And why firms use it as a measure of investment performance... Note: The concepts discussed in this article are meant for those who have studied finance at some point If you've studied finance at any point in your life, you would have come across the concept of Internal Rate of Return ("IRR") - the rate at which … Continue reading Demystifying Internal Rate of Return
How we earned 16.50% p.a. in a fixed income investment
In November 2013, we made a case for investing in the 20-year tax free bonds of Housing and Urban Development Corporation ("HUDCO") which paid a tax free interest of 9.01% to retail investors. Just to recap, our reasons for recommending the same included the following: Tax-free rate of 9.01% was much better than the after-tax … Continue reading How we earned 16.50% p.a. in a fixed income investment