The Saga of Corruption And Misgovernance in India
We have been massively bearish on the Indian stock markets for a long time now citing the huge mis-governance and corruption that afflicts the entire economy. During the credit fueled boom in the early 2000s, these problems got shoved down the carpet, leading to high valuations to groups with huge governance issues. But now as the economy tanks and the currency melts, these issues have come to the fore. Some of India’s biggest business groups have seen their company stock prices crash more than 80-90% from their peak values. They are currently trading at below book values and still there are no buyers. Except for the IT and pharma companies, the whole economy is in a really bad state. The huge debt undertaken for expansion is like a big lead weight pulling the stock prices down.
Indian Stock Market Crashing
The Adanis, ADAG, Videocon, Essar and other big business conglomerates have seen their value imploding. The less said about the mid cap and small companies the better. They have heavily under performed their large cap index peers and are still seeing outflows. The smaller companies in India are even worse off in governance than the large cap companies.
The main problem with the stocks is that no one trusts the numbers that these companies publish. Even the big fund managers have no trust in the financial statements issued by the companies. Insider trading is rampant in India and no one cares a hoot about the law. All SEBI, the regulator has done till now is to impose small fines on some of the large groups such as Reliance. Promoters of companies are more interested in pillaging the companies of assets rather than creating value. Minority shareholders are made to look like fools in most case as Indian auditors are mostly a joke.
Good Time to Buy
The silver lining of all this is that most stocks are available at dirt cheap valuations and even the better run companies are trading at depressed prices. If you can do the due diligence you can now buy stocks at really great prices which would give you great return in the medium term.