Indian equity markets have grown at a rapid pace over the past 2-3 years. Domestic flows have gone up several fold over this time frame as the new generation is finally waking up to capital markets as a viable end for their savings. This shift in the asset allocation from banking system, real estate and gold towards financial assets such as stocks, insurance etc has meant that equity markets have seen strong flows. This liquidity flow coupled with rising stock prices has meant that suddenly fund managers are saddled with lots of money and expensive valuations. This has led to a peculiar problem for modern fund managers in India, how to deploy this large pool of money that is coming in and where to find new ideas from. Further the number of investible companies have been growing steadily, fueled by number of IPOs and growing small-cap/mid-cap companies that are now making the cut.
Udit Garg
Published on 12/03/2017 12:00 AM
In a previous post we talked about our handmade(!) financial models. But just because we have put in the effort to create these models, doesn’t mean we stop there. To our mind the models are only the starting point. We are building a large set of tools that will help users to make better sense of the data by Comparing it across dimensions such as companies, users, time, industries, geographies and more, Valuing it better using not only standard benchmarks, but also custom made ones, Estimates of market expectations at overall as well as granular level (think – volume growth expectations). Better trend analysis of expectations and actual performance – both markets and own … and as our product matures, there will be a lot more.
Published on 13/01/2017 12:00 AM
Continuing from our previous post on Financial models… In this post we talk about the other two components of Financial models. The reason we have separated these posts is to differentiate the “Science” from the “Art”. We believe that Historical data and the Business Model represent the science of investing. They are quantifiable and objective in nature. Whereas the Assumptions for future drivers and valuations are more of Art. Future assumptions are always subjective in nature and can be debatable – perception for the future outlook of businesses can vary between investors, management and other stakeholders. Similarly valuation is a fluidic topic and is a subject of great debate and argument between investors.
Despite this we have only models for less than 20% of the listed companies in India. There are still many industries that are not covered even now and even many companies in the sectors that we have solved. This just goes on to show how large and vast the Indian equity markets are. Every few months new IPOs of very interesting companies come up. We are making it a habit of putting out models for IPO companies before the IPO – to allow investors to make their own unbiased decisions (after all one has to invest looking in mind the future and not the past performance as given in the prospectus). – This means the task is only getting tougher and bigger for us. But spare a thought for investors, who need to know, remember and process this ever increasing information pool.
DistrictD is about fostering and developing upon new ideas and thoughts and then debating on them. As such the investor community has always been a chatty lot, any information or idea travels through the community like wildfire. Qualitative information, snippets, management talks etc play an important role in defining how the markets behave and what is being bought or sold. However the underlying key aspect that eventually drives everything in markets are HARD NUMBERS.
Financial models are tools used by analysts to estimate the future financial performance of any financial asset – be it equities, bonds, or complex derivatives and securities. Just like in fashion industry where a model is used to show the look of a fashion garment and value it, in finance, they are used to see how the cash flows of the asset will look like and then value them. In essence a financial model shows the analyst the future cash flows/profits etc of any financial asset.
