Saturday, September 17, 2005


Apples and oranges

A CPI MP, Gurudas Das Gupta, has demanded a probe into the stock market rally.

"What gives rise to serious suspicion is that while the price earning ratio for a firm like ONGC is 9 to 10 and SAIL is 3.6 to 4, the price earning ratio for Dr Reddy's Laboratory is 67 and for Bharati Televentures it is above 122."

Perhaps some one needs to remind him that one of the main reasons why ONGC and SAIL are undervalued is because they are PSUs. The market will give PSUs higher PE multiples if they are disinvested. And the Left doesn't want that. So why complain about lower valuations.

Second, comparing a SAIL and Bharti is like comparing apples and oranges. SAIL is a PSU, a commodity stock and its business is cyclical in nature. Stock markets always give lower valuations to such stocks. May be Bharti is overvalued. But stock markets discount the future. And Bharati is at the vanguard of a telecom revolution sweeping the country. So, I am not really surprised by the difference in valuations.

I personally own SAIL and not Bharti, which I wouldn't buy at present valuations.

Comments: Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?