Billionaire investor George Soros claims that the China crisis is as bad as the 2008 global financial meltdown and this is just the tip of the iceberg. Global markets around the world have started the New Year on a worst weekly start in a decade and there is every reason for Indian investors to prepare themselves for more volatility and uncertainty. The Indian stock market index BSE Sensex fell by nearly 1,200 points in three straight trading sessions following the global turmoil driven by China post its currency yuan devaluation. Traders were also struck by fear and panic following multi year low crude oil prices, start of a currency war and other geo-political tensions. While India has been performing better than Hang Sang, Nikkei, FTSE, DAX among others, predictions by most analysts and fund managers are flying in thick and fast that India will perform better than compatriot emerging markets in the long run. In the medium term, India’s stock market is overvalued with a high P/E and is definitely not sustainable. The other principal reason for markets to go down is outflow by foreign institutional investors including sovereign wealth funds. The latter, particularly from the Middle East, could sell their holdings in Indian blue chip companies. It looks like 2016 is going to be dominated by currency volatility, movement of crude oil prices, investment or disinvestment by foreign institutional investors and macro economic data.
Bayer CropSciences India Ltd was incorporated in 1958 in Mumbai and is part of Bayer AG Germany and a true multinational company. Bayer CS has an extremely light asset business model as it does not own any manufacturing facility in the country but outsources most of its products from vendors. Based on present valuations, Bayer CS looks fairly valued as short term outlook is subdued on the back of low farmer income, commodity prices and reservoir levels. Scanty rainfall in the country has also put pressure on margins. However, the long-term growth prospects of the industry and of the company is positive, anchored by its comprehensive distribution network, branded portfolio, launch of innovative products and parent Bayer AG research and development muscle. Return of capital to shareholders or buyback offer in October 2015 elicited a good response with 12,65,000 shares of Rs10 face value were bought back at a price of Rs 4,000 per equity share. The total amount utilised in the buyback offer is Rs 506 crore. Currently the Bayer CS stock is quoting at Rs 3,330 on the Indian bourses and can easily give a 30% price appreciation in the next one year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.