Oiling the Markets

I received various complaints, especially from fellow IITians, regarding my mentioning IIT Delhi as the 4^th best of the IITs. This came rather as a shock to me. I thought that it was kind of well known. However, now I know that it is not and I welcome arguments from people who so not believe this. I think people would agree that IIT Bombay and IIT Kanpur are better though some may have problems with the claimed superiority of IIT Chennai.

We all have heard of the rise of the Indian stock exchanges which is refraining from stopping atleast in the near future. The BSE Sensex has crossed the Dow Jones which like a benchmark index in the US. Another important statistic not very well publicized is that the m-cap of the entire BSE 500 index pole-vaulted from Rs 15,79,802 crore as on March 31 2005 to Rs 26,56,913 crore in March 2006. At the same time, India’s GDP, which was at Rs 23,93,671 crore at factor cost for 2004-2005 is estimated to grow to Rs 25,87,558 crore assuming an 8.1% GDP growth rate for 2005-06. Considering the above figures the m-cap (BSE 500) to GDP ratio, too, has improved from 0.65 to 1.02.

So, now the money involved in the stock markets of India is greater the GDP of the country. I do not know what to infer, but as a layman I feel that the markets are atleast a little overvalued. The Price to Earnings ratio of the markets is also around 20, not a good sign at all.

Continuing with economics, these days the entire economics of a country vests on one commodity. Yes, you guessed it right, it is oil. A good place to get started on this topic would be my friend's post. The prices of oil are increasing everyday. There was a time when the prices would hover around 28$ a barrel of oil (1 barrel of oil = approx 159 litres). Now, it has not gone below 60$ for quite some time and even manages to touch 70$ once in a while.

Previously the production of oil by the major oil producing countries was conditioned in a way to keep the prices stable. These days the conditioning (read, cutting of production) is done so that the prices only go in one direction (read, up). Everyone has realized not only the importance of this commodity which is set to become more important than even water but also that it is depleting at a rate where we may have to do without it maybe tomorrow.

Though the common man is feeling the pinch with the ever escalating prices of petrol, diesel and kerosene and with the accompanying increase in the prices of all products; the pinch would be the greatest once the commodity is no longer available. Recently, I was in our car with my cousin brother on my way to a pool joint and half way down the car refused to move even a bit. Thankfully, we were not very far from our house; But that may not be the case when we utilize the last drop of the commodity assigned in our quota.