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Correspondent

23 August 2024 at 4:29:04 pm

Red Romance

For long, the Naxalite in news was recognisable by the gun. But the more insidious version of Naxalism has never needed a rifle. It has thrived in varsity classrooms and newspaper and magazine columns, fostered by men and women sympathetic to it. These academics and other members of the so-called intelligentsia have long enjoyed their status as ‘respectable dissenters’ even when their politics offered intellectual alibis for Naxals carrying guns. Prime Minister Narendra Modi’s recent...

Red Romance

For long, the Naxalite in news was recognisable by the gun. But the more insidious version of Naxalism has never needed a rifle. It has thrived in varsity classrooms and newspaper and magazine columns, fostered by men and women sympathetic to it. These academics and other members of the so-called intelligentsia have long enjoyed their status as ‘respectable dissenters’ even when their politics offered intellectual alibis for Naxals carrying guns. Prime Minister Narendra Modi’s recent Independence Day warning about “dimaagi Naxals” should therefore not be dismissed as another political label. His larger point was that an insurgency does not survive on ammunition alone. It survives on ideas and people willing to make violence appear morally fashionable. The most revealing feature of India’s Maoist movement was never simply its brutality. It was the strange attraction it exercised over sections of the metropolitan Left elite. The Naxalite with an AK-47 could be transformed into a romantic revolutionary while the policeman he killed became an instrument of an oppressive state. This was not merely naïveté. At its ugliest, it was the intellectual laundering of political violence. The fantasy of the romantic revolutionary has always been seductive. In this narrative, amplified through sympathetic media priding itself on telling ‘truth to power,’ India was not a constitutional democracy struggling with inequality and corruption but an inherently illegitimate state waiting to be overthrown. In the minds of this elite Left, Maoist violence has often been recast as resistance while attacks on infrastructure as blows against capitalism. The armed overthrow of the Indian republic was the liberation they craved for. Some of India’s most celebrated intellectuals have flirted dangerously close to that moral inversion. The issue here is whether intellectual prestige can be used to sanitise an ideology whose practitioners have murdered civilians, policemen and public servants and terrorised some of India’s poorest districts. A university cannot be the place where Maoist romanticism acquires the legitimacy of a fashionable campus cause. Professors who turn armed insurgents into heroic revolutionaries are not merely exercising academic freedom. If they knowingly excuse violence, they are helping to construct the moral vocabulary that makes violence possible. Let’s be clear here. A professor who criticises the Indian state is not a Naxal while a journalist who exposes state excesses is not an enemy of India. But an intellectual who repeatedly excuses, glorifies or rationalises political violence cannot hide behind the word ‘dissent.’ India has paid an enormous price for the Maoist fantasy. Thousands have died. Entire regions were held back by fear while development was obstructed. The people supposedly being liberated were often the first to suffer. The armed Naxal is now being pushed towards extinction. But the Indian republic cannot afford to leave behind the romantic mythology that made the gun respectable. A democracy can tolerate dissent. It should never be expected to tolerate the glorification of those who seek its violent destruction.

Why is buying high P/E ratio stocks a risky strategy?

Updated: Oct 22, 2024

high P/E ratio stocks

The Indian stock markets have generated significant wealth for investors over the past 3-4 years. The Nifty50 index has seen a return of 48.5 per cent over this period. Similarly, the Nifty smallcap 100 and Nifty midcap 150 indices have shown impressive returns of 76.6 per cent and 96.8 per cent respectively during the same timeframe. However, some well-known stocks have underperformed the index. The primary reason for this underperformance is often attributed to their high valuation.

To begin with, let's look at the Price to Earnings (P/E) ratio, which is a key valuation metric. This ratio provides insight into how much investors are paying for each dollar of a company's earnings, with higher ratios indicating a more expensive stock. Generally, stocks with a P/E ratio below 15 are considered value stocks, those between 15 and 25 are seen as fairly valued, and those above 25 are deemed expensive. Now, let's examine the stocks in the Nifty 500 index that have significantly fallen short of the index's performance over the last three years.

high P/E ratio stocks

Out of around 500 stocks in Nifty500 index, about 25 have either seen no return or have returned very little. Prominent examples include Bata, Asian Paints, Metropolis, Star Health, Mphasis, SBI Cards, and Jubilant Foodworks, all of which had a P/E ratio above 25 in September 2021. This data suggests that investing in high P/E stocks can be a risky move, as these stocks often lag behind the overall market.

While the P/E ratio shouldn't be the sole consideration for investment, it's undeniably a crucial one. Investors should also look at other financial ratios such as Return on Equity (ROE), Return on Capital Employed (RoCE), and Debt to Equity (D/E) ratio in conjunction with the P/E ratio. Stocks that show consistent profit growth, a healthy ROE, low debt, and a reasonable P/E ratio are more

likely to generate above-average returns in the stock market.

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