The world economy is back on a growth track. The recovery in world markets is being fuelled not only by growth in developed countries. The economies of important developing countries are surging as well.
As part of my ongoing series about growing industries in my home country of India, I offer the following analysis of the Indian picture tube market.
About a decade ago, it was rare for an Indian household to own a television. TV sets were just too expensive for the average family.
After India's economy liberalised, however, consumer electronics manufacturers sought chances to tap India's mass market. These players realised they needed to make it easy for Indians to own TVs and that is exactly what they did.
Multinational companies (MNCs) reduced the prices of their products and made TVs, formerly a luxury, into something much more affordable.
India soon had a huge domestic market for TVs. Total TV sales in 2003-04 were estimated at about 8.9 million sets compared to 7.8 million in 2002-03. Total market demand for TVs should be about 13 million sets a year by 2006-07.
This growth in the TV market resulted in growth in demand for picture tubes.
Picture tubes are used all over the world in both computers and TVs. In India, television manufacturers mainly use domestically produced picture tubes.
The introduction of satellite TV channels helped propel much of the growth in India's demand for TVs. With quality content available, the demand for TVs went up, as did the demand for picture tubes.
The industry at present has a capacity of about 11 million picture tubes versus demand for about 8.9 million tubes.
In this industry, cost is the most crucial factor in determining whether a manufacturer will succeed or fail. In order to minimise costs, manufacturers overbuild their capacity to produce, in order to take advantage of economies of scale.
Indian companies typically produce picture tubes in sizes of 14, 15 and 21 inches.
Twenty-one inch tubes are in particularly high demand these days. It's believed that the Indian market will soon demand large numbers of 29 inch TVs in coming years.
In order to meet the anticipated demand, Indian companies are expanding their production capacity.
This industry is a capital-intensive one, with a high rate of consolidation. The big fishes are eating up the smaller fishes. This means the industry should be able to extend the gains it has realised through economies of scale.
Currently, the main players are Samtel, Hotline, JCT and BPL. Samtel is the largest of the group.
This industry is expected to grow at a rate of 15-20 per cent in the next few years. Wise investors will keep an eye on this sector.
It seems nothing can stop the Indian markets from setting new record highs.
The Indian markets closed last week at 6,498, gaining about 2.4 per cent during the week.
Banking stocks were the darling of the markets this month. The proposed merger of Bank of India and Union Bank of India set the ball rolling for this sector. Stocks here saw gain of 4-5 per cent.
Metal stocks too were very active last week. The record high prices of aluminum in the LSE saw the metal sector going up. Stocks here gained in the region of 5-6 per cent.
Oil and gas sector stocks too saw gains this week of 4-5 per cent. These stocks gained on news of a major government policy change.
The fact crude prices stopped their northward journey also stimulated interest in this sector.
Auto stocks too saw some good gains during the week, with stocks here gaining about 4-5 per cent.
Other sectors such as pharma, IT and FMCG stocks saw a mixed trend during the week.
The coming week is going to see some subdued activity, due to both Christmas and the new year.
Last week saw the release of inflation figures for the week ending December 11. Inflation stood at 6.73 per cent, compared to last week's figure of 7.02 per cent.
This is a big positive for the markets as inflation was a matter of concern
The market should see some record highs in the coming week, but it will be more or less range bound and trade between 6,300-6,650.
The writer heads the Dubai office of Karvy Stock Broking Ltd
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