EASY Ways to Invest in India

Rupee Depreciation : Reasons

2012-01-16T16:00:00.002+05:30

Navigating through Volatile Market : Gopal Agarwal, Fund Manager

2012-01-09T18:43:00.003+05:30

Click the picture below to enlarge:

Top 22 Fund Managers who Outperformed in 2011

2012-01-05T19:01:00.003+05:30

The volatility in the stock markets saw the performance of various equity diversified funds suffer in 2011. However, there were some fund managers who were able to steer their investments better, shows our analysis.

These fund managers were successful in containing losses against their respective benchmark during the year 2011. Out of the over 80 fund managers who managed equity diversified funds, the following 22 fund managers who administered a total of 47 funds between them have registered an impressive performance. These fund managers have managed to contain losses by more than 5 percent each against the benchmark.

Soumendra Nath Lahiri :
Canara Robeco Large Cap+, Canara Robeco Eq Diversified, Canara Robeco Multicap, Canara Robeco Emerging Eq, Canara Robeco F.O.R.C.E

R. Srinivasan:
SBI Magnum Emrg Businesses, SBI Magnum Global 94, SBI PSU, SBI Magnum Equity

Apoorva Shah:
DSPBR Micro-Cap, DSPBR Top 100 Equity, DSPBR Small & Mid Cap, DSPBR Equity

Anoop Bhaskar:
UTI Oppor, UTI Mid Cap, UTI Equity, UTI Master Value

Kenneth Andrade:
IDFC Premier Equity, IDFC Sterling Equity, IDFC Strategic Sector (50-50) Eq, IDFC Equity

Satish Ramanathan:
Sundaram Select Small Cap, Sundaram Select Midcap, Sundaram Equity Multiplier

Vinay Paharia:
Religare Mid Cap, Religare Mid N Small Cap

Gopal Agrawal/Neelesh Surana:
Mirae Asset Emerging BlueChip, Mirae Asset India Oppor

Prashant Kothari:
ICICI Pru Indo Asia Eq, ICICI Pru Focused Blue Chip Equity

Shreyash Devalkar:
BNP Paribas Mid Cap Fund, BNP Paribas Equity Fund

Anand Radhakrishnan:
Franklin India Prima Plus, Franklin India Bluechip

Swati Kulkarni:
UTI Top 100, UTI Mastershare

Chirag Setalvad:
HDFC Mid-Cap Oppor, HDFC Capital Builder

Sandeep Kothari:
Fidelity Equity, Fidelity India Growth

Pankaj Tibrewal/Emmanuel Elango:
Kotak Emerging Equity, Kotak Midcap

Lalit Nambiar:
UTI India LifeStyle

Huzaifa Hussain:
AIG India Equity

Neelotpal Sahai:
IDFC India GDP Growth

Paul Parampreet:
Edelweiss EDGE Top 100

Atul Kumar:
Quantum LT Equity

Source: Cafe Mutual Fund

Note: We considered those equity diversified funds that have been in existence on January 1, 2011. We then segregated these funds according to their respective fund manager and collated their year-to-date (YTD) performance as on 28 December 2011.

FII outflow in 2011 : highest among BRIC Nations

2012-01-01T11:46:00.004+05:30

Even as Foreign Institutional Investors (FIIs) have been selling across markets and pulling out money, their outflow was highest from India in 2011, compared with BRIC peers (Brazil, Russia, India and China) and other emerging markets. According to data compiled by EPFR Global, FIIs withdrew over $4 billion from India in 2011, against an inflow of $1.35 billion in 2010. EPFR Global tracks foreign fund flows across markets and different asset classes.

Emerging European countries and China are other markets where FII outflows during 2011 were significant at $3.7 billion, followed by Brazil that saw $2.35-billion being pulled out. Foreign equity funds have been withdrawing from these markets consequently since last seven weeks as, “Headwinds from Europe, uncertainty about China’s prospects next year and stubbornly high levels of inflation in many countries kept investors on edge. The latest redemption’s were blunted by the reinvestment of dividends from some major Global Emerging Markets (GEM) Equity Funds, but 2011 ended with both Latin America and EMEA (Europe, Middle East and Africa ) Equity Funds setting new outflow records,” said Cameron Brandt, Global Markets Analyst with EPFR

While gravity of outflows from India was high, according to him, the year also saw a general souring towards theme-driven fund groups. Dedicated BRIC Equity Funds posted outflows in 48 of the year’s 52 weeks and flows into Frontier Markets Funds (like funds for investing in markets like Vietnam, Argentina etc) tailed off. The latest theme, the so-called CIVETS (Colombia, Indonesia, Vietnam, Egypt, Thailand and South Africa) markets, also lost momentum.”

While EPFR Global data are widely accepted, they are at wide variance with the data provided by the Securities and Exchange Board of India (Sebi). According to the Sebi data, FIIs’ were net sellers in the Indian capital market, including the primary market, by $4.95 billion, against $4 billion as per EPFR. Data shown on exchanges say FIIs were net sellers in 2011 at $5.5 billion.

Food Inflation ... Going down atlast :

2011-12-29T14:39:00.002+05:30

Food inflation fell sharply to a six-year low of 0.42 per cent in the week ended December 17 as prices of essential items like vegetables, onion, potato and wheat declined. Food inflation, as measured by Wholesale Price Index (WPI), stood at 1.81 per cent in the previous week.

It was recorded at 15.48 per cent in the corresponding week of 2010. According to official data released today, onions grew cheaper by 59.04 per cent year-on-year during the week under review, while potato prices were down by 33.76 per cent. Prices of wheat also fell by 3.30 per cent.

Overall, vegetables became 36.02 per cent cheaper during the week ended December 17. Experts feel the sharp fall in food inflation numbers, which was in double digits till the first week of November, comes as a big relief to both the government and the Reserve Bank, who have been battling high prices for over two years.

It will also be a major incentive for the RBI to look at the option of key interest rate cuts at its next quarterly monetary policy review in January.

However, other food products grew more expensive on an annual basis, led by protein-based items.

Pulses became 14.07 per cent costlier during the week under review, while milk grew dearer by 11.30 per cent and eggs, meat and fish by 11.56 per cent.

Fruits also became 8.46 per cent more expensive on an annual basis, while cereal prices were up 2.15 per cent. Inflation in the overall primary articles category stood at 2.70 per cent during the week ended December 17, as against 3.78 per cent in the previous week.

Primary articles have over 20 per cent weight in the wholesale price index.

Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 0.28 per cent during the week under review, as against 1.37 per cent in the week ended December 10.

Fuel and power inflation stood at 14.37 per cent during the week ended December 17, as against 15.24 per cent in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9 per cent-mark since December, 2010. It stood at 9.11 per cent in November this year.

The RBI has hiked interest rates 13 times since March, 2010, to tame demand and curb inflation.

In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7 per cent by March, 2012.

To read original article in Economic times, click here.

Conservative, but proven strategy for Investing in Volatile Market

2011-12-29T13:30:00.011+05:30

Investing in volatile market is a challenging task. When you see the existing portfolio realing under (severe) loss, many investors refrain from investing when market falls. Rather investors should be investing in market falls (inspite of lots of negative news and pessimism), for simple reason prices are cheap.

Investing in falling market is easier said than done. Hence we have time tested investment strategy. For those investors who could not make up their mind to invest when market falls, SIP is the best way to get into. It is an emotionless way to invest.

There is a deep meaning for existing investors too. Read the article below to understand more about the benefits of investing in a falling market.

There is a BIG difference
between SEEING and Opportunity
and
SEIZING an opportunity.

Having seen the opportunity (SIP works better in falling market), it is right time to seize it.
Start your SIP today.
For assistance call us / email us @ easyinvest@gmail.com
.

Financial Events in Year 2011 :

2011-12-28T22:47:00.003+05:30

Source: yahoo finance

2011 would be best forgotten by the Indian markets.

Stocks have fallen around 25%, making it the second worst year in market history, after 2008's drop of 52%.

The rupee has fallen another 20% against the dollar.

Petrol prices are so high that pumps now sell it in ink droppers.

The government has, with little prompting, carefully applied egg on its own face.

Corporate profits are dropping dramatically,

and RBI continues to hold interest rates high, because honestly that's the only thing that's they can keep high in this country.

Europe has decided that each country will take its turn being in the news, so after we were bored of Greece, Portugal and Spain, Italy took centrestage. The concept of what actually happened is so complicated that if we unravel it in a single article, your computer will explode. What it means in the end is that when you mention " is in trouble", very smart and sophisticated people in the financial industry will nod their head and quietly request their brokers to sell everything.

We attempt to take you through the events that occurred in the financial space, with the note that you can safely disbelieve anything you read here because we are likely to have made it up. (With due apologies to Dave Barry for borrowing his format)

JANUARY 2011

The Great Gurgaon Fraud was unearthed as a Shivraj Puri, a relationship manager at Citibank, managed to lose nearly Rs 300 crores taken from high net-worth investors by putting money in the market while having guaranteed returns. He was immediately hired for a top government job.

The Sensex flirted with the 20,000 level but it had a big beefy boyfriend which smacked markets in the solar plexus and sent it right back to 18,000. The RBI patiently explained that it expected inflation to "moderate" after March. Onions became really expensive and prompted extensive outrage. Team Anna said that a Jan Lok Pal would immediately bring onion prices down and tears would be cheaper again.

Goldman Sachs declared that there was "no end in sight to India's growth boom", while at the same time telling other people to get the hell out of India. This is normal; you should cower in fear when they all say the same thing. Which happened soon.

FEBRUARY 2011

Oil prices went to $120 as the Libyan crisis worsened, when protestors decided to overthrow the eccentric Gaddafi from power. Libya has a lot of oil, and good, healthy oil, unlike the Saudi Arabian oil which has to be sent to the hospital often for minor ailments. With Libya out of circulation, oil prices had to go up.

In India, the ban on plastic packaging of Gutkha was reaffirmed by the Supreme Court, saying "We're okay if you get cancer eating that gunk, but God forbid you leave something non-bio-degradable behind". Team Anna proposed that the Jan Lok Pal bill will cure cancer.

Gold went beyond $1,400 an ounce, creating panic in the arranged-marriage-implied-dowry-supply/demand. In the national budget, the finance minister Pranab Mukherjee lowered taxes by expanding the tax slabs, and brought about some earth shattering changes, such as giving 100 crores to a veterinary hospital in Kerala.

Markets continued to fall, with every analyst on every TV channel saying things like "This is a cyclical bear rally in a structural bull run", a phrase that has the collective wisdom of wood chips. But it was all reversed soon.

MARCH 2011

Stocks rose 10% on the hope that Europe would not find itself drunk silly and lying in the gutter, which we will realize in September that it failed to do so. Warren Buffett's candidate for succession, David Sokol, announced his resignation from Buffett's company after it came to light that he had bought shares in a company before suggesting that the Big B buy it. This stunned many in the Indian financial space where such behaviour is considered good manners.

Japan saw a larger earthquake, a tsunami and a subsequent nuclear disaster at Fukushima, a place famous for having had a nuclear disaster. The Japanese establishment said there was nothing to worry about, and it was completely natural for residents to glow in the dark. Europe immediately went into a debt crisis, but no one knew the difference. The Jan Look Pal bill, said Team Anna, would arrest nuclear disasters and put them in jail.

RBI increase rates once again, to 6.75%, to control prices from running amok, which prices promptly proceeded to do. And soon, in:

APRIL 2011

India won the cricket world cup, defeating Sri Lanka in the final. The financial repercussions swept through the country as state after state offered the cricketers massive amounts of taxpayer money, despite many children dying of hunger in those states. More priorities were reinforced as the government, in the choice between a) governing and b) maligning Team Anna, chose (b), which was the wrong answer.

Corporate results came in better than expected, or worse than expected, depending on who Goldman Sachs was talking to. The IMF lowered India's growth rate to 8.2%, as a result of the arrest of Suresh Kalmadi in the Commonwealth Games scam stemming from his being the emperor-for-life in all Indian sports. But it was being compensated by the Speak Asia scam, where if you paid some money, you earned the privilege of telling your friends, in a few months, how you lost all of it.

But the summer made things even more interesting.

MAY 2011

In the annual policy statement, the RBI raised interest rates yet again to 7.25%, to control inflation. They also raised loan provisioning requirements, changed growth trajectories, lowered GDP projections, and mulled automatic data flow. This spooked investors, mostly those who didn't understand a word that was said, which turned out to be 99% of the lot.

Osama Bin Laden was taken out in a sting operation in Pakistan after it was revealed he owed a substantial sum of money to the "Navy Seals", having bet on Sri Lanka in the final of the cricket world cup. "You don't default on the Navy Seals", is what they tell you in Taliban schools now.

Petrol prices were raised by Rs 5 per litre immediately after state elections, making it even more expensive to drive someone up the wall. Infosys was investigated for visa fraud which involved sending people to work in the US on business visa applications, thus creating employment in the US for a vast battery of lawyers to defend their case.

JUNE 2011

Greece voted for an "austerity" package, which involved cutting down 28% of their government expenditure, including not allowing people to retire in their 50s, a measure very unpopular with Greek people in their 50s.

Diesel prices were increased in India by Rs. 3 per liter, which brought down the difference between diesel and petrol from a gazillion rupees to a gazillion rupees minus 3. Petrol prices were deregulated and oil companies were free to raise them whenever they liked. People wanted to protest but were hampered by having to queue up in long lines to fill up their diesel guzzling SUVs before the increase came through. Team Anna said that cars could be powered by the Jan Lok Pal bill if it was passed.

Indian real estate prices kept going up, with prices quoted so high that you could only fit your torso and one upper and lower limb. Real estate professionals said this was not a concern because you had anyway paid an arm and a leg for it.

JULY 2011

There was a "debt limit" crisis in the US, where politicians debated whether or not the US government could take on more debt to pay back the debt they had taken previously. The choices were a) yes, okay and b) No, let the world come to an end. After long negotiations involving who gets to cut the cake and eat it, they voted to invade Iraq again.

Two analysts wrote about how Anil Ambani owned Reliance Communications had crossed an ethical line, demonstrating what is wrong with Corporate India. Mr. A praised their efforts, sending his comments taped to the head of a horse.

Analysts said that China is a bubble, for the 64,000th time. Team Anna reiterated that the Jan Lok Pal bill would cure bubbles.

AUGUST 2011

Markets fell 8% in a month that was best forgotten. So we don't remember anything else about it.

SEPTEMBER 2011

The Agriculture Minister stated that food production this year would be the highest ever, but that the government would continue to pay higher for it and have it rot in warehouses. Surprised, the RBI raised rates another 0.25% to 8.25%, with companies having to steal petrol from cars to pay the interest on their loans.

A rogue UBS trader lost $2 billion and managed to hide it from everyone, which created immediate demands to bring back black money from it, as it is a Swiss bank and can no longer be trusted.

The rupee-dollar exchange rate, after remaining in a benign range of Rs. 44 to Rs. 46 to the dollar, shot up to Rs. 48 without telling anyone, scaring the daylights out of everyone except Team Anna, who said the Jan Lok Pal bill would ban the rate going above Rs. 48, if only you would please be outraged enough to demand that the parliament pass the darn bill already.

OCTOBER 2011

The RBI raised interest rates to 8.5% and deregulated Savings Account rates which had been 4% or lower forever, prompting bankers to complain that they have to change rates for both borrowing and lending, which is double the effort.

MF Global filed for bankruptcy in the US, and it was found that in its dying days, it used customer money as collateral for its own trades. This was followed by a European debt crisis which never seemed to go away, as Italy joined the party and saw its bond yields go up all the way to 7%.

Going to the big hole in the sky were Ghazal maestro Jagjit Singh and legendary producer of the device that allowed you to listen to each of them for $0.99, Steve Jobs.

Diwali brought with it a scandal of Mahurat Trading when a rogue program went out of hand and bought all of the Sensex and its first born children. The trades were reversed, even though Team Anna said nothing. The stock market ended up 7.6% for the month anyway.

NOVEMBER 2011

Kingfisher cancelled many flights all the way till January, mostly because it couldn't pay for the fuel, the parking or the pilots. The stock fell to new lows but recovered quickly after it was found that the airline has been close to bankruptcy for a long time. Greece continued to haunt worldwide markets, while European leaders wondered if they could, or couldn't, do something, or maybe not do something, or do something else.

Second quarter GDP growth fell to 6.9%, way lower than the 8-9% initially estimated. The drop in GDP growth coincided with a halt in all commercial activity on account of sending SMS and Emails that 1/11/11 and 11/11/11 were great dates for Aishwarya Rai Bachchan to have her baby.

Gold reversed a rising trend, prompting calls that the "bubble" was finally over, and that we told you so all the way from $1200. Moody's downgraded Indian banks from "stable" to "negative"; foreign exchange reserves fell as the RBI scrambled to save the rupee going beyond Rs. 51 to a dollar; the stock market fell below ground level to the basement and was last seen poking around sewage pipes somewhere. Which got even worse in:

DECEMBER 2011

After an initial rise to the 5,000 level, the Nifty proceeded to fall nearly 10% and hit new two year lows as it became apparent that the Indian Government was not going to do anything that remotely resembled governance, and instead, figure out how to win votes for further elections. They introduced the FDI-in-retail card and quickly withdrew it, hoping that no one noticed. Then they introduced the Food Security Bill, which will cost the taxpayers between Rs 40,000 crore and Rs 100,000 crore. The money will not be looted, say government officials, while ordering a Mercedes for their cat.

The dollar-rupee rate went to Rs. 54, companies who have borrowed in dollars, who now must use more rupees to pay the loans back. Industrial production fell 5.1% and inflation stayed at above 9%, making it possible to have low growth and high inflation at the same time, while the RBI learnt to pronounce "stagflation".

Team Anna was still in the news, angry about everything that had happened in the year, especially when all it would have taken was a Strong Jan Lok Pal….

***********************************************************************************

So all in all, it has been a year that we would like to write off and ask for a tax deduction on. But no matter how controversial the year has been, it can only be overshadowed by 2012, when we expect more fireworks in Japan, China, Europe (if it still exists) and America. And in India, economic news will continue to be depressing, unless there is a game changing event such as "Why This Kolaveri Di" receiving an Oscar.

It will take more than words to soothe the global economy, and for all our claims of India being "decoupled" from the rest of the world, it is apparent our problems are just as bad. Let us hope 2012 brings us more cheer, joy and good humour.

(You will of course note that substantial portions of this article are made up and are not intended to hurt religious sentiments or resemble real people or events, or cause social disruptions such as the desire to send us New Year Gifts to shut us up.)

Author : Deepak Shenoy is co-founder at MarketVision, a financial knowledge company and writes at Capital Mind.

Indian Economy - 2011 Year End Note

2011-12-28T17:24:00.001+05:30

Best Time to buy is ........

2011-12-26T10:25:00.002+05:30

New Fund Offers of 2007 : Status report

2011-12-26T01:25:00.004+05:30

Bull markets are
Born on pessimism,
Grow on scepticism,
Mature on optimism and
Die on euphoria.

It is during this euphoric times you see hell a lot of Share IPO's and New Fund offers. When the going is good, investors also flock to these investments - be it Reliance Power Share IPO or Infrastructure funds NFO's from various Mutual Fund companies. Unfortunately, it is more like Make Hay when the Sunshines. While many may think that only few, 2nd rated company are involved in this, the list below would say all top guns are into such acts. It is sad.

NFO's are always made at Rs.10 notional NAV. If the NAV of a fund falls below the notional Rs.10, the premise is that the book value ( or proportionate value of shares held in the fund) has shrunk due to the market volatality.

Share Prices being visible many investors would be aware of their current investment status. But in Mutual fund, informations are not that visible. Not only these NFO's launched on 'AUM' target drive, deliver negative retuns, many big investors have already booked their profits/loss out of these funds and moved out. With prospects of appreciation being meager, there is no fresh inflow also. It is high time investors look into their portfolio and make an appropriate decision to make up for the loss. Otherwise they may be left behind - lonely.

Rising Stars : Small Cap Stocks

2011-12-26T01:10:00.003+05:30

Small cap stocks are those companies which have started growing. The Risk - Reward ratio is usually high. If the company succedes, then investor makes multibagger returns. Otherwise, there is potential risk of losing large part of the investment. For that reason, every company - be it infosys or Bharti had to start as small cap and eventually grow into a midcap and then mature into a largecap company.

Following are some of the smallcap's which are doing well. Investors can keep an eye on them and accumulate at suitable price.

Zydus Wellness: This is a 350 Crore FMCG arm of Zydus-Cadilla Group. Main products are: Sugar Free tablets, Nutralite and Everyuth. It commands 85% market share in sugarfree (lowcal sweetner). Company is expected to grow at 20%. Company aims to achieve revenue target of Rs.500 Crores by 2012-2014.

Wabco India: is a 75% subsidary of WABCO Holdings USA. It is a supplier of auto components to commercial vehicle industry. Long term looks good for this company, since Road infra development is vital to india's growth.

Other stocks listed can be considered for investing after studying their business model and earnings visibility.

Pledge Shares to Raise Cash:

2011-12-26T01:02:00.002+05:30

In a recession market, Cash is King. And those companies caught in middle of project would be desperately needing cash at any cost.

One of the easiest way to generate cash is pledging promoters shares and taking a Loan against securites. In a bull market, this strategy would work. But in a bear market, when market falls, the valuation of stock would fall forcing the lender ( often the bank's ) to squeeze the promoters to pay back cash or sell the shares. Though there could have been bitter episodes of such instances , promoters often commit the same mistakes again and again.

Companies like TATA Cofee, though have taken a loan by pledging all the promotes shares, the lineage of promoter could give some comfort level. But companies like Kingfisher airlines are under high risk if bankers liquidate promoters holdings.

Hindustan Construction Company : HCC Lavasa

2011-12-26T00:12:00.004+05:30

It has been a Roller coaster ride for HCC.

During the mad bull run, the stock touched Rs.130 in Nov 2007. Following the meltdown, it fell to Rs.14.70 on 9-March-2009, recovered back to 78 in 15-Jan-2010,then on steadily fell down to Rs.17.35 on 23-Dec-2011.

Unlike Pantaloon Retail story, where the opening up of FDI could turn the table around, the problem with HCC is characterisic of India : Political nexus and violation of rules. Here are a few:

First the Background of HCC:
(1) HCC has got 67 subsidaries to operate in diverse segments - primarily in infrastructure.
(2) HCC embarked upon Lake city in Himachal Pradesh called "LAVASA" which is/was the brain child of Union Agri Minister Sharad Pawar. HCC Hariman Mr.Ajit Gulabchand 'got' all the approval's to start this project.

(2a) Infact a company called Yashomala Leasing and financing was merged with LAVASA, leading to issuance of shares to Sharad Pawar's son-in-law Sadanand Sule and daughter Supriya Sule.
(3) LAVASA hill city is a man made city build by one company - HCC.
(4) LAVASA is on 13,226 acres, which is about one fourth of Mumbai.
(5) LAVASA is to be built in four phases, with first phase to be completed in March 2012 and last phase in 2021.

LAVASA could be imagined to something like a quasi-Venice in Italy, quasi-Genting Highland in Malaysia.

(6) LAVASA was so promising that many banks have invested in convertible debentures of HCC valuing HCC @ 12000 Cr. Some of these banks are : J&K Bank - 100 Cr, Axis - 225 Cr, Bank of INdia - 150 Cr, Allahabad Bk - 100 Cr, Indus Ind bank - 50 Cr, Andhra Bank - 25 Cr, United Bank of India - 50 Cr, ICICI Bank - 250 Cr.

HCC's Problems:
(1) Environment ministry has objected and suspended the works @ LAVASA stating that environment and ecosystem would detoriate at the site. More over HCC has not taken adequate precautions / preventive measures to protect the environment. Otherwise, HCC has ignored sustainable development path.
(2) Due to ths suspension of LAVASA-Phase I which is worth Rs.2800 Crores, Rs.55 Crores is the loss the company is incuring every month.
(3) Proposed IPO of LAVASA aimed to collect Rs.2000 Cr, didnot materialize due to hostile capital market condition.
(4) Total debt in HCC's balance sheet as on 31-March-2011 is Rs.7382 Crores.
(5) HCC's interest cost stood at Rs.107.4 Crores which is 13% of its net sales ( not net profit ) of Rs.828 Crores in Q2 Sept 2011.
(6) Interest costs increased by a whopping 60% due to incresing interest rates and FCCB repayment.

Only Way out:
(1) HCC succesfully repaid FCCB worth Rs.598 Crores on 1st April 2011. Thank god. Had they delayed the payment, dollar appreciation would have costed them 20% more.
(2) 67 subsidaries of HCC hold the key. Selling some of them could release cash.
(3) Recently, HCC ofloaded 14.5% of HCC Concesions to Xander Group for Rs.240 Crores, valuing this subsidary alone at Rs.1650 Crores. Similar such transaction could reduce debt.
(4) But the real solution is getting the environment clearance and completing the project or getting out of the project after Phase 1.

Investors need to think twice before investing in HCC. It could be a High Risk-High return proposal. Remember high risk before investing.

Problem with Pantaloon

2011-12-25T23:29:00.003+05:30

Pantaloon's Kishore Biyani rightly said "It happened in India" when the retail supermarkets met its initial success. He is the frontrunner in this industry setting trend, simulating American Retail Business model. But off late, Pantaloon's stock prices have crashed sizably. Though many may think the general weekness in the market is the reason, the problem here is stock specific or sector specific. Let us understand them before taking a call on investing/holding/exiting the stock:

(1) Pantaloon is into multiple business : Retail, Non Banking Financial services and Logistics.
(2) Has more than 50 subsidaries.
(3) Core business is retail super market, with more than 14 million square feet.
(4) Aggressive addition of retail space and stores has significantly increased the debt which stands at Rs.7846 crores, as on 30-Jun-2011.
(4) Interest outgo is about 75% of Earnings before Income Tax (EBIT)
(5) For Sept 2011 quarter results, against an income of 3180 Crores, interest paid was 210 crores and Proft after tax was only Rs.23 Crores.
(6) Same store sales growth is around 3% which is far lower than competitors like shoppers stop who grew 11% on same stores.

Hence the major reason for Pantaloon's share price has been balooning debt and high inventory.

Outlook:
Companies like Pantaloon, who are in retail trade are eagerly looking forward for reforms like allowing foreign investors to increase their stake in Indian companies. Right now, Foreign direct investment (FDI) is limited to 24% stake. Though Government proposed to hike it to 51%, due to hasty handling of situations and upcoming state government elections in Uttarpradesh etc (till March 5th), the proposal has been put in deep freezer.

Pantaloon's recovery, rather lifeline, would be fresh flow of cash to reduce its debt. Though company may raise some money by selling non-core assets, FDI participation is needed. The moment FDI hike happens, stock may shoot up. Hence investors who are willing to take risk and wait for the reforms to take place, can buy this stock at lower price. From a peak of Rs.380, the stock is trading now @ Rs.136.

Munjal Showa

2011-12-22T21:50:00.004+05:30

Part of Hero Group.
Largest suppliers of shock absorbers to auto comapanies in India.
Share price peaked in 2006.
Stands to gain from robust growth in two wheeler segment.
Keep in mind the very low liquidity in the stock while investing.

Indraprastha Gas

2011-12-22T21:47:00.003+05:30

Indraprastha Gas is India's largest retailer of Natural Gas.
It grew steadily in the past due to compulsory CNG for commercial vehicles in many states, natural gas being cheaper than other liquid fuels.
But its monopoly status ends in Dec 2011.
So far it grew at steady 15% to 20%.
Its steady growth is expected to continue in future due to paucity of gas in India.

Hindustan Copper

2011-12-22T21:25:00.003+05:30

It is a Govt of India Enterprise involved in Copper mining. Hence the price of stock is very much linked to underlying commodity pricing, just like Gold.

Consumption of metals like Copper and steel is to some extent dependent on European nations who are big consumers. Just like today when there was some revival in Europe, Hind copper shot up by 15% !!!

99.59% of the company's share is owned by Govt of India, making it likely candidate for disinvestment. But the bottleneck in government, coupled with poor primary market sentiment for FPO/IPO is delaying the public issue.

With face value of Rs.5, Hind copper's PE works out to 61.45

Areva T&D

2011-12-22T21:09:00.002+05:30

One stock that fell the most in recent times was French Nuclear Power company, listed in India as Areva T&D.

Areva is one of the five companies authorised by International Atomic Energy Authority to construct Civil Nuclear Reactor. Although Areva's presence in Indian Civil nuclear projects is not visible, it has been actively participaring in Transmission and Distribution (T&D) of power.

Reason for Areva's fall from 2008 peak are:
> In 2004-2008, Sales grew 33% and earnings grow by 41% CAGR
> Post 2008, Power projects didnot pickup, Orderbook slowed down.
> Increasing competition from Chinese and Korean imports
> Apart from that, recent demerge of the Medium voltage business operations into a wholly owned subsidary of Smartgrid Automation Distributionand Switchgear ltd was read negatively by the market and the stock fell 22% on 15th Dec 2011 - the day of demerger.

As per the demerger, existing Areva share holders would get 1:1 shares in the new company - Smart Grid.

The companies EPS is Rs.8.87/SH.
PE works out to 16.91.
Book value of the company is Rs.41.90.
At current price Price to Book value is 3.58.
Dividend Yield is 1.2%

Phonenix Mills

2011-12-22T20:15:00.001+05:30

: Real Estate Development company, converting its land bank into commercial properties like supermarkets.
: One of the best places stocks in the sector, despite challenges like hike in interest rates and delay in FDI in retail trade.
: Mr.Arul Ruia, MD Phoenix Mills, claims the response is extraordinary to their projects.
: Recently opened Phoenix Market City @ Kurla, Mumbai on Mukund Mills Plot which the company bought in 2006. Spread over 2.5 million sq ft, it is largest mall in India.
: Lat 4 months, PMC opened 3.5 million sq ft : June'11:Pune, Oct'11: Bangalore, Nov'11: Mumbai
: PMC in chennai by March-April 2011

Features of PMC, Kurla, Mumbai:
> 300+ stores in it
> 40000 sq ft open air courtyard
> 8 screen multiplex
> 16 lane bowling
> 50 F&B outlet
> 2500 car park

PC is largely a self funded project with an investment of Rs.1130 Crores.
1st Phase of 900000 is partly funded by debt (Rs.575 Cr) and equity of 310 Cr.

It is always Dark before Dawn

2011-09-30T15:03:00.001+05:30

Greece on edge of biggest sovereign default 24 centuries after first insolvency

2011-09-24T13:22:00.003+05:30

*********** 24 Sep, 2011, 12.50PM IST, Bloomberg, London ***********

History's first sovereign default came in the 4th century BC (400BC), committed by 10 Greek municipalities. There was one creditor: the temple of Delos, Apollo's mythical birthplace.

Twenty-four centuries (2400 years !) later, Greece is at the edge of the biggest sovereign default and policy makers are worried about global shock waves of a insolvency by a government with 353 billion ($483 billion) of debt -- five times the size of Argentina's $95 billion default in 2001.

"There is a monstrously large amount of uncertainty and a massive range of possibilities," said David Mackie, chief European economist at JPMorgan Chase & Co. in London. "A macroeconomic disaster could be averted but only by aggressive policy action" by central banks and governments.

After two international-bailout deals, three years of recession and budget-cutting votes that almost cost him his job, Greek Prime Minister George Papandreou says throwing in the towel now would be a "catastrophe." Potential consequences of a national bankruptcy include the failure of the country's banking system, an even deeper economic contraction and government collapse.

The fallout may echo the days following the 2008 implosion of Lehman Brothers Holdings Inc. when credit markets froze and the global economy sank into recession, this time with the prospect that the 17-nation euro zone splinters before reaching its teens.

The International Monetary Fund, whose annual meetings start in Washington today, reckons the debt crisis has generated as much as 300 billion in credit risk for European banks. Credit-insurance prices on Greece indicate the chance of default at more than 90%.

Investors can expect losses on Greek debt of as much as 100%, says Mark Schofield, head of interest-rate strategy at Citigroup Inc. in London.

"People, justifiably, think the crisis is what we're living now: cuts in wages, pensions and incomes, fewer prospects for the young," Greek Finance Minister Evangelos Venizelos told reporters on Friday in Athens.

"Unfortunately this isn't the crisis. This is an attempt, a difficult attempt, to protect ourselves and avert a crisis. Because the crisis is Argentina: the complete collapse of the economy, institutions, the social fabric and the productive base of the country."

Even if Greece receives its next aid payment, due next month, default beckons in December when 5.23 billion of bonds mature, said Harvinder Sian, senior interest rate strategist at Royal Bank of Scotland Group.

VIOLENT CONTAGION
"Contagion will be violent" as the price of the two-year Greek note tumbles below 30 cents per euro from about 65 cents now, predicts Sian. The European Central Bank would be the first responders through purchases of government debt, he says.

The country's banks, of which National Bank of Greece SA is the largest, would be the next dominoes. They hold most of the 137 billion euros of Greek government bonds in domestic hands, a third of the total and three times their level of capital and reserves, says JPMorgan Chase.

As those bonds are written down and equity wiped out, banks would lose the collateral needed to borrow from the ECB and suffer a rush of withdrawals that likely triggers nationalizations, said Commerzbank AG economist Christoph Balz.

High-flying gold crashes in record $100 freefall

2011-09-24T12:22:00.002+05:30

**** 24 Sep, 2011, 10.22AM IST, Reuters ****

Gold crashed more than $100 lower on Friday, 23rd Sept 2011, as a slide turned into a freefall, with weeks of volatility, renewed strength in the dollar and talk of hedge fund liquidation wrecking its safe-haven status.

Widespread talk of possible selling by big hedge funds covering losses in other markets set off one of the biggest routs on record. Silver futures, which had attracted even more speculative funds over the past year, closed 18 percent down, the biggest daily loss since 1987.

Mounting fears this week of a global recession and a deepening Greek debt crisis made investors treat precious metals like any commodity, ignoring the safe-haven appeal that had made them a must-have in times of trouble.

Gold slumped more than 6 percent at one point -- its biggest slide since the financial crisis in 2008 -- to hit early-August lows as this week's losses accelerated. The selloff came even as stock and oil markets stabilized after Thursday's rout.

Adding to Thursday's losses, gold is down almost 9 per cent over the last two days, while silver has lost nearly 25 per cent. In the case of gold particularly, it was the third-sharpest daily loss in the past 20 years.

"I'm sure talk of hedge fund liquidation is helping to pressure things, though there's no confirmation of any single fund selling," said Jonathan Jossen, an independent COMEX trader.

Despite its steep losses this week, gold remained up 16 per cent year-to-date, thanks to gains from earlier months. But silver turned negative, with the spot price down almost 1 per cent for the year.

By 2:45 p.m. EDT (1845 GMT), the spot price of bullion was down 5.5 per cent at $1,641 an ounce, after falling to a session low under $1,628. The move was more than 5 standard deviations beyond the normal one-day change. At $127 an ounce, the intraday move was the biggest on record in dollar terms.

US gold futures' benchmark December contract on COMEX settled down 6 per cent, or more than $101, at under $1,640 an ounce.

Spot silver was down 14 per cent at a seven-month low below $31 an ounce.

Benchmark silver futures closed down nearly $6.50 at around $30.10 an ounce.

"We're making new lows and the bull case for gold is on pause for the near term," said Adam Klopfenstein, senior market strategist for precious metals at MF Global in Chicago.

"In the near term, the flight-to-quality interest in owning gold is also out of the window as people are not interested in buying it even in the face of fears in the economy. Until it stabilizes, I'm staying out of this market."

Gold appeared detached from almost every market, ignoring a mild dip in the US dollar index as the selling accelerated. The plunge took out several key technical supports, including the 100-day moving average for the first time since February.

Mint Money conclave on Wealth Management : Investor's Conference

2011-09-22T09:32:00.006+05:30

Equities look good, but so does debt
- by Bindisha Sarang & Lisa Pallavi Barbora

With global markets unravelling on account of the debt crisis, investors across the world are in a tizzy and Indian investors are no different. With Sensex losing 18% so far this year, investors are confused whether it’s the right time to put money in equities. Add to that the rising policy rates—the Reserve Bank of India (RBI) has raised the key interest rate (repo rate or the rate at which banks borrow from RBI) 12 times since March 2010.Gold has returned 25% in the past five years; so far this year it has risen by 28%. Is there more steam left in it?

Building a sustainable portfolio across asset classes is always a challenge in times of uncertainty. Mint brings together a panel of eight experts across the financial industry to bring clarity to the crisis in front of us, to cut through the jargon and to suggest a strategy for the common man to build sustainable portfolios.

List of Panelist at Mint Money conclave on Wealth Management: Building Sustainable Portfolios, in Mumbai on Tuesday 20-Sept-2011.

(1) Abhay Aima, country head (equity and private banking), HDFC Bank Ltd;
(2) Nilesh Shah, managing director and chief executive officer, Envision Capital Ltd;
(3) Prashant Jain, chief investment officer, HDFC Asset Management Co. Ltd;
(4) Rakesh Jhunjhunwala, chief executive officer, Rare Enterprises;
(5) Ridham Desai, managing director and head (research), Morgan Stanley, India;
(6) Ritwick Ghoshal, senior vice-president and head (wealth management and liabilities), HSBC India;
(7) S. Naren, chief investment officer (equity), ICICI Prudential Asset Management Co. Ltd; and
(8) Vetri Subramaniam, chief investment officer (equity), Religare Asset Management Co. Ltd.

Mint’s deputy managing editor Tamal Bandyopadhyay moderated the discussion.

Edited excerpts:

Bandyopadhyay: We are in uncertain times; in four years, the stock market hasn’t moved anywhere. Debt investments have given good returns, but inflation at 9%-plus for the last 13 months is eating away your returns. Gold is the flavour of the season. Real estate prices have reached such a level that very few brave hearts are venturing into it. After the 2008 financial crisis, certain standard assumptions about risk management, wealth management and where to put your money have gone out the window. Correct me if I am wrong, in India, fund managers and investors, even though we are in a new zone, peddle the old truth. If you are in your 20s, invest more in equity than debt, if you are in the 50s, do the reverse and stay invested in equities for the long term. How long is long term? Nikkie is nowhere near the level it reached in the 1990s, it’s one-third of that now. So, is a loss decade staring at us?

Aima: The beauty about the markets is, depending whether you are bull or bear you can take any time line and from there draw a chart and say if you have done exceedingly well or very badly. The fact is it is an asset class that historically has given you close to 20%. You can take the peak of 2008 and chart it or go back 10 years. Look at Dow Jones and paint a bullish scenario. I think the equity market in India is a great place. You should look at remaining invested, not as a trading class, but as an asset.

Ghoshal: As a wealth manager, I will not talk about equity per se, but in terms of all asset classes. Surprisingly, large inflows in equity funds have happened in the last two to three months. Even in debt funds, as well as gold, there are opportunities. But holistically, we have rebalanced portfolios, which were heavily skewed towards equity. We are looking towards debt and gold, and alternative investments like structured products, fixed maturity plans and so on.

Naren: I think equities will always remain a volatile asset class. We, as part of the mutual fund (MF) industry, recommend asset allocation and products like systematic investment plans (SIP) and systematic transfer plans. We have seen good returns; if you go back one year there was so much enthusiasm, markets were at 20,000 levels and everyone was thinking they will go up further.

The problem is that volatility has increased because of global events. As Carmen M. Reinhart and Kenneth S. Rogoff pointed out, once you have a banking crisis, you will have a period of volatility, we are in that period right now. How do you handle a period like this? Use asset allocation and SIP. As long as you do it, you will make returns.

Subramaniam: There are long cycles in the equity markets and returns may not necessarily be as high as we are accustomed to. Therefore, when we make statements such as equity is for the long term, it’s important to keep in mind that long term could be 5-20 years. If we look at the US, there have been 17 to 20 cycles when markets have done well, and other cycles when markets have done poorly.

In the context of equities, SIP is a fantastic way to even out volatility, but you can’t lose sight of asset allocation. There is clearly a support which equity investors need, in the sense that they need to be cognizant to market valuation.

Shah: It’s unfortunate that when we look at equities as an asset class, the return expectation is the highest, but the time frame is the shortest. When we look at other asset classes such as real estate, private equity, bonds, we look at 5-10 years. But when we look at equity, we look at shorter time frames. If we look at returns over similar time horizons with debt instruments, equities have delivered 17%-plus returns over 10 years after accounting for dividends and its tax-free status. I don’t think it’s been a lost decade. Over a 5-10 years’ horizon, I still think its among the best performing asset classes.

Jain: Equities are a very simple asset class. In the long run, it has returned as much as nominal business growth. Businesses in India have grown at 15%-plus compounded annual growth rate (CAGR) and that’s why the Sensex has delivered 18-19% CAGR. That’s a beautiful return over 30-40 years. I’m quite optimistic about economic growth prospects of India. Once in a while every few years due to high fiscal deficit or other issues such as high interest rates, we see a slight moderation in growth rates, but they will pick up again.

The problem with equities is that people focus more on the news flow and less on the valuations. If you focus more on the valuations and less on the news flow, you can make above average returns. You will get great valuations only when the news flow is bad. If you see the last 10-15 years whenever the news flow is bad, price-earnings (P-E) multiples have dropped. Investments made at that time, not over three months, but over three-five years, have given returns significantly above 17% CAGR. I feel this is a similar opportunity.

Desai: As Prashant said, if I can summarize, the point of maximum uncertainty is also equal to the point of maximum return. Right now the world looks very uncertain and grim, the news flow is terrible. That’s really the time you want to buy equity, not a time like January 2008, when everything looked good—that’s the time when you don’t want to buy.

If you have a three-five years’ view, you should do quite well in equities. Shorter time frame is very hard to forecast, the next three months is impossible to forecast and that is the case at any point in time. My bet is equities will probably be the best asset class in the next 5-10 years and this is a good time to buy. Bear in mind there could be downside risk and you can keep buying when there is a downside.

Jhunjhunwala: Has any country in this stage of economic growth and this kind of demographic profile and size ever lost out on economic growth? If earnings growth is going to be a function of nominal gross domestic product (GDP) growth for the next decade, India will show a 15-18% earnings growth. This year Indians will save $700 billion; even if 5% of that comes to the equity market, it’ll be great. Indians have imported gold in the last five years, equal to the size of the Indian MF industry. Despite economic growth you have vast under-exposure in Indian equity.

How can we even compare ourselves with Japan of 1989? Do we have that kind of a bubble? Do we have that kind of a world investment in our industries? Do we have that kind of leverage? If you look at the movement of the index, it has always taken time to consolidate after a big spurt. If we look at valuations, we are overvalued today. Our average valuations have been 14-15 times. I think a Japan-like boom will come to India in the next decade and we are not going to peak before 25-30 times. So, at 15-17% earnings growth in the next 10 years and 60-80% rise in the P-Es, the kind of index level that can be projected, is mind-boggling. I am sure of one thing: given India’s growth prospects and underexposure of Indian to equities, it will be empirical for foreigners to invest in emerging markets. I think the best decade is still ahead of us.

Bandyopadhyay: Are Indian markets in a better position than the European and American markets? Is there an opportunity for India in the slowdown in Europe and the US?

Naren: Last year, inflation was a big problem in countries like India, Brazil and China; these countries did badly last year in terms of performance. Basically, growth came back to the western world but it didn’t last. Now we are back to a situation where we are worried about growth in the entire western world and our own worries on inflation are lower. This puts countries like India in a better position for fresh investments.

Also, interest rates in most of the Western world have been brought down close to zero. But India has such a high interest rate that there is a potential to give a big boost to the economy by bringing them down. That is going to be the big difference between countries like India and the western world. There they are facing a crisis, they have a demographic crisis and they are facing a crisis where monetary stimulus is not possible. In India the situation is opposite. That’s why we look at stocks in a different way from the rest of the world. Because the West is in a bad shape and there is no exuberance in India, falling markets offer opportunities to buy good stocks if we get money from all of you for the long term.

Bandyopadhyay: Are you saying that inflation is coming off and it’s time to cut rates?

Naren: You’ve had a good monsoon, earlier a good monsoon meant that the entire market would focus on it. Now despite, one of the best monsoons in recent times, people have forgotten about it. Today people are only focusing on the negative and whenever that happens, it is a good opportunity to put money in equity as the market falls in a staggered fashion. We never know where the market will bottom out. So as the market falls, people can put money and they will make money.

Ghoshal: As a bank we are looking at all the asset classes. We are looking at international equities through the feeder fund route. We want our clients to look at other opportunities across the world such as commodities, global agri-business and other themes over the next three-four months.

Bandyopadhyay: Abhay, are you also seeing interest among your clients to diversify into overseas markets like Brazil?

Aima: From an asset allocation point of view, if you want to diversify, one can probably recommend it. Remember the western world is looking at 1-2% GDP growth. Commodity and crude prices are likely to come down. About 80% of India’s GDP comes from the domestic economy and 20% from exports. I think the rest of the world will slow down over the next 10 years. Hence, commodities and crude prices will fall. In that case, 80% of India’s GDP will get a boost.

I would not look at advising investors to look overseas through feeder funds or otherwise. I expect the rupee to appreciate in the next three-five years. With currency, taxation and growth in your favour it is difficult to look overseas for investments.

Desai: India has to invest in the infrastructure sector in the next five-seven years. We will be big consumers of commodities, like China was in the last 10 years. If the Western world were to go through a prolonged slowdown, which I think is possible over the next five-seven years, commodity prices will get capped. This is good for India as the cost of setting up infrastructure will be lowered and provide tailwind to our economic growth.

If you look at it from the stock market perspective, it is not odd for India to trade at 20 times when the rest of the world trades at 10 times. That’s exactly what happened in the 90s when the US equity markets consistently traded over 20 times earnings and the emerging markets like India, rest of Asia and Latin America went through a banking crisis and external crisis and they had to restructure.

I think it’s a perfectly possible scenario. This is turning out to be fairly positive for India, notwithstanding the 20-30 basis points of growth we may lose as a result of exports to the West. On the matter of exports, I see the emerging world becoming a larger part of India’s exports. So that won’t be such a problem. The only risk factor in the near term is capital flows. If this morphs into a financial crisis of sorts as in 2008, access to capital may get difficult.

Jhunjhunwala: Is there going be a shock or is there going be a recession? Is there going to be a crisis in the system or a crisis of the system? I don’t rule out the crisis of the system in the Western world, especially in Europe. And so if there is crisis of the system, I think, India will be badly hit, at least for a year or two. Because then we are going into unknown territory, where the capitalists world has never gone. When you talk of countries like Italy and Greece defaulting, and the US unable to borrow, anything can happen there.

But I think better sense will prevail and it will be a crisis in the system and not of the system. If there is crisis in the system, it will attract capital in India. The lowering of commodity prices will be the biggest advantage to India. And the low cost of capital worldwide will be transmitted to India.

Subramaniam: Comparing a developed world with India is a bit like comparing a middle-aged balding man trying to figure out how to grow his hair again to a teenager whose hair is overgrown and all he needs is a hair cut. The central bank, in some sense, is delivering a haircut, the market is delivering a haircut with resetting expectations.

But I think this is where the opportunity lies. I don’t think we are completely cut off from what is happening in the rest of the world. There are some dependencies on the trade account, capital account, so growth will get affected to some level. But just look how far we have come, in the mid-90s, the growth rate of 5% and 6% was aspirational. But there is a disappointment with 6-7% growth rate. If you look at the rest of the world, a growth rate of 7% is also very good.

Shah: I don’t think, we can say that we will always remain decoupled. When the Western world slows down, it will affect us. I think our ability to bounce back in terms of growth potential is significantly higher.

Jain: Our economy is quite insulated from outside events because exports as a percentage of GDP are small and our share of global exports is minuscule. The information technology industry’s exports in the last 10 years has grown at 25-30% CAGR; 70% of that has come from market share growth and that is what will happen with manufactured exports.

If you look at five-year growth of the Indian economy and the world economy, there is no correlation, as also in the case of long-term equity returns between Sensex and foreign stock market indices like Dow and FTSE. Our markets correct sharply mainly because of sentiments. However, such dips are the best times to invest in a staggered manner over time. Whether it was September 2001 or the crisis of 2008, such times are the best times and in my mind this time will not be different. In fact, the crisis may hasten the peaking out of interest rates and that may be a significant trigger for equity markets, going ahead.

Bandyopadhyay: Speaking of sustainable investment across asset classes, what basket of assets do you recommend?

Shah: I would be most skewed towards equity as an asset class. Rest of it, you could still hold as cash, liquid funds. Fixed-return instruments are illiquid and have lock-ins. It would be better to be in instruments like equity or liquid funds, where you can withdraw money at 24 hours’ notice.

Subramaniam: Given the current valuations, equity has to be an asset class for the next five years or more. Additionally, invest in debt, property and gold based on your needs. Use gold to hedge your portfolio; it is not really a part of your core asset allocation that aims to create wealth for you over five years. The role of creating wealth has to come from equities.

Naren: Indian equities and debt look interesting. Globally people are moving to assets that offer safety. So go in search of the opposite, you can’t go wrong because the whole world is going away from it. In other parts of the world, interest rates are close to zero; here we are getting 9.5-10% in most debt instruments. So you should invest in equity and debt MFs and to some extent global equity MFs because everywhere in the world, equities have become cheap.

Jain: India should become one of the top five economies of the world in 5-10 years. If you reach there then interest rates in India won’t be high for long. It doesn’t make sense to invest outside India; the Indian debt should deliver returns equal to more risky asset classes outside India.

Choose a mix of Indian equity and debt depending on your risk appetite. Ask yourself a question: how much of your wealth can you put away for the next two-three years and can tolerate some volatility in the interim, put away that much in equities.

Ghoshal: We are looking at alternative investments like structured products, fixed maturity plans, some ideas in private equities for the private banking clients, more specifically, a mix of equity MFs, dynamic asset allocation funds and then short-term debt instruments. Also look at bonds.

Jhunjhunwala: I think for the next 5-10 years, if equity is to give me 18% post-tax returns, I want to know one asset class that will give me the same returns, the same ease of management with the same liquidity. I don’t find any asset class apart from equity. Painting and antiques cannot be big investment classes.

Aima: Given the nature of our market, it is developing and by and large we are single asset investors and asset allocation as a concept is not understood. When you talk about asset allocation, the idea is to be underweight or overweight, it is not a concept of being fully invested or not in one asset class. Over time, wealth managers and advisers reduce allocation based on two factors, valuation and personal risk profile.

Desai: I can’t disagree with equities, which I feel will be among the best going forward. Also, this country is really short of land. We have one-fifth the per capita land that Americans have. So I think land is viable for the next 10 years. Long-term bonds are probably not as attractive. In terms of asset allocation, I would rate equities highest, followed by land and then a bit of long-term bonds.

Bandyopadhyay: Sensex after five years and your favourite sectors?

Aima: Five years is indeed crystal-gazing. I am pretty bullish on GDP growth over the next five years, 6.5-7% at the least. Sensex could grow 15-18% CAGR over the next 5-10 years. The best way to choose sectors is to look at the GDP and its composition. Services sector comprises 56%; you align your portfolio 56% to services. I am extremely bullish on agriculture worldwide and for India too.

Another sector is infrastructure, as things can’t get worse than this, it can only get better. It doesn’t include real estate firms. It includes power. The problem is infrastructure requires a lot of government intervention and given that the election is about two and half years away, politicians will do as much as possible to keep things moving.

Naren: I don’t crystal gaze on markets. I tell people to practice asset allocation genuinely. As far as sectors are concerned, exports will be one of the good sectors to invest in over the next two-three years because you have the advantage of the cost of Chinese imports going up. Mid-caps as a group looks good for the long term and infrastructure is something you should invest when interest rates are reduced as they have suffered most on account of high interest rates.

Jain: I’m glad you asked five years—in equities it is easier to talk about the longer term than short term. In five years, earnings will double, if P-E multiples go near their long-term averages, they could go up 20-50%, my best guess would be that index could more than double in the next five years. In terms of sectors, we are looking for sectors where sentiment is most beaten down and those that are hurt most by interest rate. These are cyclicals and infrastructure. There has been a flight to safety and predictability. Thus, consumer and pharmaceutical company stock prices have increased. From here on, their P-Es may not go up even as earnings will continue increasing.

Desai: From a longer-term perspective, financial services sector stands out. Infrastructure services should do well. But there are challenges. If you select companies carefully, there could be money to be made there. Agriculture is a good theme too. Consumer products are very expensive and experience shows that if you buy expensive stocks regardless of fundamentals you don’t make returns.

The Art of Stock Market Investing

2011-09-17T20:15:00.006+05:30

Stock markets have been very volatile in the past few years. There is a greater chance that investors might have lost some of their investments. They might wonder if they made a mistake by investing in stock market.

We had published an article in our investment newsletter "The FACTS" which deals with this sticky subject. Few investors who read this article did call us to appreciate the clarity of thought. They persuaded us to circulate this article among wider circle of investors. Hence it is being re-published. Kindly click the article below to enlarge and read.

You may post your comments online by clicking the comments tab, below this article.

Multibaggers - Small cap's Show

2011-09-17T09:57:00.005+05:30

Companies with more than 10000 Crores of Market capitalization are classified as Large caps.
Companies with 1000 Crores to 10000 Crores are classified as Midcap Companies.
And Companies with market cap less than 1000 Crores are known as Small Cap Companies.

Large Cap companies are grown up bigger companies with established track record. Logically the active growth of these companies may have already been over. But they are much more stable.

Midcap companies are fast growing companies which have already started growing. Hence they grow faster than Largecap stocks. Having the potential to grow into Largecap companies.

Meanwhile, smallcap companies are young companies with high risk - high reward ratio. If the business clicks, then these companies grow many fold, rewarding their share holders richly. On the otherhand, if anything misfires then these companies may not have the capacity to hold on and survive. They are like hot air baloons. They sizzle and give multifold returns, but once they fizzle, they crash like pack of cards.

But the fact, today's largecaps were once smallcaps. Identifying them as a smallcap can be rewarding from Investment point of view.

Following are some of the small cap's which are in the process of becoming midcaps. Some of them deserve a closer look.

(1) Symphony :
- Ahmedabad based company
- Manufactures Aircoolers, Airconditioners and Water heaters
- Listed on BSE in 2001
- Has grown 9407.34% (yes it is a 4 digit growth)
- Net profit grew 23 times against net sales of 7 times in past 4 years alone.
- PE is 16.05 Vs Industry average of 13.48
- Profitability to grow as exports from Surat Special Economic zone are fully exempt from tax for 1st 5 years and 50% for next 5 years.
- Current Price is 1384.
- When the price comes down to Rs.1100 levels, it could be a better buy.

(2) EPC Industries :
- Nasik based company
- Involved in manufacturing of drip irrigation systems, sprinklers and industrial pipes and coils.
- Has grown 1788% in past five years
- Was discharged by BIFR after UK based PE player Schroder Credit Renaissance Fund bought 52.3% equity and M&M acquired 38% stake
- PE is 111.65 - very expensive
- But for the govenments boost to irrigation and strong pedigree of M&M, the company has nothing to offer.

(3) Vinati Organics :
- Pharma company
- Produces organic intermediates, monomers and polymers.
- World's largest manufacturer of Isobutylbenzene - basic raw material for manufaturing ibuprofen.
- World's 2nd largest producer of 2-acrylamido 2-methyl propane sulfonic acid.
- Has grown by 1601% in five years
- Net profit leaped 26 times and net sales 5.5 times in these five years
- Has declared One bonus for every two held in 2007 and made a stock split of five for one in 2009
- Investment by World bank's investment arm : International Finance corporation at a conversion prise of Rs.100 per share in July 2011 signal's optimism
- Current price is Rs.63
- Current PE is 6.08 : Highly undervalued when compared to industry average of 16.94

(4) Ador Fontech:
- Bangalore based, Welding equipment maker
- High dividend Yielding company
- Net profit rose 4 times against net sales doubling in five years.
- Current price is Rs.106
- PE multiple is 9.81
- Debt Free, Low competition makes it an attractive buy.

Motilal Oswal - Midcap ETF - M100 - Update

2011-09-14T11:29:00.003+05:30

Click the article below to enlarge.

Stocks @ Discount Price

2011-09-14T11:24:00.003+05:30

When panic grips, market falls. During the process, many stocks fall steeply. But many investors fail to recognize them due to commotion. Only those investors who are able to identify those stocks which are at deep discount will be able to invest in them and benefit.

Following is the list of stocks which are part of Nifty Index. The figures are self explanatory. Do make use of them and benefit.

Click the table below to enlarge.

Rags to Riches : Nikhil Gandhi

2011-09-13T13:56:00.004+05:30

Sometime in the early 80s, a 20-year-old lad from Kolkata used to board an unreserved compartment of a Mumbai-bound train twice every month. He would park himself and the 4,000 betel leaves he carried next to the compartment's filthy toilet to keep the leaves fresh by sprinkling water during the 30-hour journey. On the ride back, the young man would bring along toys to sell in Kolkata's wholesale market. The total earnings after a roundtrip: Rs 200.

Today, Nikhil Gandhi, 51, moves around in a chauffeur-driven Merc E series, stays in a tony Napean Sea high-rise in Mumbai, and rubs shoulders with the city's high and mighty.

His net worth is at least Rs 2,500 crore, going by the closing price of two of his main listed companies, Pipavav Defence & Offshore Engineering (formerly Pipavav Shipyard) and Everonn Education. It will quadruple if a proposed sale of equity in his holding company, SKIL Infrastructure, to the private equity arm of JPMorgan goes through.

And, now the Kolkata boy is thinking even bigger. His grand plan is to invest $5 billion in next six years: $1 billion in the shipyard and defence businesses, and $2 billion each in infrastructure and education. Investors - Indian and global - are keen to buy into Gandhi's ambitions. SKIL has signed a non-binding term sheet to sell 18% to JPMorgan PE for $400 million, which values it at $2.2 billion.

Shades of Grey in Rags-to-Riches Story
AIG owns 7% while Nitin Nohria, dean of Harvard Business School (HBS), and Mark Maletz, a senior fellow at HBS, together own 3%. Maverick investor Rakesh Jhunjhunwala has picked up a minority stake in Pipavav Defence. "I consider myself to be a good judge of entrepreneurial leadership. I was so impressed by Gandhi's capabilities that I invested in his holding company," says Maletz, who knows Gandhi for six years. Between the rags, riches and rapture, however, lurk shades of grey.

One of those hues came to the fore last fortnight when the founder chairman of Everron, in which Gandhi owns 21% and is the second-largest investor, was arrested on allegations of bribing an income-tax official. Gandhi may have had no role to play in that scandal, but the event has scarred Everron and its investors.

Gandhi says he is committed to his investment in the education firm. "Everonn is a fundamentally sound company. I will support it to steer out of the mess," says the man who is no stranger to controversy and has invited the wrath of the market regulator and stock exchanges in the past.

Grey Shades:
The National Stock Exchange had suspended trading in a Gandhi-owned company, Horizon Infrastructure, for almost eight years, beginning March 2000, for not complying with listing agreements. Then, in September 2009, market regulator Sebi had charged key officials of KLG Capital Services, another Gandhi firm, with insider trading and barred it from the stock market.

Gandhi attributes the non-compliance issue to the former promoter of Horizon from whom he had acquired the company. But he admits it was his lapse as well. He denies the insider trading charges, and had appealed to the apex body, the Securities Appellate Tribunal, which set aside the Sebi order. If investors are willing to ignore the warts, and back this first-generation entrepreneur, that's because he has a record - of building infrastructure businesses from scratch.

Click here to read original article.

Bluechips - After Discount Sale

2011-09-02T06:33:00.001+05:30

Developed Market Vs Gold Market Vs Devoloping Market : SWOT Analysis

2011-08-22T10:19:00.005+05:30

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Developed Markets - Especially US:

The domestic stock market was volatile this week with the S&P 500 Index losing 1.72 percent. The figure below shows the performance of each sector in the index for the week. One sector managed a small increase, and the other nine sectors declined. The best-performing sector for the week was materials which increased 0.23 percent. Other top-three sectors were healthcare and technology. Financials was the worst performer, down 5 percent. Other bottom-three performers were energy and telecom services.

Within the materials sector, the best-performing stock was CF Industries Holdings, which rose 14.69 percent. Other top-five performers were Newmont Mining, Monsanto, Sigma-Aldrich, and Praxair.

Strengths
•The fertilizers & agricultural chemicals group was the best-performing group for the week, up 6 percent, led by CF Industries Holdings. The U.S. Department of Agriculture lowered its U.S. corn and soybean production forecasts sharply this week. This news was supportive of agricultural product prices and fertilizer equities.
•Three of the top-ten outperforming groups were real estate investment trusts (REITs). Residential, retail, and office REITs rose between 3 percent and 6 percent. At least two brokerage firms published reports pointing out that the spread between the dividend yield on REITs and the yield on the 10-year U.S. Treasury note is above the historical average spread, implying that REITs are attractive.
•The broadcasting group outperformed, gaining 5 percent. All three of the group members (CBS, Discovery Communications, and Scripps Networks Interactive) reported earnings the prior week which exceeded the consensus analysts’ estimates.
Weaknesses
•The education services group underperformed, losing 10 percent, led down by Devry. The for-profit educational firm warned that new student enrollment is lagging due to the economy, new government regulations regarding higher education, and an industry-wide reversion toward historical levels of enrollment after several years of exceptional enrollment growth.
•Several financial-related groups (regional banks, investment banking & brokerage, thrifts & mortgage finance, real estate services, and other diversified financial services) underperformed, falling from 8 percent to 11 percent.
•The construction materials group lost 10 percent, led down by its single member, Vulcan Materials. A major brokerage firm reiterated its “sell” rating on the stock, citing macro concerns and the uncertain impact of government spending on infrastructure continuing to weigh heavily on the stock.
Opportunities
•There may be an opportunity for gain in merger and acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.
Threats
•A mid-cycle slowdown in the domestic economy would be negative for stocks.
•An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.

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Gold Market

For the week, spot gold closed at $1,746.95, up $83.15 per ounce, or 5.0 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, rose 5.4 percent. The U.S. Trade-Weighted Dollar Index was essentially unchanged for the week.

Strengths
•As reported on Mineweb, precious metals analyst David Morgan anticipates that silver could reach $65 to $75 an ounce. He attributes the main demand for silver coming from the East, where silver demand is growing for both industry and as an investment.
•Year-to-date, demand for silver in China and India is up 30 percent. Silver demand in China and India has increased sharply in recent years as more investors use silver as a store of value. About 70 percent of China’s silver demand comes from the industrial sectors. Albanian Minerals President and CEO Sahit Muja said, “Silver demand in China and India is set to rise 40 percent in 2012.”
•Reuters reported that gold available in exchange for cash has been drying up as prices are rising even higher. In Mexico City, it has been noted that fewer customers have been coming into the shops that buy bullion from local residents. The success of the cash-for-gold industry over the past three years has left fewer and fewer people with any “old gold.” For those who did cash out in 2008, they missed a three-year bullion boom in which prices doubled.
Weaknesses
•On Thursday, exchange operator CME Group raised margin requirements on gold futures by 22 percent, to $5,500 per contract from $4,500 per contract, which is the first time gold margins have been raised since November 15, 2010. Following this announcement, we saw gold settle to $1,764 per ounce.
•Rising margin requirements put a damper on gold prices on Friday, too, with prices slipping another $17.
•Overall, the gold stocks held up pretty well with the pullback in bullion prices.
Opportunities
•Eric Sprott believes gold has been the metal of the past decade, while silver is the metal of the decade to come. He says there is a large imbalance between demand and supply and that the metal is set for a major re-rating which will, in turn, bring the gold-to-silver ratio down to much lower levels.
•BlackRock’s investment strategist, James Holt, has said that the group will use profits from gold and bond investments to shop for bargains among the falling global equity markets. He stated that the firm will be seeking to put its resources into asset classes that are getting cheaper and cheaper, namely equities. BlackRock, one of the world’s largest money managers, holds 5 percent of its $83 billion global allocation fund in gold equities and gold exchange traded funds (ETFs). This could have a substantial positive effect on the gold equity market.
•Goldman Sachs and JP Morgan raised their gold price forecasts for the year, expecting the commodity to continue its surge as the sovereign debt issues in the U.S. and Europe intensify. JP Morgan now expects spot gold to soar to $2,500 an ounce by year end.
•Investors have been flocking to seek refuge in bullion amid economic concerns triggered by a downgrade of the U.S. debt.
Threats
•The last time we saw increased margin requirements for silver, just over three months ago, we saw silver fall from close to $50 an ounce back to below $34. Depending on market response, this scenario could be a possibility for gold as well, although there was much more leverage in the silver space compared to gold.
•The Ecuadorian President Rafael Correa has said that his government is demanding that mineral companies pay an 8 percent in mining royalties before “starting to extract the mineral.” His main driver behind this new policy is to assure that mining operations are “environmentally friendly and socially responsible,” with residents of the cities, parishes and communities near mining projects being the primary beneficiaries. Royalties to the extent of 8 percent have never been seen before and can make a project potentially uneconomic.
•Resource nationalism is one of Ernst & Young’s main concerns in its list of top ten risks facing the mining sector. As many governments struggle with budget deficits, the continuing boom in commodity prices has made the mining and metals sector an easy target as a source for increased revenue.

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Emerging Markets - especially China

Strengths
•China retail sales in July were up 17.2 percent year-over-year, and 1.26 percent month-over-month. Investors in Hong Kong and the Association of Southeast Asian Nations (ASEAN) stock markets have supported the stock price of consumer stables and luxury goods.
•China’s July industrial production was up 14 percent year-over-year, and 0.9 percent month-over-month, showing China is in a safe soft landing.
•China’s July exports were up 20.4 percent year-over-year, while imports were up 22.9 percent. July’s export numbers broke the monthly export record set in June. In spite of slowing growth in the U.S., Europe, and Japan, China export numbers show some hopeful signs that global trade is still resilient. From January to July, China’s total global trade surplus was $76.2 billion, but China runs a $29.5 billion trade deficit with Japan, and $12 billion with ASEAN countries.
•Korea’s central bank left its benchmark interest rate at 3.25 percent.
•China’s renminbi (RMB) rapidly appreciated during the week. The RMB, for the first time, closed at 6.3898 to the dollar. While a strong RMB is making Chinese consumers and corporations richer, it also helps other countries to sell more to China. Particularly in a world where there is a lack of growth, this will be able to help the U.S. and European countries with their economic recovery. A strong RMB is also positive for commodity producers, Chinese airlines, and Chinese tourism.
•China fixed asset investment grew 25.4 percent from January to July, showing robust activities.
•The Turkish Statistical Institute announced the industrial production indices for June 2011. The industrial production index increased 6.7 percent in June 2011, compared to the same month of 2010.
•Walmart, the world’s largest retailer, is said to be exploring a bid for Carrefour’s Brazil business to help bolster its scale in Latin America.

Weaknesses
•China’s July CPI was 6.5 percent, 0.01 percent higher than in June. Pork alone contributed 1.46 percent to the monthly number. Economists and analysts believe China’s inflation has peaked and expect CPI to come down slowly. This may not force the People’s Bank of China to further tighten the money supply by raising interest rates, but it won’t be enough to make the central bank ease the current policy. However, China’s National Development and Reform Commission (NRDC) said, after the inflation number was released, that China’s inflation is at an inflection point. It further said that China’s economy will be able to make a soft landing.
•China’s auto production and sales in July were up 1.26 percent and 2.18 percent year-over-year, respectively, but were down 6.69 percent and 11.19 percent month-over-month, respectively. Passenger car sales were one million units in the month, up 6.74 percent year-over-year, but down 8.78 percent from June.
•Hong Kong’s second quarter GDP grew 5.1 percent, less than the market estimate of 6 percent. Hong Kong residents are buying gold and houses to protect their wealth under the pressure of the dollar’s weakness.

•The combined outflows from all emerging market funds was $7.8 billion, with total outflows of $14 billion year-to-date. Country-wise, Russia saw the largest redemptions over the last 60 days.

Opportunities
•China tax revenue is increasing as a percentage of GDP and in absolute amount. Normally, higher tax income may not be a good thing for the economy, but this time is different. This huge revenue can provide the Chinese government with the means to handle the economy in case the global economy retreats into recession.
•Poland’s inflation rate unexpectedly fell in July on lower food prices, adding to arguments for the central bank to hold off on tightening monetary policy for the rest of the year.
•Finance ministers from across South America are discussing the creation of a fund to provide the region a safety net and ward off the effects of the global financial crisis, Brazilian Finance Minister Guido Mantega said. Officials are meeting in Buenos Aires to discuss creating a new stability fund or strengthening an existing mechanism, known as the Fondo Latinoamericano de Reservas. The $4 billion FLAR pools foreign currency reserves from five Andean nations plus Costa Rica and Uruguay to help member nations that run into balance of payment problems.
Threats
•Chinese premier Wen JiaBao asked the Ministry of Railway to lower the speed across all the high speed trains. China is now suspending approval for new rail projects. In addition, rumor has it in China that the government will reduce 20 percent of the affordable housing units planned for 2012. These events will affect the demand for building materials, such as steel and cements, and will be a headwind on the sector in the short term.
•Due to the U.S. government debt fiasco and European sovereign debt crisis, the probability for the world to go into a recession has increased. The market, therefore, is reasoning that the global economic environment may make the Chinese central bank think twice before implementing another rate increase, or not increase the rate at all. Should the PBOC go ahead and increase interest rates this month, the market likely will become volatile.
•Ukraine is keen to revise its Russian gas contract, looking for another $100 per cubic meter discount to Russian gas prices, which would bring Ukraine down to levels paid by Belarus. The discount would cost the Russian gas monopoly Gazprom $4 billion by JP Morgan estimates.
•Colombia is “very worried” about the possibility that the U.S. Federal Reserve will start a third round of asset purchases, known as quantitative easing, to boost the economy, Finance Minister Juan Carlos Echeverry said. He is worried that should the Federal Reserve do so, “It could bring another phase of the currency war.”

Profit from Panic

2011-08-22T10:09:00.003+05:30

Extract from the article "Buy, Sell or Hold? Relax and Don't Panic - By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors"

To read full article, Click Here.

There’s an old contrarian investing maxim from Baron Rothschild that says “the time to buy is when there’s blood in the streets, even if the blood is your own.” The idea is that the best investors strategize when others panic, allowing them to buy stocks on “sale.” The legend of Warren Buffett was built on this philosophy during the market turmoil of the mid-1970s.

There was more “blood in the streets” Monday as the world continued to digest S&P’s downgrade of U.S. debt, the two-week market selloff, and the likelihood the U.S. economy could possibly slide back into recession. These concerns, combined with continued political/economic struggles in the eurozone from socialist policies, have created a potent concoction of fear across global markets and sent volatility skyrocketing Monday to its highest level since the May 2010 “Flash Crash.” While many investors are running for the exits, others have chosen to ride the wave of volatility or buy depressed shares.

The S&P 500 Index has fallen 15 percent since July. This has happened only fives times since 1960: The 1987 Crash, the Asian financial crisis in 1998 and twice in 2008, according to research from Desjardins. In each of these instances, markets gained an average 9 percent the following month.

The CBOE Volatility Index (VIX) rose more than 46 percent to break the key 40 level, signaling an extreme event. In general, any time the VIX rises above 30 indicates conditions are volatile. Above 40, it’s clear the only thing at a premium in this market is fear.

The S&P 500 isn’t the only investment that’s been experiencing extremes. A flood of safe-haven buying this week sent gold prices up more than $80 an ounce (about 5 percent) to $1,746.73 at market close Friday. Gold prices are up over 43 percent for the past year and roughly 11 percent the past 30 days. The increase over the past month is roughly equal to gold’s normal volatility over an entire year and is a short-term risk for a minor correction in a secular bull market.

Meanwhile, oil (along with oil-related equities) has been bludgeoned down to price levels not seen in a year—off almost 25 percent from April 2011 highs. Other commodities such as copper, wheat and cotton have also taken sizable haircuts over the past two weeks.

Such market turmoil creates a real challenge for investors who are in it for the long haul. Investors must control their emotional response and remain on the lookout for opportunities. Equity performance and fear-driven volatility carry a strong inverse correlation. This chart shows sharp spikes in the VIX trigger an autonomic selloff in the S&P 500.

However, these selloffs have historically resulted in strong rebounds, thus providing an opportunity for clever investors who like to buy their summer clothes during a winter sale and their winter clothes during the summer. ..........

.......A key question for the global economy is: Who will lead a recovery in global markets? Where will growth come from?

With trillions of dollars in debt acting as a ball-and-chain for much of Europe, the U.S. and the rest of the developed world must detoxify their balance sheets before hitting the ground running. On the other hand, emerging market economies carry low levels of debt and operate like a cash business, making them the final frontier for strong economic growth.

A key reason is emerging market governments have the long-term policies in place to facilitate growth of their economies. GaveKal points out it’s unlikely we’ll get a second dose of large stimulus like we did in 2008-2009 because of inflationary pressures, but that magnitude of assistance isn’t needed. Because China and other emerging market governments focused their stimulus on job creation and infrastructure development, their roads to economic growth have already been paved.

This will allow them to flex their economic muscles during short-term instability and insulate them from the turmoil. This is why we think emerging markets will continue to shine for many years to come.

Take China’s $300+ billion commitment to construct a nationwide high speed rail network, for example. The project is already paid for and will invigorate consumption across all sectors of the economy by connecting 700 million people across 250 cities. The recent accident was a terrible tragedy but the country is not going to abandon its plans. Rather, China will learn from the setback and push forward with better safety standards.

Mutual Fund for NRI's

2011-08-22T09:22:00.002+05:30

With actively managed mutual funds in India providing superior returns compared with funds available in developed nations such as the US, Indians living abroad may wish to invest in mutual funds in India.

Here are a set of frequently asked questions on non-resident Indians investing in Indian mutual funds. Investors are advised to visit the RBI's Web site http://www.rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=174 for details relating to Foreign Exchange Management (transfer or issue of security by a person resident outside India) Regulations, 2000.

They would also do well to consult their tax advisors for individual implications although the broad tax issues are discussed below:

Can NRIs buy MFs?

Non-resident Indians (NRI) are allowed to invest in mutual funds in India — in both debt and equity schemes. No specific approval is needed as the RBI has given a general approval through foreign exchange regulations.

The individual can invest in funds on a repatriable or non-repatriable basis. The former implies taking back the principal and income abroad.

Non-repatriable does not permit taking back the principal amount out of the country where it is invested.

How to remit funds?

It is mandatory for an NRI to maintain a bank account in India to be able to invest in mutual funds. To invest on a repatriable basis, the individual should have an NRE or FCNR account in India.

Investments on a non-repatriable basis can be made either through the above route or by inward remittance to the NRO/NRNR/NRSR accounts of the investor.

An NRI cannot make investment in foreign currency and has to necessarily use any of the above means. Investor can also draw a rupee cheque from the above accounts in India.

Can investors have a Power of Attorney (POA)?

NRIs can authorise a POA holder to invest in mutual funds on his/her behalf.

The POA holder needs to submit the original POA or a notarised copy. It should contain signature of both the first holder and the POA holder. Only after the POA is registered with the fund house, would the holder be allowed to transact.

The POA holder can thereafter sign documents for initial as well as additional purchases and redemptions.

Can NRIs have joint holders and nominees?

Investors are allowed to invest jointly and can have a nominee. In fact an NRI can also act as a nominee for an account of a resident Indian.

How do I receive redemption proceeds?

Redemption proceeds as well as dividends will be paid by cheque or directly credited to the investor's bank account in India.

The proceeds will not be directly credited to any overseas account. NRIs however may choose to repatriate it.

What is the tax implication?

As is the case with domestic investors, NRIs will not suffer tax on dividends in their hands.

The rules on long-term capital gains and short term capital gains are also similar to the taxation laws for resident Indians. While long-term gains on equity funds would be exempt, short-term gains would be taxed at 15 per cent.

NRIs would also enjoy indexation benefits for long-term capital gains on debt funds, which would be taxed at 10 per cent without indexation or 20 per cent with indexation. The tax would be deducted at source (TDS).

A TDS certificate known as Form 16 A would be issued as proof of deduction. The same would be despatched to the registered address of the investor along with the redemption warrant.

The above mentioned article appeared in The Businessline. To read the original article click here.

What Next ? - Stock Market - Technical View

2011-08-18T23:05:00.005+05:30

Fibbonachi Number calculations in predicting stock market is widely used. Here is how these calculations are being made.

For Sensex,
Recent high is 21004
Recent Low is 8325
The difference between these two is 12679 points
38.2% of 12679 points is 4843 points.
Deducting this 4843 from 21004 gives 16160, which is called as 38.2% retracement
And 61.8% of 12679 is 7835 points.
Deducting this 7835 from 21004 gives 13168 points, which is called as 61.8% retracement.

'Usually' stock market takes support at 38.2% or at 61.8% retracement levels.
Hence markets closing at 16400 on 18th august, is close to 38.2% retracement levels.
But with 'Global Meltdown' of 5% in stockmarkets today @ Europe or USA indicates we may slice below 16160.

Hence, hold your breath and your cash to invest at much lower levels.
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US Teasury Bond Holding Countries

2011-08-16T22:27:00.004+05:30

There is a saying, When America catches Cold - Rest of world sneezes. You know why? Read on to know:

Post the downgrade, with the markets having somehow digested the news, all eyes are now on how countries holding US Treasuries will react. Most will not sell off as there are simply no other viable alternatives. Despite the downgrade, the truth is that US still remains one of the safest investment option when it comes to Treasuries.

Here is a quick look at the major Treasury holders as at 31st May 2011:

China Mainland – US$1159.80 billion; around 30% of the total treasury holdings by foreigners.

Japan – Second largest holder of US treasury at US$912.4 billion.

United Kingdom (incl. Channel Islands and Isle of Man) - US$346.5billion

Oil Exporters (incl. Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait,Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria) – US$229.8 billion

Brazil – US$211.40 billion

Taiwan – US$153.4 billion

Caribbean Banking Centers (Bahamas, Bermuda,Cayman Islands, Netherlands Antilles and Panama and British Virgin Islands.) – US$148.3 billion.

Hong Kong – US$121.9 billion

Russia – US$115.2 billion

Switzerland – US$108.2 billion

Canada – US$90.7 billion

Luxembourg – US$68 billion

Germany – US$61.2 billion

Thailand – US$59.8 billion

Singapore – US$57.4 billion

India – US$41.0 billion

Source : Department of the Treasury/Federal Reserve Board

Rating of Countries

2011-08-09T14:36:00.003+05:30

The rating of coutries has never been noted like the way it has been watched now. The US has enjoyed an AAA rating from S&P since 1917. But now its rating was downgraded from AAA to AA+.

That brings us to the question of how the other countries in the world are rated. Here is a brief summary.

(1) After the USA derating, there are now only 16 countries left in the exclusive AAA club as rated by Moody's and S&P. (Click the map to enlarge).
(2) Being in India, we would be keen to know how our country has been rated. We enjoy "BBB-" rating. But we are happy - as always.
(3) Now the only way S&P could please USA is to rerate other countries - atleast a few. That may trigger fresh set of concerns about the countries ability to fact economic turmoils.
(4) But what ever said and done, each country will be doing what ever possible to keep them afloat like printing paper money.
(5) Rarely country like Greece are on the verge of default. Does it mean that those countries who lent money to Greece take over the country along with other assets and liabilities?

At the end it is quiet clear - be it people or country - living of borrowed money is dangerous. And Derating indicates the detoriating conditions.

High Dividend Yield Stocks

2011-08-09T10:00:00.006+05:30

Every problem may open the doors for an opportunity. And the current market mayhem across the globe is no exception. Though the pain in the market is quiet visible, it is a good chance to buy companies declaring regular dividend. By investing in them, you may get periodic dividends year on year. And as warren buffet says, Dividends don't lie. Here is a list of companies which have consistent dividend records. You can include some of them in your portfolio. Highlighted are the stocks which we track in our research desk.

Click the table list to enlarge.

Wealth Creation Quiz:

2011-08-01T15:12:00.002+05:30

Match the place of residence given below to the following men.

World's Richest Man: Carlos Slim
World's Second Richest man : Bill Gates
World's Third richest man : Warren Buffet
World's Fourth richest man : Bernard Arnault

And Where do they stay?

World's Largest House
World's 2nd largest house
World's 3rd largest house
World's 4th largest house

Answer: None of the answers given above matches the place of residence of the men given above. Isn't that so odd? The richest men not living in the biggest houses.

Then, what is the use of having so much money?

The shocker: The 3rd Richest man in the world stays in a five bedroom house brought in 1958 and that today is valued at around USD 700,000 (although this works out to Rs 3.5 crore if we take the current exchange rates, it is only around a crore in PPP terms). Today almost 10% of Indians would be having a house in excess of Rs 1 Crore.
So does that mean that Warren Buffet is a miser? With over $50 Billion in wealth, he still stays in a 53-year-old house that too with "just" five bedrooms. He surely must be bluffing about his wealth, because, we know for sure he is not bluffing about the house! Or is he?
Well not at all. His known public wealth is 50 billion dollars and growing.

So why does the world's third richest man stay in such a small house?
No, Warren Buffet is not stingy or miserly by any means; not anyone who donates 30 Billion to charity can be one. Rather, he has mastered the art of creating wealth.

Wealth is not created just by investing, but, also by avoiding unnecessary expenses.
It's not called 'stingy', rather, it's called 'Frugality'. This frugality has helped him grow his wealth year on year.

His logic is simple: An extra ten rooms in the house is not going to create any major difference to him. However, the same money if invested rightly (of which he is a master) can be made to grow to probably ten times the same amount.

Yes, it is not easy for all of us to be like him. Others might say that he can "afford" to be frugal because he already has so much wealth and does not need to worry about anything else. True, but he has stayed the same way even when he was poor!

If Warren Buffett can do it on such a large scale, we can at least do it on a smaller scale. The secret lies in falling in love: In love with growing wealth. If you can fall in love with the happiness that one gets by seeing his wealth grow, you will automatically start repelling the evil twin: spending.

Initially it may be very difficult and you may not even be able to follow. But, once you get accustomed to it. you realize that the pain of sacrificing current consumption is much smaller as compared to the thrill of creating long term wealth. The 20,000 Rupees saved by going for a simple phone (rather than a gold studded one) can in the coming years grow into Rs 200000 and give you the power to be a giver.

"The fundamental is to make sure we give priority to the needs and minimize the wants. Happy Frugality!"

Reading between lines of what Jhunjhunwala says ...

2011-07-31T09:02:00.004+05:30

No one in the market will tell you that stock prices are going to crash. To figure that out, you have to read between the lines when they talk a lot.

In a recent interview published by The Economic Times in middle of June 2011, India’s ace investor Rakesh Jhunjhunwala gave his take on the direction the markets will take and his conclusions are clear: it is headed downwards for now. Nirvana—making money—is only for the long-term.

A close look at some of the things intoned by Jhunjhunwala, reading between lines and decoding them could benefit wider audience. While the newspaper interview focuses a lot on Jhunjhunwala’s own investments in companies like Titan, Lupin, VIP Industries, Relish and Orchid Chemicals, the real message is in the attitude he brings to investing. His message: don’t trade, but invest in the India story.

Here’s what he said (in Bold), and what his words could mean:

Jhunjhunwala: The next three months will be very difficult for the markets. Chances to break down seem greater than the chances to break up.
• The market is headed downwards, if not for a crash. No one knows how the next few months will pan out since we don’t know whether the monsoons will be good and the economy will pick up steam. By August, the market will have a clearer sense of direction. If all things work out positively, the market could pick up. So watch the monsoon and price trends.
The most important thing is inflation because it controls everything, be it interest rates or growth. The second headwind is sheer government inaction….
• This means all depends on governance – of which there is no sign. Inflation will partly depend on the monsoon, but that could be complicated by the Food Security Act, which will need huge amounts of grain to be sold at Rs 2-3 a kg for wheat and rice. It could make inflation worse. As for governance, bureaucrats are already slowing down action for fear of the law. The granaries are full with wheat and rice, but no one is willing to take a call on exports. This means grain will rot partly in the godowns. The 2G scam and investigations are far from over, and governance will not improve till the UPA re-discovers its will to act. Net-net: even after three months, the market could continue its slide.

I am bullish in the longer period – three, five, Ten years. (The golden period for Indian equities) has not even started. The golden period is still ahead.
• What Jhunjhunwala means is that the long-term India story does not depend on government improving things. The economy will grow on its own, given the demographic advantage India has (with a youthful population driving growth and consumption), and the fact that the population is grossly underinvested in equity. At some point, pension and provident funds have to get into equity, and foreign institutional investors have to return. At that point, equity will make a killing. But Jhunjhunwala does not know when that will happen.

The world is undoubtedly slowing. In western societies, the slowdown is due to structural and economic challenges, while in developing economies it is due to governments’ fight against inflation…. If commodity prices correct and we have a good monsoon, we will have a very good year (in 2012-13). It is difficult to predict what will happen in 2013. One worry is that the euro will break. There is no doubt that Greece will default.
• Jhunjhunwala is essentially saying that the real growth risks are outside India, with the US facing a problem of excess debts, Greece about to default, and Japan facing a permanent slowdown due to an ageing population and the aftermath of the nuclear disaster. But in the developing world, the economies have clearly overheated – India and China are now slowing down in order to control inflation and avoid a macroeconomic crisis. Net-net: the prospects for the next one year are not too good, either globally or in India. After that, the jury is out.
I wish I could find the next Titan. I do not see any on the horizon. Titan may get expensive for six months, but that does not change the long-term prospects…
• Jhunjhunwala made a killing by buying Titan shares and says he does not see many more Titans on the horizon for now. But this need not be taken at face value. What he means is that if he finds a Titan, he will invest in it first before he talks. Even if he has invested in it, he will not talk ill of it till he has sold it. Which is why he still says Titan is a good long-term prospect…It means chances of making big money in the short-term in this stock are weak.
I have never liked real estate stocks as they are laden with debt and there is no genuine cash flow. There is no scalability. There will be further distortion in these stocks in the next three months.
• In other words, forget real estate stocks. They should be avoided like the plague. They will not deliver value, and they will destroy further value before they get to become good investments – if ever.

Banking will grow in India but the question is efficiency. If you look at SBI, there is growth every year, but the cost-to-income ratio just does not go down… (But) I would not say yes, I would not say no (to buying public sector bank shares). It depends on the situations…
• Jhunjhunwala is unlikely to buy public sector banks. His own investments are in two old private sector banks – Karur Vysya and Federal Bank, based in Tamil Nadu and Kerala. Public sector banks won’t do well unless they have real autonomy, and become productive by increasing the profits per employee. In short, they have to deliver more before he considers buying them, though there may be exceptions…
I am not as bullish on commodities as other people are…
• High commodity prices are a double-edged sword for India. If it means costlier oil, it means more inflation, and slower growth. If it means costlier steel and cement, it also means higher inflation, but with better profits for big companies like Tata Steel, Hindalco, Grasim and ACC. High commodity prices are not so good for a new oil importer like India. If he is bullish on commodities, he has to be less bullish on India’s medium term prospects.
I don’t think (interest rates in the system have peaked out). We will get further hikes.
• Given high inflation, the RBI will keep raising rates till either (1) growth slows to a crawl, or (2) inflation falls below 5%, or (3) both. This means the short-term scenario for banks is a profit squeeze unless they can manage their costs better. One more reason not to buy public sector bank shares for now.
Equity will give me 15-25% post-tax return. I cannot do any business, any investment, which can give me a higher post-tax return on large volumes.
• This is bad news for India Inc. If equity will always give more returns than manufacturing and services, who will invest in industries that create jobs? Everybody will become a market operator.

Don’t trade is the first thing (I would advice investors). And you should invest in monthly schemes so that you get to invest at all levels in the market. Believe in the India story and you will make money.
• In short, buy only for the long term, and in companies that are well-run and have staying power. In the short run, there may be bad news. But in the long-term, India will deliver.

Fund Manager's View : Mr.Prasanth Jain, HDFC MF

2011-07-31T08:30:00.005+05:30

(Below mentioned interview was dated 12th May 2011. But it is still relevant. Hence, read on to understand the Indian stock market from Fund Manager's point of view.)

Prashant Jain is known to be a voice of calm reason - a trait that is even more appreciated in stormy weather like what the stock market is witnessing right now. In a conversation with Wealth Forum, Prashant shared his simple and clear insights on the key aspects that markets are worried about : inflation, interest rates and oil. As regards the fear that markets are entering a bear phase, he poses a pointed question : has the bull market started - for us to worry about its end? Here are the excerpts of that chat ……

Inflation and stock markets From an equity market perspective, we must appreciate that in an economy like India, inflation is more often than not a pass through. Good companies have pricing power - they should be able to pass through the impact of inflation by means of marginally higher prices. So, the direct impact of inflation on earnings is expected to be rather muted.

What would be a concern is if we see demand destruction as a result of consumers' inability to absorb this inflation.

We are not seeing significant evidence of demand destruction as of now. We must look at this fear of demand destruction in context. First, the proportion of middle class household income that is spent on food has come down substantially in the last decade as incomes have risen quite rapidly. Food inflation - which has been the biggest concern - does impact the poor very severely. But, the consuming class - the middle class - has been able to absorb this impact to a large extent, thanks to rising income levels.

Then, if you look at the discretionary spends of the middle class, the story on inflation is entirely different. Consumer electronics prices today are lower in absolute terms than where they were 5 years ago, same is the case with cable TV costs, with airfares, with hotel room tariffs. Consumers have not really felt any inflationary impact on all of these items, which are increasingly becoming a big portion of their spending patterns.

Yes, power and fuel prices have gone through the roof and consumers' pockets are getting pinched by this. Is that enough to destroy demand? Will petrol and electricity bills bite so much that people start cutting down on entertainment, travel and other discretionary spends? Again, the proportion of household income spent on power and fuel has gone down over the last decade to levels where the middle class is perhaps able to absorb price hikes. But obviously, this cannot go on - if oil prices continue to rise, we will see some impact on overall consumption.

What RBI is trying to do is to postpone consumption by pushing up financing costs. If demand for consumer durables, automobiles, homes etc gets postponed and thus inflation can be cooled down, it is for the good of the economy. That consumption is most likely going to get postponed - not destroyed.

High interest rates and stock markets
High interest rates will have a negative impact on earnings. Growth can also slow down as investments get curtailed or postponed. It's possible that GDP growth rate can be knocked down by 1% - if we were projecting an 8% GDP growth, perhaps it is sensible to look at 7% now.

The Indian economy has lived through many periods of high interest rates, without it doing too much damage to the economy. Yes, some impact will be felt - but I don't think the underlying bull case for Indian equities is to be questioned by higher interest rates.

Sectoral impact of high interest rates
Auto and banking stocks have come under pressure as a result of the recent interest rate movements.

Regarding automobile companies, I suppose some of these concerns are warranted, at least in the cars segment. Footfalls in car showrooms have decreased. 7 out of 10 cars in India are sold on the back of car loans. As car loans become expensive, some consumers have sought to postpone their purchases - which can impact near term earnings of these companies.

As regards banks, I am not so sure that a high interest rate environment is so bad for banks. Well managed banks have close to 40% of their deposit base in the form of low interest bearing savings and current accounts. A stable base of low cost deposits should help manage a rising interest rate environment. Banks who depend on wholesale deposits are the ones who may be impacted adversely.
Banks have corrected to fairly attractive levels. Some of the large well run PSU banks are available at close to 1 time book value on a FY 13 valuation basis. That's not really expensive.

Oil and stock markets
This is the one factor that we ought to be worried about. Last year, a robust export growth helped camouflage the impact of rising oil prices on our current account balances. If oil prices continue to rise to say $ 140, it will have a material impact on our fiscal deficit, on inflation, on aggregate consumption and therefore on growth.
If on the other hand, oil prices cool off to under $90, that will be a big positive for India and therefore for our markets.

Outlook for markets
I don't see why people should become bearish on the Indian market from a long term perspective. Let's remember that this market is where it was three years ago. And in these three years, earnings have grown and therefore valuations have become reasonable. So, when people talk about the bull market ending, my only question is: has the bull market started yet? We are only where we were three years ago! One can describe this as a flat market - not a bull market.
Markets are fairly valued - while we can't see huge room for near term appreciation, we don't see a case for a drastic fall as well. The structural case for Indian equities continues to be strong - it will play out over the next several years. One should expect markets to deliver returns in line with earnings growth, over time. But, for that, one needs patience and conviction to stay invested through volatile conditions.

DISCLAIMER: The views expressed by Mr. Prashant Jain, Executive Director & CIO of HDFC Asset Management Company Limited, constitute the author's views as of this date. It should not be construed as investment advice to any party. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on the author's views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice and shall be fully responsible for the decisions taken. Mutual fund investments are subject to market risks, read the Offer Document carefully before investing.

LIC's Share / Equity Portfolio

2011-07-31T08:14:00.003+05:30

LIC is India's premium institutional investor. With regular cash flow by way of premium collection, LIC's portfolio in stocks as a pure investor has been a great strength to Indian Stock Market. Unlike Mutual funds, LIC doesnot see sudden outflow of money. This simple fact gives them the strength to be buyers when everyone sells.

Following are the list of stocks held by LIC in recent times.

L&T Finance Allotment Price & Details

2011-07-31T08:04:00.006+05:30

L&T Finance holdings which was open for subscription in price band of Rs.51 to Rs.59 has announced Rs.52 as its allotment (cut-off) price . Investors who applied at cut-off price would get the balance refunded by the registrar one day prior to listing of the shares.

Subscription details to the issue is given below:

To check if your application in L&T Finance Holdings got alloted, CLICK HERE.

The shareholders and employees quota put together has been at five times. If this allotment is on clubbed basis, then one fifth of applied shares may be alloted or one in five application may be alloted.

The Public quota has oversubscribed by 9%. Hence the chance of allotment are relatively bleek in this category. For someone to get allotment in this category, they need to be lucky.

And the participation by FII and Mutual funds is quiet weak ( at 1.93 times).

Hence the stock price may not runup on listing. May be a marginal appreciation of 5% to 10% on listing is possible. Investors who didnot get allotment in the IPO or didnot apply for the IPO may consider adding L&T Finance on listing. With a three to five years outlook, this company may deliver good returns with further unfolding of its foray into direct banking business.

Euro Crisis - Details - by George Soros

2011-07-29T10:28:00.005+05:30

This article titled "True Europeans now need a ‘plan B’ " by George Soros was published in Financial Times on July 11, 2011

The European Union was brought into existence by what Karl Popper called “piecemeal social engineering”. A group of far-sighted statesmen, inspired by the vision of a United States of Europe, recognised that this ideal could be approached only gradually, by setting limited objectives, mobilising the political will needed to achieve them and concluding treaties that required states to surrender only as much sovereignty as they could bear politically. That is how the postwar Coal and Steel Community was transformed into the EU – one step at a time, understanding that each step was incomplete and would require further steps in due course.

The EU’s architects generated the necessary political will by drawing on the memory of the second world war, the threat posed by the Soviet Union and the economic benefits of greater integration. The process fed on its own success and, as the Soviet Union crumbled, it received a powerful boost from the prospect of German reunification.

Germany recognised that it could be reunified only in the context of greater European unification, and it was willing to pay the price. With the Germans helping to reconcile conflicting national interests by putting a little extra on the table, the process of European integration reached its apogee with the Maastricht treaty and the introduction of the euro.

But the euro was an incomplete currency: it had a central bank but no treasury. Its architects were fully aware of this deficiency, but believed that when the need arose, the political will could be summoned to take the next step forward.

That is not what happened, because the euro had other deficiencies of which its architects were unaware. They laboured under the misconception that financial markets can correct their own excesses, so the rules were designed to rein in only public-sector excesses. Even there, they relied too heavily on self-policing by sovereign states.

The excesses, however, were mainly in the private sector, as interest-rate convergence generated economic divergence. Lower interest rates in the weaker countries fuelled housing bubbles, while the strongest country, Germany, had to tighten its belt in order to cope with the burden of reunification. Meanwhile, the financial sector was thoroughly compromised by the spread of unsound financial instruments and poor lending practices.

With Germany reunified, the main impetus behind the integration process was removed. Then, the financial crisis unleashed a process of disintegration. The decisive moment came after Lehman Brothers collapsed, and authorities had to guarantee that no other systemically important financial institution would be allowed to fail. The German chancellor Angela Merkel insisted that there should be no joint EU guarantee; each country would have to take care of its own institutions. That was the root cause of today’s euro crisis.

The financial crisis forced sovereign states to substitute their own credit for the credit that had collapsed, and in Europe each state had to do so on its own, calling into question the creditworthiness of European government bonds. Risk premiums widened, and the eurozone was divided into creditor and debtor countries. Germany changed course 180 degrees from being the main driver of integration to the main opponent of a “transfer union”.

This created a two-speed Europe, with debtor countries sinking under the weight of their liabilities, and surplus countries forging ahead. As the largest creditor, Germany could dictate the terms of assistance, which were punitive and pushed debtor countries towards insolvency. Meanwhile, Germany benefited from the euro crisis, which depressed the exchange rate and boosted its competitiveness further.

As integration has turned into disintegration, the role of the European political establishment was also reversed, from spearheading further unification to defending the status quo. As a result, anyone who considers the status quo undesirable, unacceptable or unsustainable has had to take an anti-European stance. And, as heavily indebted countries are pushed towards insolvency, the number of the disaffected continues to grow, together with support for anti-European parties such as True Finns in Finland.

Yet Europe’s political establishment continues to argue that there is no alternative to the status quo. Financial authorities resort to increasingly desperate measures in order to buy time. But time is working against them: the two-speed Europe is driving member countries further apart. Greece is heading towards disorderly default and/or devaluation, with incalculable consequences.

If this seemingly inexorable process is to be arrested and reversed, both Greece and the eurozone must urgently adopt a plan B. A Greek default may be inevitable, but it need not be disorderly. And, while some contagion will be unavoidable – whatever happens to Greece is likely to spread to Portugal, and Ireland’s financial position, too, could become unsustainable – the rest of the eurozone needs to be ringfenced. That means strengthening the eurozone, which would probably require wider use of Eurobonds and a eurozone-wide deposit-insurance scheme of some kind.

Generating the political will would require a plan B for the EU itself. The European elite needs to revert to the principles that guided the union’s creation, recognising that our understanding of reality is inherently imperfect, and that perceptions are bound to be biased and institutions flawed. An open society does not treat prevailing arrangements as sacrosanct; it allows for alternatives when those arrangements fail.

It should be possible to mobilise a pro-European silent majority behind the idea that when the status quo becomes untenable, we should look for a European solution rather than national ones. “True Europeans” ought to outnumber true Finns and other anti-Europeans in Germany and elsewhere.

L&T Finance Holdings Ltd IPO Details :

2011-07-24T18:46:00.005+05:30

This is the first listing in L&T family after L&T’s listing in 1950.

Rating Agency CARE has assigned an IPO Grade 5. This means as per CARE, company has 'Strong Fundamentals'.

The company has already raised Rs 330 crore through a pre-IPO placement to Capital International which has picked up a four percent stake in the company at Rs 55 per share.

The total issue size is of Rs 1,275 crore or 17% stake in the company.

Apart from that about Rs.170 Crores is reserved for preferential allotment to L&T Employees and Shareholders, who will be entitled to a discount of Rs.2 per share on allotment price.

That leaves a net issue of Rs 1075 crore available for general public.

About the Company:

L&T Finance Holdings is a fully-owned subsidiary of engineering major L&T having five subsidiaries namely L&T Infrastructure Company, L&T Finance, India Infrastructure Developers, L&T Investment Management and L&T Mutual Fund Trustees.

The combined asset base of these group companies as of FY11 stood at Rs 18,800 crore, up from Rs 12,000 crore in FY'10. The company posted a PAT of Rs 392 crore last fiscal, up from 262 crore in the previous fiscal.

L&T Infrastructure Finance is a diversified company, financing power, roads, telecom, oil and gas, ports and urban infrastructure. This is a relatively new player, incorporated in 2007. Yet, it has scaled its portfolio to Rs 7,186 crore, as of March 2011. The exposure is also pretty much diversified with power, roads and telecom accounting for 29 per cent, 17 per cent and 14 per cent of the total exposure.

The size of the loan book under L&T Finance, as of March 2011, was Rs 10,156 crore. This includes exposure of Rs 460 crore to the micro finance sector. L&T Finance's loan book is riskier than the infrastructure financing business as it involves lending to smaller and mid-sized businesses. However, the company only lends for income generating activities, thus mitigating the risk to some extent.

Issue Detail:
»» Issue Open: Jul 27, 2011 - Jul 29, 2011
»» Issue Type: 100% Book Built Issue IPO
»» Issue Size: Equity Shares of Rs. 10
»» Issue Size: Rs. 1,245.00 Crore
»» Face Value: Rs. 10 Per Equity Share
»» Issue Price: Rs. 51 - Rs. 59 Per Equity Share
»» Market Lot: (to be announced)
»» Minimum Order Quantity: (to be announced)
»» Listing At: BSE, NSE

Indian Market Outlook : July 2011 : Andrew Holland

2011-07-20T13:35:00.005+05:30

Global headwinds to bring Indian markets down: Andrew Holland, Ambit Capital Ltd
In an interview with ET Now, Andrew Holland , CEO-Investment Advisory, Ambit Capital Ltd, gives his views on the market and the domestic macro picture. Excerpts:

What do you make of the positive momentum that we have in the global markets today? Sustainable do you think at that end and would that have a rub-off effect on our markets as well?
I do not think it will be sustainable. I do not think the problems in the US are going away. They might have some direction on the debt ceiling, but that was already expected. The markets went up yesterday with very little volume in the US. So I am not overly convinced. The US economy is slowing quite quickly.

Many leading brokers have now started to reduce the economic forecasts quite considerably and said that the risk is still at downside. So I still think there is more pain to come to the US. In the European Union, we have got some meetings with the ECB tomorrow, which will be crucial there. But you cannot keep kicking this count down the road and that's what the markets are saying. So it is going to be a volatile a few days ahead of us, but the markets will go down from here.

What's your view on the domestic macro picture? In terms of what is the market pricing in as to what the RBI may do in terms of the next policy action? Is it still a fear or a risk in terms of the market or is the 25 bps hike, which the street is expecting already priced in? How is the market viewing this big event?

It is very much priced in. We have to look further beyond the credit policy now and think where the economy is going to be in terms of inflation. Our view remains that at some point there will be demand destruction from the high oil prices.

We saw a sell off a few months back and the oil prices have been creeping back. So until you see that and lower commodity prices globally, the inflation probably will keep there and keep the markets preoccupied by that. Our view is more constructive in terms of being more positive that commodity prices will fall as the US slows and the Eurozone really continues to have its problems and China slows as well. So that's the backdrop which we have been more in a positive towards India going into the second half, but in the very short term, there are too many global headwinds there which should bring our markets down.

I certainly would not be chasing this market at this stage. So the event next week and some of the heavyweights results next week, I do not think will surprise the market. But obviously the RBI now has to stop being careful because the economy will start to slow quite quickly and it is really the trade off between slowing growth and inflation expectations.

At the moment they are in that Catch-22 where unfortunately commodity prices, particularly oil, remain quite high and that's really going to keep them more towards with the rate hikes in the very short term. So I do not think we are over with the rate hikes, have to see some real movement in commodities, which I am expecting, but it is just not coming through at the moment. So the markets had originally got moved towards the high end of its range, but we are pretty much capped now where we are.

Even in sectors, which have not really seen any kind of a bullish signal, would you still wait for lower levels to come in?

We are going to get that opportunity in the next few weeks, that's for sure. Fortunately the results season does help you in terms of weeding out the better companies in each of the sectors. But if you have got something like Crompton Greaves yesterday where you have seen earnings to be lowered by a minimal of 20-25%, you can see why the stock price continues to fall.

So in that respect, I do not think the market has given you any extra points even for slightly beating the kind of expectations. If you are below, then the stock will continue to come under a lot of pressure and that's what's going to happen next week. Some of the heavyweights next week starting with Reliance are not going to please the market.

What's the view on the entire rate sensitive lot, autos and banks in particular, and whether there are pockets that you would now start buying into?

The banks and autos have had a pretty reasonable run actually over the past month. I would not be chased in at these levels, but these are the sectors that we have been buying ahead of expectations that commodity prices would be a lot lower by the end of August. And you got that play, which I have talked about before where there is a shift from emerging markets towards India and China as the interest rate cycle comes to a peak.

So I am still of that view. I just think that in very short term and I am talking over the next week or so, it is going to be quite volatile and our markets along with global markets will actually go down rather than up from here.

(Click here to read the original article.)

Logic of Lottery

2011-07-18T18:53:00.005+05:30

Thank God. Lottery has been banned officially in Tamilnadu.

The Reason : The probability of winning a lottery is Very Low. Information below, from Singapore Science Centre, clearly illustrates this.

Click the picture below to enlarge.

KVB 2nd Call money : Rights Issue Details

2011-07-12T10:01:00.002+05:30

KVB's 2nd and final call money @ Rs.35 per share need to be paid by the rights share holders. The last date for the same is 21-July-2011. Cheque/DD to be drawn in favour of KVB Rights Issue - Second Call Money.

Fine details of the issue is given below. Click the forms to enlarge.

Wealth Creation Thought

2011-07-11T13:32:00.002+05:30

Mines and Mineral Development and Regulation Bill (MMDR) 2011

2011-07-11T09:01:00.002+05:30

A ministerial panel approved a draft bill for the mining sector – the draft Mines and Mineral Development and Regulation (MMDR) Bill, 2011, proposes to make it mandatory for coal miners to share 26% of their net profits with project-affected people. Non-coal miners ( iron, bauxite, manganese, copper, aluminium, gold, silver) will be required to pay 100% of the royalty on their production to those who were displaced due to the project. This rule applies to metal companies too, which also have their own mines.

This is Corporate Social Responsibility (CSR), only in India, it needs to be forced. As a lay man, for someone who does not own the stocks of any mining company, this is very good news.

For eg: Coal India, in FY11 posted a consolidated net profit of Rs.10,867 crore and 26% of this would mean Rs.2825 crore which will have to be distributed to the local community directly affected or displaced by its mines.

This sounds good that the displaced people, will continue to get annually a payment of Rs.2000 crore or more (or even less) depending on the net profit earned by Coal India.

The compensation could be given either in cash or maybe asking companies to directly plough back the money to build schools and hospitals, building infrastructure for the community would have been a much better option. Or even providing employment to some of the displaced locals would empower them for life, instead of making them dependent on annual handouts.

The major research houses, Indian and foreign have stated that unless the mining companies hike their prices, the hit on their bottomlines and EPS would average anywhere between 8 to 15%. Coal India’s NPM for FY11 was at 22%, which in FY12, assuming it parts with a 26% share in net profit, is expected to come down to around 16% if the same growth rate is taken. But given the high prices of coal, profit growth is expected to be much stronger and though there will be a fall in margins, it may not be too acute.

Fate of Reliance Natural Resources Ltd (RNRL) :

2011-07-09T13:17:00.003+05:30

Some investors who hold physical share certificates would be wondering what to do with RNRL certificate, since the share price is not quoted.

RNRL has been merged to Reliance Power Ltd on 5th July 2010, in a swap ratio of 4:1, meaning RNRL shareholders are to get one R-Power share for every four they hold.

As a result you would have got a fresh share certificate of RPower, which can be demated and sold off. And the old certificate of RNRL is invalid. Hence donot confuse yourself with this old RNRL Certificate

List of Recent Dividends declared in MF's : as on 1-July-2011

2011-07-07T10:34:00.003+05:30

Indian Mind

2011-07-06T23:23:00.001+05:30

Corporate War

2011-07-06T23:02:00.003+05:30

Advertisement campaigns by competitors could sometimes be interesting. Below mentioned is one such Ad., highlighting the intensity of competition.

Fate of Greece : Random Thoughts

2011-07-03T17:19:00.004+05:30

Greece could have been in financial turmoil in recent past, while the world bails them out. But this country has given the world lots of philosophers - be it Socrates, Plato, Aristotle etc apart from Alexander the Great.

While I was wondering, why should a country of such high intellectual power face a downfall. Though I could not get a complete answer, I got patches of them. I may be wrong in some of these assumptions. Do think and let me know if you found any answer.

(1) However BIG / GREAT / POWERFUL / RICH / ANCIENT may be country, mismanagement can trigger fall from heights.
(2) There is no immunity that would prevent a country from going bankrupt.
(3) Stop talking about your lineage, history and olden days achievements. If you have to survive today, you need to be competent. No execuse.
(4) May be as Charles Darwin puts it "Survival of Fittest" is an eternal truth - be it wildlife in forest or success in profession/business or survival of countries.
(5) And it seems inevitable, that the future geneations often become complacent on the comfort of family assets / super power nature of countries. As a result after few generations, the fall seems imminent.
(6) To avoid such a situation, every citizen needs to realize, "Every day is a new day. To survive, you will have to be worthy of it."

List of Great Greek Scients / Philosophers / Astronomers from School of Athens:

7th Century B.C.
Thales (636-546)
6th Century B.C.
Anaximander(c.611-c.547 B.C.)
Pythagoras of Samos (c.580-c.520 B.C.)
Anaximenes(d. c. 502)
Xenophanes of Colophon (c. 570-480)
Parmenides of Elea(c. 515-c. 445 B.C.)
Heraclitus(fl. 500 B.C.)
5th Century B.C.
Anaxagoras of Clazomenae(c. 499-c. 428 B.C.)
Empedocles of Acragas(c. 492-c. 432 B.C.)
Zeno of Elea(c. 490-c. 430 B.C.)
Leucippus(c. 480-c. 420 B.C.)
Protagoras(480-411 B.C.)
Hippocrates of Chios (c. 470-c. 410 B.C.)
Philolaus(c.470 - c.385)
Socrates(c. 469-399 B.C.)
Democritus(b. c. 460)
Antisthenes(c. 445-c. 365 B.C.)
Xenophon(c. 431 - 355 BC B.C.)
Plato(c. 427-347 B.C.)
Diogenes of Sinope(412-323 B.C.)
4th Century B.C.
Stilpo (Stilpon)(c. 380-330 B.C.)
Aristotle(384-322 B.C.)
Demetrius of Phalerum(c. 350-283 B.C.)
Epicurus(341-271 B.C.)
Pyrrho(c. 270 B.C.)
Zeno of Citium(c. 336-264 B.C.)
Cleanthes(c. 331-232 B.C.)
Euclid(c. 325-265 B.C.)
Aristarchos(c. 310-250 B.C.)
3rd Century B.C.
Chrysippus(c. 280-207 B.C.)
Eratosthenes(276-194 B.C.)
2nd Century B.C.
Panaetius(c. 185-110 B.C.)
Cicero(106-43 B.C.)
Lucretius(c. 98-55 B.C.)
1st Century A.D.
Epictetus(A.D. 50 - 138)
Claudius Ptolemy(c. A.D. 85-c. 165)
2nd Century A.D.
Marcus Aurelius(A.D. 121-180)
3rd Century A.D.
Plotinus(c. A.D. 204-270)
4th Century A.D.
Augustine of Hippo(A.D. 354-430)
Hypatia of Alexandria(c. A.D. 370-415)
5th Century A.D.
Proclus Diadochus(A.D. 8 Feb 411-17 April 485)
Boethius(A.D. 480-525)
529 A.D.
The Byzantine Emperor Justinian closed the schools of Athens.

Getting Wealthy ...

2011-06-28T10:32:00.002+05:30

Ultimate Truth - 3

2011-06-19T21:55:00.002+05:30

SIP in Stock Market

2011-06-19T21:05:00.004+05:30

So far investors have been buying shares only by placing orders on day to day basis. In other words, there has been no option to automate this share purchase just like the way we do it in Mutual funds.

Now Investors who want to gradually accumulate shares over a period of time, on a month on month basis can be happy. EASY Investments along with Motilal Oswal Securities has launched an innovative Systematic Investment Plan in Equity Shares.

Following are its highlights:
• You can choose from a choice of 300+ shares to buy on regular interval say weekly or monthly basis.
• You can buy shares on any specific date like 1st of each month or 15th of each month to buy these shares.
• Shares would automatically be bought and credited to your demat account.
• Payment against these purchase of shares can either be an ECS debit to your bank account or debited to your running ledger account
• You can invest from a minimum of Rs.2000 and in multiples of Rs.500.
• You need to opt for minimum SIP period of 12 Months
• There is no lock in period against this purchase of shares. You are free to sell these shares at any time you want.
• This Equity SIP is an exclusive offer for clients who have their demat and trading account with Motilal Oswal Securities Ltd.
Advantages of Equity Share SIP:
• In stock market you can place orders that is valid for a day. In short, your orders are “Good for the Day”.
• With this Equity SIP in place, your order may be “Good for Year(s)”.
• Once the SIP is set, the purchase happens automatically for the stipulated period.
• There is no need for the investor to keep watching their stock and buy it in regular intervals.
• Since fluctuation is a normal feature of stock market, the selected share is bought at different price over a period of time. For instance @ Rs.100, Rs.5000 buys 50 shares; at Rs.200, Rs.5000 buys only 25 shares only and at Rs.50 per share Rs.5000 buys as 100 shares. That means you buy more share when price is less and buy less share when price is more.
• If someone wants to buy gold for Rs.10000 every month for next three years, this option becomes much easier. Option for Gold ETF SIP would take care of all your problem.

Below mentioned SIP example summarizes all these benefits. While the one time investment made on 1st July 2009 is yet to break even, SIP has already made profits.

To sum up, Small drops make a big ocean. A monthly accumulation of 100 shares over a period of one year would result in 1200 shares in your Demat. Each and every investor needs to make use of this innovation to buy stock of his/her choice. And donot forget - SIP is a safe way to surf in rough sea of stock market.

High Inflation - Likely Market Impact

2011-06-14T22:10:00.002+05:30

On 8th April 2010 we were at 18000 points on the sensex. Today on 14th June 2011, we are again close to 18000 points. In otherwords, the indian stock market index has grows by a mear 1.66% over a period of 14 months. Thanks to host of worries and negative news that held the index static for such a long duration. And we may have more surprises in the next few weeks.

Let us understand a few of them:

(1) Today India's Inflation rose to 9.06% in May 2011 when compared to 8.66% in April 2011. And there are fears that it may touch double digit in next few months.
(2) China hiked its interest rates by 0.5% to contain its inflation which has been rising for the past 34 months.
(3) Thanks to Libya and unrest in middle east, Oil price remains high @ US$120/barrel. With 90% of oil consumed is being imported, india faces high oil price.
(4) After much delay, post state elections, Petrol prices were hiked. But the government is still not confident of hiking the diesel price and cooking gas price. Once that is being done, inflation will run up further, fuelling further inflation.
(5) Given these situations RBI would hike interest rates much higher.
(7) And there are the huge Foreign Currency convertible bond repayable by many indian companies in the next 12 months.
(6) Added to these are global uncertainities like Greece being dumped as likely candidate of defaulting and US president Obama quoting "Debt crisis could trigger new economic meltdown"

Likely impact on Stock Markets:
(1) Higher inflation / Higher interest rates are deffinitely not good for - economy / citizens / stock market.
(2) In the first place, due to higher cost people would be left with lesser money to spend. That means lower consumption and lower sales by companies resulting in lower profitability. Hence all these companies share prices may not fare well till such time inflation is higher.
(3) Higher interest rates badly affects credit dependent industries like automobiles ( 4 wheelers ), capital goods, housing etc. Hence, it is better to avoid them till such time interest rates are higher.
(4) The glamour for Real estate has always been with indians, but not for the Real estate companies who are already debt ladended. The current rising interest rate scenario may squeeze them even further throwing wonderful opportunity to pick them at fraction of their peak price.
(5) Though banks which pay higher interest rates for their deposits could charge higher interest rates on their lending, due to falling demand for credit there is greater possibility of idle cash. As a result bank's profitability may be hit.
(6) The inflation figures (9.06%) has so far captured only the petrol price hike. When diesel prices and Gas prices are hiked, inflation are certaily bound to hit double digit. And diesel price hike is directly linked to cost of truck transport resulting in higher vegetable prices. And don't forget the likely lorry stike demanding roll back of diesel price - resulting in even higher esclation of vegetable prices.

All these fact put together indicate few simple things:
(a) Now is not the time to buy / invest in shares.
(b) Any rally in stock market can be used to exit existing investments at profit.
(c) It is wiser to accumulate cash and be ready to invest when everyone sells.

But exemption is always the rule. Few sectors / stocks may stand out and perform. Some of them could be:
(i) Retail Sector companies like Pantaloon,. With strong possibility that Government may hike FDI limit and allow foreign companies to participate in indian retail industry, most of the retail companies may deliver positive returns inspite of sluggish market conditions.
(ii) Same is true for Insurance industry. With possible FDI hike in insurance sector, many insurance companies may open up with IPO's or benefit from subsidaries. Analjith Sing's Max India is the only pure insurance company which is listed in india. Apart from that you do have Rel Capital etc. All of them may benefit
(iii)Pharma companies may benefit due to huge number of drugs going out of patency. Indian drug companies like cipla are mostly mass drug producers who are likely to benefit immensely.
(iv) Few NBFC's companies may get RBI licence to convert themselves into bank. Such companies may also hold out.

To sum up:
(1) You need to be stock specific while investing in shares.
(2) You need to be patient in deploying your funds. It is better to invest in parts.
(3) High risk takers may take the contrarian bets like the exception items given above and make higher returns, though at higher risks.

Market Outlook : by Mr.Sankaran Naren, CIO, ICICI Pru AMC

2011-06-13T07:17:00.005+05:30

Below mentioned is an interview given by Mr.Shankar Naren, CIO of ICICI Pru AMC, that appeared in Economic Times. He manages Rs.16,000 crore across 22 equity schemes of ICICI Prudential Mutual Funds. Click here to read the original article.

The government's indecision in raising prices of subsidised fuel is weighing on Indian equities. An increase in retail fuel prices will boost an already-elevated inflation, but could remove the haze that is clouding the markets' prospects and signal that the current downturn is nearing its end, said Sankaran Naren , chief investment officer-equities, ICICI Prudential Asset Management.

"The fact that diesel and LPG price hikes have not been passed on is the biggest concern. Inflation will go up in near term once prices are hiked, but the way the equity market works is that perfect bottom happens soon after the crisis, like the Lehman one," said Naren, who manages assets worth about.Rs.16,000 crore across 22 equity schemes. The fund house, India's third largest, handles total assets worth .`73,551 crore.

"Once bad news is announced, the market tends to look forward more positively," he said. New Delhi has repeatedly deferred decision on lifting the stateset rates of the three regulated petroleum products - diesel, kerosene and cooking LPG - despite rising global crude oil prices. Last week, Prime Minister's economic advisor C Rangarajan said the government must raise fuel prices to achieve the budgeted fiscal deficit target of 4.6% of GDP for the current fiscal year.

Naren said that the outlook on the Indian market is brighter than it was six months earlier, as inflation is seen softening, going ahead. However, global economic outlook has become grim as the US Federal Reserve's bond buyback programme or QE2, to pump billions of dollars into the country's banks, comes to an end in June. A portion of this money found its way into emerging markets and commodities including crude oil, driving prices higher. With this money flow expected to dry up, commodities prices are likely to soften globally that will in turn reduce price pressures in emerging economies.

"The outlook for the world is turning bleak and India has gone through a tough period of handling inflation in the last six months. So, if India is able to fiscally tighten through diesel and LPG price hikes, then most of our problems will be behind us," said Naren. The government will release May inflation numbers later this week and most economists expect headline inflation to accelerate to about 9% from 8.66% in April.

The fund house's top stock picks would include infrastructure, once interest rates peak as valuation is cheap after three years of subdued performance. The sector has been battered due to rising interest rates that curbed demand. "It's a sector that has got derated tremendously and at the point of interest rate peaking, it will be extremely cheap because people would have almost given them up after seeing three years of pain," said Naren. "Concerns over (earnings) growth will remain even then, but many of the stocks are trading below book and when the (interest rate) cycle peaks, it should trade lower. We can't have a country where only consumption grows and infrastructure doesn't," he said.

The Reserve Bank of India has raised policy rates nine times since April 2010 to tame stubborn price pressures. The central bank will review its monetary policy again on June 16.

Lumpsum - Investment options :

2011-06-10T10:12:00.002+05:30

Below mentioned article was published in Yahoo Finance. Click here to read the original article.

You just got that BIG bonus you deserve but plucked up the courage not to treat yourself that 150 inch plasma television and save for a rainy day. You already have some systematic investment plans that you are steadily investing into, if not start now. Here are some tips. Now, let's look at options to park that big chunk of money you got.

1. Pay off a debt
Make a list of all of your debts and their interest rates. This includes housing loans, credit cards and student loans. If the interest on the debt is high you should pay off this debt before investing the money.

2. Park your funds into a fixed deposit
A person can invest an amount for a fixed duration. The banks provide interest rates depending on this loan amount and the tenure of deposit. Pick a bank that offers the highest interest rate and invest your lump sum.

3. Invest in the stock market
Indian private equities promise satisfactory returns and have more than 365 equity investments firms functioning under it. Investing in the share market yields higher profits. Influenced by unanticipated turn of market events, stock market to some extent cannot be considered as the safest investment options. Do, remember that even old experienced hands have lost out on massive sums of money with one miscalculation, so tread carefully.

4. Invest in Mutual Funds
A mutual fund company pools the money of many investors and invests it for them in a collection of securities by purchasing stocks, bonds, money markets and/or other securities. Mutual funds are subject to market risks so be prepared in case you find your NAV lower than the sum invested. Conduct a thorough research on the best mutual fund and select a well balanced fund (in case you are risk averse) before you invest. The advantage you have when investing in a mutual fund is that an expert makes the investments for you.

5. A good down payment for real estate
Everyone should think of their home as an investment and if you have a sizeable enough chunk to make a down payment for a house. This is probably the largest and best asset to look at. Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle. There are, of course, blemishes on the face of what seems like an ideal investment. When you invest in real estate, money is made or lost behind the scenes, not when the final deal is made.

6. Invest in government securities
These are government debt obligation backed by the credit and taxing power of a country with very little risk of default. This includes short-term Treasury bills, medium-term Treasury notes, and long-term Treasury bonds. Government securities are one of the safest in the market. G-secs can be bought either in the primary market (through RBI auctions) or from the secondary market. G-secs are available for tenure of three months (counting T-bills) to 30 years.

7. Investments in National Saving Certificate (NSC)
National Savings Certificate is a post-office savings scheme, backed by the government. The minimum amount of investment is Rs 100, with no upper cap. NSCs are sold in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. The rate of interest is 8 percent per annum compounded half yearly. The amount invested in NSCs is eligible for tax deductions under Section 80C; however, the interest you earn would be taxable.

8. Investments in Public Provident Fund (PPF)
PPF is a government-guaranteed fixed income security. It provides regular savings by ensuring that contributions (which can vary from Rs.500 to Rs.70,000 per year) are made every year. An interest rate of 8% p.a. (compounded annually) is credited to the PPF account at the end of each financial year. The account matures in 15 years from the date of initial investment. One can then exercise an option of continuing the account for an additional block of 5 years or closing it.

Rakesh Jhunjhunwala : Interview in Economictimes, India

2011-06-04T18:33:00.003+05:30

In 1985, when Big Bull Rakesh Jhunjhunwala entered the market with Rs 5,000 as his initial capital, his dream was to earn about Rs 1 lakh a month. Now after journeying through a little over a quarter a century, even the man himself doesn't remember when he had crossed that dream to enter into the current realty of probably earning much more than a lakh of rupees every hour.

So when we meet the last Big Bull of his generation at his 15th floor office at Nariman Bhavan in Mumbai's central business district of Nariman Point, naturally a good part of the conversation is about his wealth along with others like the ethics, tricks and the secrets of the trade.

Although various estimates put his total wealth above $1 billion, 51-year-old Jhunjhunwala wouldn't reveal a specific number. Instead his answer is a rather diplomatic and prosaic; "I have far less wealth than people think but I have much more than I need". But he is candid enough to add that the first time he was listed among the country's richest, his father, a tax man whom the junior Jhunjhunwala idolizes, was happy about his son's achievements. "He asked me to use more of it for charity," he says adding that that is something he has been trying to do seriously.

Whatever be his net worth, the fact remains he is the most watched man on Dalal Street. People want to know what he is buying, what he thinks of the market trends. At times there is an 'irrational exuberance' in a counter just because it is rumoured that Jhunjhunwala is interested in the company and its business.

It was Sesa Goa and Tata Power that he started off with in the mid-1980s, Jhunjhunwala reminisces, sitting across the corner office, which surprisingly doesn't have any TV. What it has, however, is a lovely view of the Arabian Sea.

That's where Jhunjhunwala, a trained chartered accountant, tasted the smell of money. Crisil, Titan, Praj Industries are some other stocks in which he has made loads of money. So is there a common thread to his stock selection? It's his knack to pick stocks with strong under-valuations and long-term prospects. At present, "retail and banking are the sectors to watch out for," he revealed. Rather strange for a man who is known not to reveal any of his bets.

Although considered to be a Big Bull on the Street, unlike some of the discredited players in the past who also carried the same title, Jhunjhunwala doesn't want to control the market. To a pointed question that how he is different from them, he said; "I don't want to control the opportunity. Rather I grab the opportunity". "Greed and immaturity are the two things to avoida¦ I would never manipulate a stock. I know the road to Arthur Road Jail and I would not like to take that path," was his admission about his approach to the market. And since opportunities don't come regularly, by his own admission, wealth has come to him in spurts. "It doesn't come when you deserve it," he says taking a deep puff on a cigarette.

SUN TV : Stock Outlook

2011-06-04T10:30:00.004+05:30

After the PIL on Dayanythi maran was filed, his brother Kalanith Maran owned company shares fell sharply. The extent of fall has so sharp like a fall from the cliff. SUN TV tanked 27% on a single day from Rs.362 to Rs.262. That is a straight Rs.100 shave. Similarly Spice Jet tanked 16%. As usual many investors got interested in this stock which had corrected more than 30% in just 3 days. Many investors would be wondering wheather to buy the stock now or avoid it.

Here is our view on both these stocks:

Sun TV was listed in April 2006
The allotment price was Rs.875 per share.
In July 2007 the stock announced 1:1 Bonus.
Hence the holding cost of original allotment Rs.437.50
The company has been regularly declaring dividends.
And its Consolidated profit surged 45% in FY 2011

Sun Network consists of:
This family well established in Media, Sun Network (Sun TV, K TV, Sun Music, Sun News, Chutti TV, Adithya, Surya TV, Kiran TV, Gemini TV, Gemini Movies, Gemini News, Gemini Music, Gemini Comedy, Kushi TV, Udaya TV, Udaya Comedy, Udaya 2, Udaya Movies, Udaya Varthegalu & Chintu TV.) and newspaper (Dinakaran, Tamizh Murasu, Kungumum, Mutharam, Vannathirai, Kumguma Chimizh).

Sun Products: (which SUN TV now clarifies is a seperate company and not linked to Sun TV)
Sun Direct, Sun Direct HD, Kal Publications.

Our Views:
Though SUN TV claims that 60% of its revenue is from outside Tamilnadu, it is obvious that Tamilnadu is its home turf and any change in regulation in Tamilnadu ( which is more likely) is to affect SUN TV's performance and profitability.

For instance @ proposed Rs.50 Government Cable TV, mass of viewership is likely to switch over from Satellite Dish TV. And this Satellite TV business consists of players like Dish TV, TATA Sky, Sun TV etc.

But if the Arasu Cable doesnot telecast Sun TV channels, then the viewership will fall. As a result Ad revenus will fall impacting profitability directly. To overcome this barrier (for next 5 years atlest), SUN has to go in for exclusive, top class products and production.

Added to that is the constant pledging of promoters shares of SUN TV. Any further fall in SUN TV price ( on likely investigation or chargesheeting ), margin call could trigger resulting in further crash in stock price.

In all permutation and combination, SUN TV's profitability is likely to fall sizable in the days to come. Hence it is wiser to stay away from SUN TV at the moment. We can bottom fish at some point of time in future.

Regarding Spice Jet, they operate in domestic airspace across india. But for the money trail to Spicejet, which we cannot comment right now, Spice jet is a better bet. With commencement of International flying shortly, Spice jet @ Rs. 35 per share is likely to do well. Its profit has grown 64% in the last financial year. From a recent high price of Rs.90 per share in Nov 2010, the current price of Rs.35 is at 61% discount. That may sound like fibbonachi number. But fundamentals may support Spicejet.

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Real Retirement Planning

2011-06-02T12:15:00.002+05:30

Every one has to retire one day or other. With our high savings rate many of us assume that our retirement has been taken care. But the fact is Retirement planning is beyond money. Below mentioned article that appeared in yahoo finance is crisp and interesting. Beyond reading this article, act on them right today. Do stay in touch with us for more information.
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Planning for retirement and doing something about it is something that most youth and elders detest. For the youth there is no incentive to plan for something that will come up 35 years later. For the elders, the fear that they may not have enough money in their last phase of life prevents them for doing a deeper analysis and action after that.

Retirement Planning is not only about money:
There is more to retirement planning than money. Some of the key things to be planned which actually make the planning more interesting is to consider:

1.How will you spend your time?
2.Places to visit
3.Tackling health related issues
4.Sharing the wealth created
5.And finally planning for income (of course)

In fact, most people just think of the last one without considering the first four. This leads to confusion and fear.

Tips for Retirement Planning

1. Plan Time: Many retired people are lost because they have not planned for the question "What next?" It is important to find some activity that will fill the 8 to 12 hours that one has spent at work. This is not only for the breadwinner but also for the homemaker. What will you do to manage a new person with whom you need to share 8 to 12 hours, suddenly?

•Think Social Activities: There are so many activities that one may have thought of doing to the society and not done due to want of time or due to other priorities. Post retirement one can take them all with a vengeance. This not only a time filler but also a very good way to keep the brain stimulated.
•Think Hobbies: Apart from filling time and keeping one mentally agile, hobbies also add to your skill sets. Taking up a new hobby and joining a hobby club is a great way to manage retired life.

2. Plan Travel: Except for the envied few who had great travel oriented jobs, most would have sacrificed their travel plans for their career. And don't grow too envious because those jet flyers on the job are also cribbing because they had to travel on such tight schedules that they hardly got to see anything worthwhile travelling on the job. Retirement is a wonder time to plan for all those missed countries and places to visit.

3. Plan Health: Health insurance is very handy when you are retired. But if this is planned on the brink of retirement not only is the cost too high, but diseases may already have set in. This means that the pre-existing diseases will not be paid for by the insurance for upto 4 years after taking the plan.

4. Write a Will: Writing a will to efficiently pass the wealth created to our loved ones is very important. However in India, this is a commonly absent practice. Even some of the richest persons in India have not taken up this practice (think Dhirubhai Ambani). This leads to costly and lengthy process of passing our hard earned wealth to our loved ones.

5. Plan Finances for Regular Income: Though this aspect alone can be written in whole books, the basic idea can be summed up with a few point:

•Do not to lock up funds in illiquid assets without cash flow - avoid buying a large house for you to stay and prefer a house from which you can get a rental income.
•Do not to give away wealth too soon - having cash does not mean that you can give it away to your sons and daughters and brothers and sisters or to a temple. Give it to them through your will so that they get your wealth, and at the same time, the money works for you when you are around.
•Do not experiment — To experiment with retirement funds in the stock market and commodities or a new business post retirement is highly risky. You may not have the time or energy to earn the money lost (if lost).

Retirement Planning:
Retired life is supposed to be fun filled and peaceful. But today we find more old age destitute homes popping up than schools, indicating a trend towards lack of retirement planning. The above tips will help those in their prime of life and those near retirement to plan for a comfortable retired life.

To read the Original article, click here.
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High Interest Rate From AAA Rated HDFC Ltd.

2011-05-19T19:59:00.004+05:30

With Inflation rising, RBI Governor recently hiked interest rates for Banks. This indeed pushed up the overall interest rate scenario of all companies. The clear winner in this situation is no doubt is YOU - THE INVESTOR. You get Guranteed High interest rate on Monthly / Quarterly / Half-yearly / Yearly Basis.

One such company where you can invest and sleep over it without any worry is HDFC Ltd, which hiked its interest rate to 9.75% per annum. And it makes senses even for the most aggressive investor to invest a portion of the portfolio in defensive investments like Fixed deposits, ofcourse with safety of capital. Hence each investor can consider to have a pie of their portfolio in HDFC Ltd Fixed Deposit.

A communication from the company is given below for better clarity.

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Petrol Politcs: Why is Petrol So expensive in India ?

2011-05-19T17:20:00.006+05:30

As we gasp to catch up with rising petrol price, there may be further hike in future too. Government explains that even after Rs.5 hike per liter of petrol, Oil Marketing companies are still at a loss of Rs.5.5 Per letter.

Before justifying the price hike, let us break up the current price of Petrol:

One Barrel of Crude oil cost you US$ 112.50
At Rs.45 per dollar, Cost / Barrel = Rs.5062.5
One Barrel of Crude Oil = 158.76 liters of Crude Oil.
So One liter of Crude Oil = Rs.31. 88.

Refining cost = 52 paise per litre.
Capital Cost of Refinery = Rs.6
Cost of Tranportation = Rs.6
Dealer's commission = Rs.1.05.

So, adding all that, the price of petrol comes to about Rs 45.46 per litre.
But how much are we actually paying for petrol?
Rs 68.3 in Mumbai,
Rs 63.4 in New Delhi,
Rs 71 in Bangalore
Rs 67.22 in Chennai

Why are we paying so much more and to whom?
The answer is tax.
Not many are aware about the huge quantum of central and state government taxes and duties levied on fuel prices. In some states the tax component is pretty close to 50%. To add to that, these taxes are levied as a percentage of the basic price of the fuel and aren't fixed per litre. That means rising fuel prices only add more to the government's kitty.

But all we hear about are the huge subsidies and the bleeding OMCs !!!

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Interesting facts about Infosys :

2011-05-19T12:07:00.007+05:30

Infosys is India's second largest tech player.

It has a shareholder base of 4,50,000.

Since inception, a shareholder has received a cumulative dividend of Rs 11,623 crore till this fiscal 2010-11.

Infosys started with a measly capital of Rs 10,000-pooled by spouses of founders-has evolved into a balance sheet of Rs 26,000 crore with $3.8 billion in cash equivalents.

Its shareholders have grown their wealth in multiples. For instance, 100 shares issued in the IPO in 1993 at Rs 9,500 have multiplied into 12,800 shares valued at Rs.4,15,00,000 (4.15 crore) as on March 31 this year, indicating a compounded growth rate of 59%. No doubt Infosys made many crorepathies.

Similar amount of Rs.9500 in a Bank FD @ 10% since 1993 would have grown to just Rs. 52,819.

Apart from that Infosys rewarded its employees generously. By March 31 1992, employees owned 13.6% of shares of the company. The employee stock option plan was introduced in 1994 and as of now, the company has given stock options worth Rs 50,000crore to employees.

Infosys added 17,024 (net) and 43,120 (gross) employees in 2010-11 taking their employee strength to 1,30,820. The company today has over 620 clients, 6,500 projects and 64 sales offices and 63 development centers spread across 75 cities in 32 countries.

KVB Rights Issue - Call money details

2011-05-19T10:32:00.005+05:30

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With reference to our earlier article on KVB Rights Issue ( Click Here to read it ), KVB has sent the first call money letter @ Rs.40 per share to all its Rights issue shareholder. Subsequent to this 1st call money, KVB will again send an intimation for the 2nd call money @

Scan image of the letter copy could be found below this article.

All you need to do is,

(1) Check if you have received the Rights issue form. If not received, do email to kvbshares@kvbmail.com
(2) If you did receive the rights issue form, you need to fill it with relevant information against the indicated amount ( @ Rs.40 per share) and submit it in the places mentioned below.

Do stay in touch with easyinvest@gmail.com for more information.
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Money Saved is Money Earned : Fuel Mileage

2011-05-19T10:15:00.005+05:30

So far we have published articles related only to investment and money management. Hence when we came across the below mentioned article ( in yahoo.com ), we were in a dilemal weather to publish in our investment blog. After deliberating for a while, we justified the inclusion of this article on the ground that Money Saved is Money Earned. Hence if this article could give your car more mileage, then you would have saved some money which may be used for investments too. Go ahead and read on to understand how to improve mileage.
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It’s really exasperating to see fuel prices skyrocketing, right? We can only feel helpless in the face of recurring and economy-driven price fluctuations. Seeking measures to improve fuel economy is the only way to combat rising fuel prices. Do not disregard these simple guidelines; each little step can really start adding up to significant savings to your budget.

Check Tyre Pressure
Keeping the tyres well inflated is one of the simplest things you can do to help improve your car’s fuel efficiency. You can improve the mileage by about 3.3 percent if you keep your tyres inflated properly, according to the DOE.

Lighten Your Load
Empty out your boot of unnecessary items. For every extra 45 kg you carry, your fuel efficiency can drop by 1-2% in a typical vehicle.

S-L-O-W D-O-W-N
The faster you drive, the more fuel you use. Driving within the speed limit recommended by the manufacturer helps save fuel. Driving just 5mph over the speed limit can affect fuel economy by up to 23%. Likewise, quick acceleration consumes too much fuel; accelerate slowly and gradually.

Do Fuel Quality/Types/Additives Help Mileage?
Petrol pump attendants often try to convince you to go for ‘Speed petrol’ or ‘X-tra Mile diesel’. But this need not necessarily help improve your vehicle’s fuel efficiency. Always use the grade recommended for the vehicle by the manufacturer. Higher octane fuel may not only be a waste of money but may harm the vehicle, as well. However sticking to one brand of fuel is always good for the engine. Know more about Octane Ratings

Tune Your Engine
A well-tuned engine can improve fuel economy by up to 4%. So change your oil and follow your car manufacturer’s recommendation on servicing.

Clean the Air Filters Regularly
Air filters keep impurities from damaging your engine. Replacing a clogged air filter can improve fuel economy by as much as 10%.

Keep the Windows Closed
Driving with your windows open considerably reduces mileage, far more than keeping the AC on while driving along highways. So preferably keep the windows closed and the AC on if you want to keep cool. Of course the air-conditioning decreases fuel efficiency considerably, so use it judiciously. Windows down or A/C on — which is more fuel-efficient?

Clean Spark Plugs
Ensure your spark plugs are in good condition. Renew the plugs and wires at intervals specified by the manufacturer. This will keep all cylinders firing properly resulting in higher efficiency.

Don’t Be a Clutch-Driver
Never keep your foot on the clutch while driving. When you do this, pressure is being placed on your clutch, and it not only reduces mileage, but also wears out the clutch plate, replacing which is not cheap.

Keep the Car in Showroom Condition
It’s always prudent to keep the car in the showroom condition. Remember that any modification to the car, such as broad tyres, diffusers etc., will adversely affect the mileage.
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Monsoon Impact in India

2011-04-26T10:57:00.003+05:30

It is quiet common that we hear news about monsoon every now and then. To understand it better, the following picture may be of some use.

As you can see, 'Monsoon Waves' keep travelling from southern region to the Western region. A Normal Monsoon is one wherein the rainfall is around predicted time for expected quantity. And no one can influnce monsoon. It is Nature's Gift, but has profound effect on economy in general.

For instance, a good rainfall would trigger need demand for agriculture like seeds, tractors, fertilizers etc. And the resultant crop would leave more money in the farmers hand ( remember 70% of Indian land is in the hand of farmers) who go on to consume more like good food, good house etc. As a result all those companies which supply goods / materials / finished products are benefited with higher sales and higher profits.

Failure of monsoon would lead to cascading problems like, poor farmer, low food production, higher food cost, depressed demand for consumable items including white goods etc.

Hence the cyclical effect of monsoon is what is being feared off in an economy. Getting a Normal Monsoon takes care of half the job of having a good financial year. We hope so in the days to come.

Mutual Fund Updates by SMS

2011-04-21T14:27:00.003+05:30

Reliance Mutual Fund has taken initiative to keep their investors informed about their investments by a very simple process. All you need to do is:

(1) Ensure that you have registered your mobile number in your MF investments with Reliance
(2) Send an SMS as "BALANCE>>last 6 digits of Folio Number>>"
(3) Send SMS to 9664001111
(4) You would get an update instantly by reply sms.

Whatelse does an investor want. May be other AMC's take cue from India's Largest Mutual fund company in keeping investors comfortable.

Gold Vs Gold Mining Companies : The Difference

2011-04-20T20:55:00.004+05:30

There are only two funds in India which invests in Gold Mining companies. They are:
(1) DSP BR World Gold Fund
(2) AIG World Gold Fund

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Why do people invest in Gold ?

2011-04-20T20:52:00.002+05:30

Click article below to enlarge :

TDS Limits for Fixed Deposits : New Regulations

2011-04-20T20:46:00.002+05:30

IDFC Premier Equity Fund : Investment Strategy

2011-04-19T12:15:00.005+05:30

Almost every investor would have invested in top funds like HDFC Top 200, Sundaram Midcap, Franklin Flexicap or atleast an indes fund.. But there have been silent performers which have done pretty well. One such fund is IDFC Premier Equity Fund. Table below speaks for itself.

And the interesting fact about IDFC Premier equity is, though they accept SIP's through out the year, they donot accept lumpsum investment always. Curious to know why ?

Following is an interview with the CIO of IDFC MF by Wealth Forum. Read on to know more about IDFC MF and its strategies.

The IDFC Premier Equity Fund recently re-opened its lumpsum subscription window - for a brief while until the AMC collects around Rs. 300 crores. While long term SIPs are always encouraged, the fund house is careful in monitoring lumpsum flows. What is the investment strategy that calls for this caliberated approach to sales? Kenneth takes us through the portfolio strategy of the IDFC Premier Equity Fund - which is truly a "portfolio manager's fund" as Kenneth describes it……

Q: The lumpsum investments window in your IDFC Premier Equity Fund seems to be open again after a long hiatus. What is the business rationale for opening and closing this window from time to time and how long will this window remain open and why now?

Kenneth: Let me answer this in two parts, from a business rationale and from the underlying investment rationale. First, the business rationale. This is a product that we positioned based on a long-term structure of how India will emerge from a developing nation to a developed nation. We are happy taking small amounts of money and if you look at the underlying portfolio and the AUM, there is just one investor who has got more than 1% of the entire fund. It's a fairly broad-based diversified equity fund at this point in time withno underlying volatility risk and has been so for the last five years that we have managed this product. We have the window always open for the SIPs though we have controlled the number and the amount of SIPs to about 10 lakhs per SIP and STP is also part of this structure. It has been a steady growth in terms of AUM with no pressure on the portfolio manager or the organization.

From the investment angle, we positioned this product to be a long-term structure. We buy businesses and hold. The turnover ratio ofthe fund is less than 30% per annum. Most of the top ten stocks are the same as the top ten stocks of the last year and alarge part of the portfolio is similar to that in 2006. So it is a lowchurn portfolio and we like to ride with the investment cycles. HDFC, Hero Honda, Bharati and Infosys are all good examples of businesses that we like to buy and hold - businesses that are well positioned to ride the country's growth from a developing to a developed nation.So we try to pick such companies that will grow in scale and establish leadership. All these things take time but if you enter early and ride through the cycle, you can create a lot of wealth.

Q: Interestingly all the examples you gave are large-cap oriented ones, yet there seems to be a perception that Premier Equity is very sharply oriented towards small and mid caps. Is this a correct perception?

Kenneth: Our tag line for the fund is that it is an unrestricted go anywhere equity fund. We buy into a cycle early. If it so happens that an entire part of the portfolio goes on to becomea large part of the market, you get a different classification. You hold on to the long-term cycle and the market capitalization moves upwards, they move into the large-cap bracket. I don't want to really put barriers around saying that we look at the capitalisation first and then build a portfolio.

Q: How has the experience been in recent times? What is the percentage of your portfolio in large caps and mid and small caps?

Kenneth: The way we classify it, the smallest stock of NIFTY is defined asa large-cap base. We have about 20% in the large-cap category but the remaining 70% plus is in emerging businesses. This proportion has been consistent over the last five years. Just to clarify on the mid cap buys, each and every one of the top ten companies which account for close to about 43% of the portfolio is a leader in the business that they operate and hence the largest companyin thatcategory.

Q: Given that from an investment perspective you can buy into liquid counters and closing a subscription window is somewhat synonymous with small-cap oriented funds, why would you not want to keep it as a genuine open-ended fund?

Kenneth: The IDFC Premier Equity fund is a portfolio manager's fund. We strive to identify businesses ahead of the entire curve. I do not have banking, technology, pharmaceuticals, capital goods, real estate in my current portfolio. I only have a sprinkling of oil and gas. Thus it is not a diversified equity fund. The portfolio manager has therefore got the discretion to orient the portfolio around a particular theme, or a particular part of the market that he likes. I have 40% of the portfolio in a consumer/consumer facing business and that's significant polarization. We like this because this is the part of the market where we can practice a buy and hold strategy and not trade on the portfolio. When you have a product offering of this kind available to investors we really do not want investors to look at the historical track record and come in with lump sum amounts. We give them an opportunity to build up their portfolio in a systematic way. It is all about discipline in terms of participating with the growth of the opportunity.

Q: What are some of the other sectors and themes that have attracted your attention in Premier Equity?You mentioned consumer facing stocks being about 40%. What broadly would constitute the balance 60%?

Kenneth: In the last five years the growth in the GDP was driven by the investment economy. The next decade we believe will be driven by the consumer economy and here's where I come from. If you map the current per capita income of India, currently it would be about Rs.46,000 or just over $ 1000. If the GDP doubles and with a growth rate of 1.2% in population, in practice you will effectively double your per capita income. If I am running a business or in this casea portfolio, the best play on that portfolio is to identify how I can capture the growth in that incremental 46,000rupees that is coming into the consumer's pocket. It's fairly a big macro data point, and if you can get 30% or 40% of a portfolio into that number, it will help drive fund performance over a long period of time which is why we oriented a large chunk of this portfolio to the consumer and the consumer-facing economy/companies.

We have about 10% of the portfolio in the agricultural sector and ancillary businesses. There again we come from a very similar thought process. We have about 35-40% of the world population between all the emerging markets with an increased ability to spend. The dynamics there are that a lot of people in the rural economy are going to get rich and demand agricultural mechanization, implements and inputs which are of far better quality than ever before. You can therefore buildan entire chain:from soft commodities which are the inflationary products to the derivatives of higher incomes which because of high food prices will transition to the implements part of the market and to the agricultural inputs.

The third part is infrastructure. In a high inflationary economy, infrastructure assets will be a very significant part of the entire inflation chain. As you go higher there will be demand for the same asset at a higher price. So these are the three parts of the market that we are concentrating on inthe next year or two.

Q: A word on the markets Kenneth : we saw a big sell off due to events in Middle East, Europe and Japan and just as we were being told that risk aversion to emerging markets is increasing, we saw this sharp rally led by FII money. Can we say that a healthy correction is over and the bull market has resumed or should we brace ourselves for more volatility ahead?

Kenneth: This market has no valuation support and the growth is slightly a question mark. In the absence of valuation support I think liquidity is the only support that you would get. So rather than calling for a bull market or bear market if we can call for more liquidity or less liquidity, it would be more relevant!

Similar to last year, I think we will play the guessing game this year too with no clue as to where the markets are going. So I don't want to put a number or a duration to it. It willall depend on the underlying liquidity but don't brace yourselves for significantly new highs or new lows.

Q: Finally, you mentioned that the market lacks valuation support. Would that be true for small and mid caps as well because we saw some 30% correction in small and mid caps? Are they now attractively valued or are they also at the top end of their range?

Kenneth: The underlying constituent mid caps can never be traded, because the moment you grow a fund over 1,000 cores, you get hit by liquidity of that stock. We believe that if the underlying company or entrepreneur has built the DNA of the company to move from number 9 in the industry to number 1, you can grow and be in multiple expansion. And if both the markets and the economy are supportive, that will deliver all the momentum that your portfolio requires. If you can build a portfolio around this in the corrective phase, which is what we started, you will have a portfolio that will last forever and be relevant in all cycles. So valuation wise I would rather be safer with a more expensive company than with an extremely cheap oneeven if the entire market is doing so. I would very rarely trade down on a stock to find cheap multiples.

As far as overall valuations for mid caps go, the last time I looked at the NSE mid cap index, it was trading at about 12.5 times earnings which is at the traditional 30% discount from the large caps.

Top Dividend Yield Stocks / Shares in India : as on 6-April-2011

2011-04-12T12:20:00.003+05:30

Sugar, Coffee Industry : Outlook Updated on Apr 2011

2011-04-04T07:34:00.003+05:30

Following article from
Bloomberg, 1 Apr, 2011, 04.30AM IST,
Coffee, sugar prices to jump 5-fold by 2014
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
LONDON: Coffee, sugar and cocoa prices will rise five- to 10-fold by 2014 because of shortages that will mean consumers getting "swamped" by food inflation, according to Superfund Financial.

A lack of farmland and rising costs mean growers will fail to keep up with demand, said Aaron Smith, managing director of Superfund Financial (Hong Kong) and Superfund USA. Commodities account for about 40% of Superfund's $1.25-billion assets under management. Smith correctly predicted record copper prices in November and a month later rightly anticipated that silver would outperform gold. A United Nations index of world food prices jumped to a record last month. Global food security is threatened by "excessive price volatility and speculation," farm ministers from 48 countries said in a joint statement after meeting in Berlin in January.

"There's a tremendous shortage of food, there's a tremendous shortage of arable land," Smith said in interview in London. "Any kind of food products are going to increase."

Coffee jumped more than fivefold in the two years through July 1994 and more than tripled from February 2002 to March 2005. Sugar prices rose fourfold from June 2002 to February 2006 and more than tripled from June 2007 to February last year. Cocoa advanced 242% from December 2000 to January 2003.

Arabica coffee traded on ICE Futures US in New York almost doubled in the past year and traded at $2.663 a pound at 7:33 am local time. Raw-sugar futures advanced 51% to 27.03 cents a pound, while cocoa is little changed at $2,960 a tonne.

Coffee prices jumped after wet weather damaged crops in Colombia and on forecasts for a smaller harvest in Brazil, the world's largest exporter. Sugar gained after floods in Pakistan and Australia and cocoa advanced as fighting after elections in November disrupted exports from Ivory Coast, the largest grower. Superfund, founded in Vienna in 1995, specialises in so-called managed futures, using its own trading system to buy and sell commodities and currency futures, stocks and bonds. It has a 24-hour trading operation in Chicago, Smith said.

The US consumer price index rose 0.5% in February, the most since June 2009. Asian countries from China to Indonesia raised interest rates this year to curb inflation. European inflation quickened to 2.6% in March, the fastest since October 2008 and above the European Central Bank's 2% limit. The commodity bull market may last for 15 to 20 years, Smith said in July 2008. The Standard & Poor's GSCI Index of 24 commodities, which that month dropped as much as 66% through February 2009, is still 20% below its 2008 peak.

Stocks / Sectors to Invest now in India : Nilesh Shah

2011-03-30T13:54:00.003+05:30

Nilesh Shah, President, Strategic Initiatives, Corporate Banking, AXIS Bank : speaks with ET Now on the trend and gives a list of sectors he thinks are a good bet for investment.

Excerpts:

It is a small sector, but look at paper stocks the way they are going up after the AP Paper deal?

It is a classical trade where a strategic investor comes to buy a company and he pays a huge premium over the market price. He pays a non-compete fees to the promoter and then suddenly the investor realises that oh my God, the market was not valuing them properly and it tries to correct. Over a period of time obviously this company's share price will again come down because the market is a trading investor whereas the person who is buying the companies is a strategic investor. There is going to be difference between those two sets of investors.

What about the overall market though? What is the market so upbeat about at 5700 plus levels?

It is a combination of factors which is probably driving the market. It is always difficult to predict the short-term trend in the market, but during the budget time, I was bullish on the market based on the fact that everyone else was so bearish on the market. Very rarely I go right in the short term.

On the global side, in the US there are worries what happens after QE2 ends. There are worries whether the borrowing limit for the government of United States will be raised or not, will that result into disturbance in their market? If we come to Europe, the political issues in Portugal have again brought back the issues of sovereign defaults. The rating downgrades in the European community continue to occur. In Japan, we know what is happening unfortunately.

So if you put all these things together, suddenly you look at India and here the doubt is whether we will grow at 8% or 8.5%. Here the worry is on inflation which is running at 8%, but the growth is at 8% unlike in the UK where growth is at 2% and inflation is at 4%. So somewhere investors have now realised that probably it is worth investing in India where there is concern on the growth, but it is of 0.5% between 8% and 8.5%. There are worries on inflation, but the central bank is trying to do something to control it and the growth is still pretty robust, valuations are reasonable and we have seen over just last couple of days, reasonably good amount of buying on the cash market side as well as futures and options side. So all these things put together, the fundamentals which are there for to be seen and the flows which are improving and the supply which has not yet emerged, all combination has pushed the market up.

Are you surprised with the bout of liquidity Indian markets have experienced in the last 4 or 5 days about the billion dollar plus? That is large by any yardstick.

No, I am not surprised at all because if you see the behaviour of FII investors in 2010, we received one of the highest ever allocations above $30 billion in 2010 and most of the money came in chunks of just 4 months. So this kind of seasonality in terms of flows, where suddenly one set of investors realises that India is looking attractive, there are not many alternatives available and they all pump the money in. So we will have to bear with this kind of chunky investment and especially when fundamentals are with you and valuations are with you, there is no surprise that FII flows are turning around.

Fundamentally, which are the pockets sectorally looking the strongest to you, could it be banks, IT, what would it be?

IT will have to face the heat of the rising rupee. The rupee has appreciated on the back of FII flows and probably some year-end consideration whereas the banks provide a very good opportunity for investment. They are in a sector where regulator is very very solid, the fundamentals are pretty good and in the emerging market parlance, we have seen that banking and financial sector generally grows at a multiple of the GDP growth. So if GDP has to grow, banks and finance have to grow much faster than that. So you have earnings growth as well as potential re-rating and the possibility of what happened in western world in 2008 credit crisis is unlikely to repeat over here. A combination of that makes the banking sector fairly attractive.

I remember your big call for the year 2010 was to buy telecom stocks. What is your big contra call now for the year 2011?

What worked in 2010 was contra telecom call and what did not work was the infrastructure sector, especially related to construction, engineering and capital goods. I still believe this year the infrastructure sector related to construction, capital goods and engineering will probably work out. If we see in the month of February, where six core sector industries' growth numbers have come, they have come fairly positive. This is in contrast to the IIP numbers which are soft. So somewhere probably it is a harbinger to the fact that the core infrastructure sector is reviving.

It is no-brainer that unless until India invests in infrastructure, the solid growth story cannot be sustained. We need to invest in infrastructure. There is no debate about it. So somewhere what we liked was in terms of execution capability and this was partly compounded by the prevailing very tight liquidity, partly compounded by environmental clearances and bureaucracy and lack of immediate execution on the ground. Now the demand is there, the liquidity is easing off, ECB is being made available and hopefully something will happen on the execution side which in turn will make this sector positive from investors' point of view and then suddenly we could see re-rating as well as earnings growth in this sector. So 2011 should be the year of the infrastructure sector.

So let's divide the infra space into two or three large pockets. Within the infra space, what do you like, do you like builders, asset owners or machinery makers?

We will have to create a bottom up analysis over there. There are certain construction companies which have really come down heavily, their order books are not getting converted into actual turnover and their margins are getting squeezed because of cost push inflation. The market has discounted most of the negatives about them and that could be surprise. Not all construction companies will deliver return, but if you choose your construction companies well, certainly there will be opportunity. Similarly, there could be certain asset owners which have been discounted or neglected by the market.

What is your view on NBFCs? Do you like NBFC stocks? If yes, which NBFC business to your mind looks attractive?

I think it is difficult to kind of go on this sector as a subset of banking and financial services sector. We have seen many NBFCs blowing out in the past because of aggressive business practices. Experience has taught us that you have to invest in companies which are very very conservative. If they are showing fast growth, it probably is coming at the cost of NPAs in future and try to avoid them. Go for companies which have gone through the cycle and who are very very conservative. Within that space you have various businesses which are niche and which gives solid return on equity like two wheeler financing, like rural financing. So there are hosts of NBFCs which are available, but only one factor which investor is to keep in mind that they should be conservative and not aggressive risk takers. If they are growing too fast, be suspicious about it.

Many of the midcap names have been witnessing high delivery base buying. Would you say that the midcaps in the near term or rather in the long term have more upside vis-a-vis the large caps?

If we see the performance of midcap indices over large cap indices, on a longer term basis midcaps have done far better than large cap and small caps have done better than midcaps. However, this performance comes at a reasonably high cost in terms of very few winners which actually make this happen and there are as many losses. So when you are buying into midcap stocks, try to be as diversified as possible rather than concentrated. While it make sense to be concentrated, but in the hindsight only people can figure out which are the winners and which are the losers. For an average investors it is far better to have a diversified portfolio in midcaps rather than concentrated bet.

The second thing, time to buy midcap is when everyone else is selling and when midcaps are available at a discount to the large cap, which is the current situation. Today the midcaps are available at reasonable discount to large caps of about 28% to 30% and this is the time to add madcap. Do not be an aggressive buyer. Buy when markets are falling rather than when the markets are rising, but this is the time and the increase in the delivery of midcap shares is kind of showing that smart money is already accumulating midcaps stocks while the market is focussed on large caps, it is time to go for the next winners and that is available in the midcap space.

Are there any individual pockets that you may have identified in the midcap space?

I cannot comment on a stock basis, but I think the companies where the management has a good track record, they are not too much dependent upon debt and who are generating free cash flow and who are giving generous dividend. If you apply the standard sets of principal you will find enough opportunities within the infrastructure space and other related space.

Tell us the sectors?

I think in construction companies it is worth paying to be contra. In capital goods and engineering it is worth paying to be contra. In technology space if you can find the niche companies which are focused on certain segments of business and which are available at, let's say, less than ten times forward earning, I think they are worth investing right now.

In your new avatar as the President of Axis Bank, are you telling your HNI clients to still buy ICICI Pru Mutual Funds or now the option is open to buy other mutual funds also?

It is a tough question, but obviously as a distributor of products, we are open to all mutual funds. ICICI Prudential Mutual Fund will be always there in my heart, but as a professional I have to work with my brains and will be open to all the manufacturers whosoever is the best for our client, we have to sell that.

Broadly speaking for the year 2011, would you buy companies which are commodity owners or would you buy companies which are commodity consumers?

I will be more biased towards commodity consumers. We will see fair amount of volatility in commodity stocks and even if they make money, the market will not give as much value to them. So if you can move towards the commodity consumers I think that cycle is going to play out well and which is where I am saying that one should focus now on the infrastructure sector. They have taken the worst hit in terms of liquidity, in terms of cost push, in terms of execution delay, in terms of demand restrictions. Now probably all these things are about to turn. Demand is there, execution delays are going to get resolved, liquidity is coming back and hopefully cost push inflation except for salaries and wages may also come under control. Put all these things together, commodity consumers probably are a little bit more biased toward commodities.

One sector which surprised everyone on the upside for the year gone by was the entire consumption space. Your thoughts on that?

I think consumption has done extremely well, because of the fiscal incentives provided by the government during the 2008 crisis. Thereafter it was supported by the farm loan waiver and the rural side NREGS on the rural side. It was also related to pay commission hike to the government employees and then overall private salaries also jumped up significantly. We have seen one of the situations where monetary policy was loose, fiscal policy was loose, it resulted into consumption stocks doing well and today consumption stocks are available at a very very high valuation. Partly this valuation is also reflecting the limited flow which is available in these companies. Putting things together, yes, on a longer-term basis, the consumption sector looks good, but valuation looks expensive.

CLICK HERE to read the original article.

Mutual Fund Tax Laws in India : Ready Reckoner

2011-03-22T14:10:00.004+05:30

Below mentioned is a summary of tax laws related to mutual fund investments in india. In many occassion, we may be searching for such small but crucial information. This page would come in handy at that time.

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Fixed Maturity Plans (FMP's) : Advantages

2011-03-22T11:18:00.003+05:30

Come March and apart from equity-linked saving schemes, there's another mutual fund (MF) scheme in the tax-friendly genre that offers an attractive proposition to make money-fixed maturity plans (FMPs). As of now, there are several of them on offer . Most of these FMPs come with a tenor of one year, though a handful offer a tenor of three month to one month too.

For those in the highest tax bracket of 30.90%, FMPs make sense since the tax rate is just 10.30% if they are held for at least a year. For tenors of a year or more, opt for the growth option. Short duration FMP's of less than an year can be in dividend mode, since the dividends are tax free after a dividend distribution tax of 15% for individual investors.

FMPs are closed-end debt schemes that come with a specific tenor, typically three months to a year, or even about two years. These schemes invest in debt securities that mature just before or on the date of the scheme's maturity. In other words, a one-year FMP will invest in scrips that mature just before a year. Around the maturity date, it sells all its securities and pays back the money to its investors.

Since FMPs invest largely in CDs and commercial papers (CP; issued by companies), they benefit when the prevailing interest rates are high in the economy.
How to choose

Choosing an FMP at the right time can be quite a pain. Most FMPs open and shut for redemption within a few days. Names of FMPs can also sound complicated with two issuances separated by just a week and saddled with serial numbers.

Stay in touch with your Investment advisor: The best way to keep track of FMPs is to be in touch with your investment advisor or Wealth Manager. Ask for regular updates. Once you ascertain the time frame for investment, keep an eye on New Fund Offers (NFOs). Blinking at the right time can get you extra returns.

Which plan to choose?

FMPs are taxed like any other bond fund. If held for at least a year, you pay tax at the rate of 10.30% (including surcharge) without indexation or 20.60% with indexation. Compared with that, interest on bank fixed deposits are taxed at your income tax rates (30.90% if you are in the highest tax bracket). For tenors of a year or more, go for "growth" option. For tenors less than a year, opt for dividend plan.

Double indexation

There's a trick in the book that helps you save taxes on your FMP investments. Despite long-term capital gains tax on debt funds at 10% without indexation and 20% with indexation (depending on the option you choose), you can save taxes by choosing the indexation option, especially in FMPs launched towards the end of March and those that come with a tenor of little over a year, so that it covers two accounting years.

For instance, a 400-day FMP that closes on, say, 21 March 2011 would mature on 23 April 2012 and would cover two accounting years; 31 March 2011 and 31 March 2012.

On account of rising inflation-and the subsequent decrease in the value of money- the government allows the cost price of a financial instrument (in this case, your FMP) to be inflated, so that the profit (difference in selling price and cost price) gets narrowed down. For instance, the cost price of Rs1 lakh invested in an FMP today will become about Rs1.12 lakh at the time of maturity, assuming the cost inflation index goes up by 6% after 31 March 2011 and a further 6% after 31 March 2012.

Since the repurchase price of the FMP is Rs1.09 lakh (less than Rs1.12 lakh; the inflated cost price), your investment shows a loss on paper and hence you don't pay tax. Typically, FMPs launched during the last fortnight of March offer double indexation (covers two accounting years).

Do make use of such opportunities to maximize wealth

Reliance Communication's Achille's Heal Problems

2011-03-22T09:37:00.006+05:30

In Greek mythology, when Achilles was a baby, it was foretold that he would die in battle from an arrow in the foot. To prevent his death, his mother Thetis took Achilles to the River Styx which was supposed to offer powers of invincibility and dipped his body into the water. But as Thetis held Achilles by the heel, his heel was not washed over by the water of the magical river. Achilles grew up to be a man of war who survived many great battles. In the war against Trojan's to win back Helen of Troy, an arrow shot at 'Mighty' Achilles heel ended his life.

Since then "Achilles Heel" is refered to "a deadly weakness in spite of overall strength, that can actually or potentially lead to downfall". It is a seemingly small but actually crucial weakness.

Relating it to Reliance Communications:

(1) R.Com is a company passionatly promoted by Reliance group.

(2) It was a dream child of Mukesh Ambani

(3) During partition, after their late father Dhirubai ambani, Anil Ambani inherited it.

(4) Post partition, Anil was really busy brandinga new identity of his company: Anil Dhirubhai Ambani Group, popularly known as ADAG. It comprised of R.Com, RNRL, Rel Energy, Rel Capital. He later launched R.Power. Apart from this ADAG owns media company like Adlabs, Big Cinema and Reliance Media works.

(5) Though R.Com debuted the indian telecom space with lots of vision, Anil's passion to be the wealthiest person along with his proximity to politicians and lack of focus on his companies seem to have doomed his fortunes.

(6) Anil was primarily PRO of Reliance Group. He is good at stage. He is good at events. He is good at sports and jogging. He is good at mass motivation. He reaches out well to media. But Business is beyond all these things.

(7) The kind of hype created around Reliance Power IPO was phenomenal. Had he lived up to the expectations, he would have been invincible.

(8) Coming to R.Com : compounding to the competition (+) huge loan book of about Rs.30000 crores (+) huge cost incurred for dual licence : GSM and CDMA (+) 2G Scam have been R.Com's headache. Compounding to this is the Number protability issue, which gave Indian mobile phone users the option to retain your phone number while you can switch your operator. As a result dissatisfied customers are free to switch over to some other company. We had indicated in our article dated 26-Nov-2010, that R.Com would be likely casulity of this new option thrown open for mobile phone users. (To read this article, CLICK HERE)

(9) Rather than satisfying existing customer with better quality and facility, R.Com was busy selling new, cheap model mobile phones. And they were busy adding up number of subscribers, only to see them switch to to other companies due to poor services. There was a basic logic why these telecom companies hunted for new subscribers. (CLICK HERE TO READ RELATED ARTICLE)

(10) Now a report states that less than 5 million cellular subscribers (nearly 1% of the customer base) had opted to switch carriers using the mobile number portability option. Of these, a net 1,92,761 customers switched to unlisted Vodafone Essar, while Idea Cellular was next, with net gains of 1,50,789 customers. Bharti Airtel gained a net 1,48,215 customers, but Reliance Communications was a net loser of 3,06,417 customers.

Unless otherwise R.Com redefines its vision and regains the confidence of customers, it would be difficult for the company to bounce back. Probably it may even trigger desperate strategic partnership.

Top 100 Mutual Funds in India : Top Fund Managers in India

2011-03-22T08:06:00.003+05:30

Following article was published in Businessworld Issue Dated 28-03-2011.

Qualcomm-Bharti Airtel Deal

2011-03-21T07:48:00.002+05:30

About a month back, we were at the disposal of Foreign Companies, who were techno partners in India. When a Foreign company sells stake in its indian unit, it was obvious that the indian unit was getting hit. But that was the way of life then.

But now, with the launch of NASDAQ-100 ETF fund, life becomes easier. For instance Qualcomm which is part of NASDAQ was holding 76% stake in Broadband Wireless Access Spectrum in India. Though BWA was an Indian asset, since it was held by a foreign company we could not encash on the opportunity. And today's news says that Qualcomm would sell its entire 76% stake to Bharti Airtel company. No doubt your existing investing in Bharti Airtel would benefit you out of this deal.

Above that, if you invest in NASDAQ-100 Fund you indirecly hold on to 100's of companies including Qualcomm. No doubt - it may be a win-win situation.
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Qualcomm Inc. (QCOM: 51.71 -0.61 -1.17%), the leading chipset maker for mobile handsets worldwide, intends to dispose of its remaining 76% stake in Broadband Wireless Access (BWA) spectrum in India to the local operator Bharti Airtel for around $1.2 billion–$1.3 billion.

In July 2010, Qualcomm sold 24% stake of its Indian broadband venture to Indian telecom operators Global Holdings Corp. and Tulip Telecom Ltd. for a consideration of around $58 million.

In 2010, the Government of India concluded a spectrum auction for both 3G networks and broadband wireless access where Qualcomm paid $1.045 billion to obtain the operating license in four major service areas of New Delhi, Mumbai, Kerala and Haryana.

Qualcomm plans to divest its full stake after creating a next-generation (4G) LTE (Long-Term Evolution) network to roll out super-fast broadband wireless access services. LTE is the emerging mobile technology that offers extremely fast broadband access speed and high-end multimedia services.

The fast-growing broadband market is attracting billions of dollars for introducing LTE networks in India in the coming years. As of now, after China, India is the second largest mobile phone market with respect to subscriber count.

Despite 735 million wireless subscribers, the broadband penetration rate is a mere 2%. This makes India the investment hub for telecom operators and gear makers.

Qualcomm maintains a strong balance sheet with nearly $19.107 billion of net cash & marketable securities. The company continues to generate positive free cash on a sequential basis. We believe liquidity will further strengthen as the company has decided to sell its FLO TV 700MHz spectrum licenses to AT&T (T: 27.94 +0.20 +0.72%) for $1.925 billion.

We maintain our long-term Outperform recommendation on Qualcomm. Currently, Qualcommhas a Zacks #2 Rank, implying a short-term Buy rating on the stock.

To read original article, click here.

Foreign Investors can Invest in India

2011-03-21T07:30:00.004+05:30

Indian mutual funds can now raise money from foreign retail investors. It is just the boost that the troubled sector needed

The floodgates might just have opened for the Indian mutual fund industry. Indian markets have always been considered to be very attractive for investors in developed markets, but mutual funds in India were never allowed to tap retail investors from abroad. Hence, mutual funds used the Mauritius route to attract international investors into their portfolio management schemes (PMS) or offshore funds. This has often been considered cumbersome and the target customer has always been institutional investors. The latest Budget proposal, however, might just change all this.

The global mutual fund market is around USD 20 trillion, with emerging markets claiming an increasing share of the pie. The Indian mutual fund accounts for only USD 150 billion, but if the economy grows at even around 8% and mutual funds are allowed to sell their products directly to foreign retail investors, the size of the market can double in a few years.

There already exists a large market for offshore India-focussed funds with more than 150 such schemes in operation. This means foreign nationals want ways to punt on Indian equities. Given that the global wealth management market is growing at a rate of around 10% and the Indian market is expected to grow at twice the rate, the Indian market should easily touch USD 400 billion in the next five years. If Indian mutual funds find a market internationally, then this figure can go up further.

However, without clarity on issues such as taxation and ‘Know Your Customer’ norms, investors may not flock to Indian mutual funds. “With ‘Know Your Customer’ norms becoming compulsory, nobody is clear about how to clear a foreign retail investor. We need to wait for more details before we become euphoric about this proposal,” says the CEO of a mid-sized mutual fund. Most foreign institutional investors come through the Mauritius route or countries with who India has signed a double taxation treaty. This helps the countries withhold tax. Mutual funds want to know how these issues will be addressed in countries where such treaties are not signed.

But overall, the industry is optimistic. There is a general feeling that bigger mutual funds will benefit more because they have the size and the money to expand into global markets. Also, mutual funds that sell exchange-traded funds (ETFs) will have an advantage over others as international investors will prefer mutual funds that sell index funds and ETFs. These funds are better known to foreign investors and bypass the fund manager risk.

But the key area is distribution. Most of the top funds in India are homegrown and do not have a foreign partner and will have to use the same distributor as mid-size and smaller funds. “All Indian mutual funds will be on equal footing when it comes to operating in the international markets, especially when it comes to distribution,” says Sanjiv Shah, executive director, Benchmark Mutual Fund.

But the biggest beneficiaries will be foreign mutual funds that operate in the Indian market because they already have an established distribution model in many countries and will find it easier to sell their Indian funds.

After the ban of entry loads, the Indian mutual fund industry went through a phase of low confidence with industry players thinking that selling mutual funds in India has been made a difficult proposition. The latest proposal comes as a very pleasant surprise.

Click here to read the original article in FORBES India.

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Recent Holdings of Big Bull Rakesh Jhunjhunwala:Jan2011

2011-03-20T22:34:00.004+05:30

From a distance, stock market is very attractive. But when you get closer and closer, the vision gets blurred. In an ocean of 6000 listed stocks, it is common for an investor to gasp when it comes to stock picking.

At this juncture, we take solace from the investment pattern of expert invesors who have made a huge fortune in stock market. One such person in India is Mr.Rakesh Jhunjhunwala. Though his short term trading calls are great secretes, his long term portfolio is a wide open book on the internet. Though his portfolio has been tailor made for his requirement, still some of the stocks may sound good and can be part of your portfolio too.

Following list of stocks probably held by Mr.Jhunjhunwala and family in Jan 2011, is obtained from internet. Also given is his holdings in 2008. You would observe that some stocks in 2008 has been exited in 2011. Hence blindly staying invested in such stocks, because Jhunjhunwala is holding them could be disastrous. This list is given just to give you an ideas about the list of probable stocks you may consider in your portfolio to create wealth.

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Interview with Rakesh Jhunjhunwala, Madhusudhan Kela etc

2011-03-20T22:22:00.003+05:30

2010 was the year of equities. Across the world, equity markets delivered strong returns despite the sovereign debt crisis in the eurozone, which caused huge periods of volatility in the middle of the year. However, the Indian markets saw a surfeit of liquidity thanks to quantitative easing measures taken by the government.

But at the start of 2011, political scams and corporate governance issues combined to create a huge dent in the Indian stock market. Even reasonable Q3 earnings failed to excite the market. But just when the market seemed to have come to terms with these issues, geopolitical tensions in the Middle East surfaced in February, which have sent crude prices soaring above USD 100 per barrel and the Sensex to 18,000 levels.

However, ace investor and partner of RARE Enterprises Rakesh Jhunjhunwala feels that India is still in a cyclical bull market, which started in 2003. Although he is extremely bullish on India, he hastened to add that India will have to counter rising crude prices and hope for a good monsoon. "There are two crystal balls you have to see. One is the monsoon and the other is the oil price. If both go in India�s favour I am extremely bullish."

Jhunjhunwala cautioned that with India importing most of its oil, crude is a big blockade for it at the moment and as long as it stays above USD 85-90 per barrel, he sees upsides for the market being capped.

However, Madhu Kela, Chief Investment Strategist, Reliance Capital sees an inverse correlation between the market and crude prices in the short-term. Speaking on crude, he said though there is no case for crude to be at its current levels, he added that if the situation escalates in the Middle East, especially if things start turning for the bad in Saudi Arabia, then crude may hit USD 150-200 per barrel.

Even as pundits expect 2011 to be a challenging year for India, in his eyes, Kela sees 2011 as being the year of the stock picker. According to him, the midcap index, where the real opportunity lies for investors, has numerous stocks available cheap across the spectrum. "I will be a systematic investor through this difficult year and buy companies with conviction with a three-year time frame," stated Kela.

Akash Prakash, Amansa Capital sees the Nifty bouncing between 5700-5200 over the next six months. According to Prakash, the Nifty seems to have made a bottom at 5200. Prakash said that if India regains control both politically and economically, then it should make investors feel a lot better about its growth outlook and the country as a whole.

Below is a verbatim transcript of their interview on CNBC-TV18. Also watch the accompanying videos.

Q: What is your tactical view on India as a market?

Jhunjhunwala: My view that we are in a cyclical bull market. I think India is very much in a cyclical bull market and in my opinion it started in 2003 and it�s going to last for long time to come. While I do agree with all his other points that commodity prices are a big I would say blockade to stock markets over the world and especially in India because India is an economy which is especially sensitive to oil prices was not in terms of inflation, the current account deficit and so many other implications. It�s also an economy where it has not been passed on to the consumers.

So I tend to agree with whatever Ruchir Sharma just said. Only one thing I would like to point out that I don�t think necessarily that India and the western world is going to move in tandem because we cannot forget that the Sensex was 3000 in 2003 and the Dow had reached 14,000 and today the Dow is below 14,000 levels and the Sensex is six times that level (comparing level of Sensex in 2003). So essentially over a period of time we have outperformed the western markets considerably and I think that will continue.

Q: What about tactically? What about say a period of six months and nine months - one year?

Jhunjhunwala: That�s difficult to predict but I can�t say what's going to happen in the next six-nine months except that India is far more sensitive to oil prices than maybe the western world.

Q: Are you tactically cautious therefore than you generally are?

Jhunjhunwala: Stock markets are always cautious. It�s always cautious.

Q: Don�t evade the question. Are you bullish for the next nine months or not for the rest of this year?

Jhunjhunwala: No, you asked me a question, I gave you an answer. I am not evading. Don't act like a tax administrator, it�s not about evasion.

Q: I am rephrasing my question, are you bullish for the remainder of this year for India?

Jhunjhunwala: There are two crystal balls you have to see. One is the monsoon and one is the oil prices. I think if both come in India�s favour I am extremely bullish. I think both can be a blockade to India and at the moment oil prices are a blockade. So as long as oil prices are above USD 85-90 per barrel I think the upsides are capped in my opinion.

Q: You've got a different perspective, so much of the current talk is around you tell me where oil is going to be and I will tell you where the Indian market will be? But your view is that maybe we should not be drawing this one to one perfect imbursement correlation with crude?

Kela: I think in the short term whether you like it or not there is a correlation and the markets will behave in the short term like that. Only two-three things which I would like to point out one is related to oil and the other is related to markets, it's about India. In 2009, oil was 7.5% of our GDP and the average oil price in 2009 were USD 90 per barrel. This year 15 days are left I think oil would be 5.8% of what total GDP is and the average oil price this year is USD 84 until now. So, clearly domestic production as a risen by 13% this year so oil definitely hurts us but maybe the dependence of oil about India is decreasing as our GDP growth.

I think one thing that has got completely unnoticed in all these debates is we are already talking about being a USD 2 trillion economy by 2012. So that is one part relating to oil. If this oil really goes significantly higher than where it is and what Ruchir presented if we have to believe that all these commodity prices are driven by excess liquidity or a speculative phenomena then there is no case for oil being where it is. So it is only a matter of time when it will fall.

We don't know, tomorrow if this situation escalates goes down to Saudi Arabia for all we are speaking oil will be USD 150-200. But there is no case for oil being at where it is and if the commodities correct and oil corrects, that's a very sweet spot for India.

The other thing which I want to point out, while all of us are looking at Sensex and Nifty and Nifty being at 5,600 and Sensex being at 18,000, the real index in my opinion, the real midcap where the real opportunities are is well-well below these indices. There are so many stocks which are available so cheap across this spectrum. So I think 2011 though broadly I agree that it is going to be a challenging year and it is very difficult for the market to make new highs.

But this is really a year of stock picker you need to systematically buy because only god has to come and tell it in my ear that oil is going to fall below USD 80. I don't know when it falls. So I will be a systematic investor through this difficult year and buy companies with conviction with a three-year time frame.

Q: What is your sense? At this point would you draw the line at 5600 Nifty or do you think we may - on the way up?

Prakash: No I think for the next 6 months is a trading zone for India I think 5,600-5,700 are on the Nifty on the way up, 5,200 on the bottom, I think the markets will bounce around this range for sometime.

Q: Is 5,200 the bottom?

Prakash: Yes, I don't think it goes much below that, of course oil goes USD 200 or something, hopefully will not happen, but otherwise I think that, that level will hold, because I think in that level the valuations become reasonable, what Madhu is talking about and even broad market valuations come to long-term averages or slightly below that. I that next 6 months are important also in my opinion because the markets don't really look at the government, and figure out, I think it presented a reasonably decent budget in terms of change of orientation, much slower spending growth, talked about trying to regain reform momentum on a whole bunch of bills and stuff like that.

In the market we will see the next six months and see what the government does. We will know the next six months are these reform bills are going to get through parliament or not. Is there going to be any action on government or not or is the government going to meet its spending target and fiscal deficits targets or not?

All these are very clear in the next six months. So I think, I broadly given Ruchir's view that if you are doing that to break out, unless commodity prices at least normalize, and stop going up and come to more normal level.

But I think the one factor which we should not ignore is that to a certain extent, India's destiny to a certain extent is in its own hands because people are very down on this government. The credibility is zero with government and if you read the press table nobody believes they can control spending, nobody is believes in any bill passed in parliament, nobody believes they will take any action corruption and governance.

So that is a potential supply that if they actually regain control of the economic momentum and regain political momentum, that could be something which is independent to what happens globally, could make people feel a more lot better about India and our growth outlook.

Q: But what worries you more about in these India specific factors that you just outlined or what happens to the world in the next nine months?

Prakash: A combination of both. I mean obviously commodity, everyone talks about. So, that is the problem because our linkages, then our exposure to commodities. But the reality also I think is India is going through a broad de-rating because you can't be the most expensive market in emerging markets with the type of governance and lack of reforms that we have.

And the reality is corporate earnings expectations were too high in the beginning of the year. I think we have a serious inflation problem. People are worried is the inflation cyclical or structural, there are debates about that. So I think the India story initially got clouded by itself. India was down below 15% before oil went too USD 125 right?

So that was an India specific problem. Governance, inflation, interest rates, earning expectation is too high. We have got our own self inflected weaknesses. They have been compounded by the global macro situation that we find ourselves in today. So I think even if global macro remains not great, if we can correct our own self inflect weaknesses, corruption, governance, inflation reforms, India will do better than people think.

Q: You have always been bullish about India per se, your problems have been with the world, do you agree with Akash's assessment that it�s India specific problems which have led to de-rating?

Jhunjhunwala: I would say it has led to some of the premium being shaved off. I don't look at them as problems, it is part of the economic growth process, it is part of the democracy. I think it is good all this is coming out because now every Prime Minister will think well before appointing a new CVC Chief. Telecom spectrum is now always going to be auctioned. So it is part of the process.

Sometimes I have a very radical thought in my mind. What I feel is that oil should go to USD 180 then only these elephants will wake up because we acted only in 1991. Yesterday we had a session with Mr Yashwant Sinha, I asked him that every politician knows what's needed to be done. You can�t run India with Indian Telegraph Act passed in 1883. In the 21st century you are running Telegraph Act of 1883, you can�t pass a Companies Bill which was introduced 6 years ago. I said you are in power or Congress is in power what difference does it make. These are all non-political laws. So I think it would be good, I mean maybe for short term we will get a shock. But we need that kind of a shock somewhere I feel to get Indians to act. I really feel, how do you get them out? You can�t do anything, can�t say anything.

Q: Is 5200 the bottom?

Kela: I am not evading the question. My mind is very clear. Whether 5,200, 5,000 or 5,600. We don't know where the index is. I am really focused this year to identify good companies, buy them from a 3-year, 5-year perspective. This is one of those 2004 to 2006 era where across the board you are getting companies really cheap.

Today we ran some sensitivity. There are 80% stocks trading below 2007 peak levels while in these 50% of these cases earnings have doubled from 2007 levels. So actually valuations have become 25% of what it used to be in 2007-2008 levels. So I am really focused this time around. We can get into a global debate where the markets are. But finally the money is being made when you invest in the right companies.

Q: Do you think this is just a 6-9 month kind of tough phase after which we get back onto a bullish kind of trajectory for India?

Jhunjhunwala: I would like to make two observations, although I agree with Ruchir that financial speculation is playing a very large part in oil prices. But even if Libya is solved tomorrow, the problem is how do you know whether something is going to happen in Saudi Arabia or not. I have not read anywhere in any part of the international press, anything about any problem in Saudi Arabia or Kuwait.

But still they say there is this lurking fear and to my mind what troubles me is why the Saudi Arabian stock market is down 24%. So even if the financial speculation is going correct there is always going to be a risk premium for the next 3-9 months on oil prices. If nothing happens in 3-9 months then people will tend to forget. Second observation I would like to make is that the Indian public has never participated in this rise from 2800-2900 effectively.

Nasdaq-100 Portfolio Factsheet

2011-03-17T14:24:00.004+05:30

There are lots of Myth surrounding NASDAQ Index. Here are a few Mythbusters.

MYTH 1 : NASDAQ-100 index comprises of All American Companies
Mythbuster: It contains Top 100 companies from different countries. For instance Infosys is part of NASDAQ-100. For better understanding, only companies with standards similar to or better than Infosys are part of NASDAQ-100.

MYTH 2 : NASDAQ-100 is an index containing only Technology stocks, like computer companies
Mythbuster: Only 60% of NASDAQ is Technology oriented. Rest 40% is from industry like healthcare, telecom and consumer goods.

MYTH 3 : All american markets including NASDAQ have done badly post 2008 financial crisis.
Mythbuster:
• Returns of Last One Year : Nasdaq-100 : 27 % Vs Nifty : 8.35 %
• Returns of Last Two Years : Nasdaq-100 : 36 % Vs Nifty :39 %
• Returns of Last Three Years: Nasdaq-100 : 15 % Vs Nifty : 0.7 %

Entire portfolio of NASDAQ-100 is attached for your kind information. It would be an ideal diversification to be part of your investment portfolio.

Portfolio of NASDAQ-100

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FMP : Better than Fixed Deposits ?

2011-03-16T17:13:00.005+05:30

FMP stands for Fixed Maturity Plan. These are a variety of mutual fund which invest in interest yielding securities. They are conservative in management style, since the investments made are held till maturity.

FMP's have been around for the past couple of years. You have FMP's for diverse durations to suit your diverse needs. For instance FMP's are launched as:
(1) One Month FMP
(2) 35 Days FMP
(3) 45 Days FMP
(4) 90 Days FMP
(5) Five month FMP
(6) 180 Days FMP
(7) One Year FMP
(8) 18 Months FMP
(9) Two / Three / Five Years FMP

FMP's Features are:
(1) Closed Ended funds.
(2) Listed in Stock market post issuance in NFO
(3) Dividend's declared are Tax Free
(4) Being Debt fund, Dividend distribution tax is deducted @ 12.5%
(5) Unlike equity mutual funds, there is no Securities Transaction Tax (STT).

An article which appeared in Tamil Fortnightly Investment Magazine is attached for your kind information.

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Investing in US Securities, in INDIA : NASDAQ-100 ETF

2011-03-16T12:15:00.006+05:30

Indian Investors can breath easy. So far equity investment meant that they were investing only in Indian Stock Market - No other option. Hence they swing with the Sensex or Nifty.

From today onwards, you can invest in United States's NASDAQ-100 Index, sitting in india. This innovative investment option throws open a whole new world for Indian Investors.

Click the document below to know more about :

(1) About NASDAQ-100
(2) Why should you consider investing in NASDAQ-100
(3) The Procedure to invest in this fund.

For further clarifications, do mail us @ easyinvest@gmail.com.

Happy Investing :-)

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How to Start / Stop "Donot Disturb Services (DND) in India"

2011-03-14T12:46:00.008+05:30

SMS is modern days telegram.

Any message, mostly of 160 alphabets or 180 characters, is delivered instantly at the mobile phone of receiver. And all these services comes at a cost as low as few paisa's.

Just like any development or advancement is accompanied by exploitation, this SMS was also exploited by opportunistic people. Many sms sourcing business, product promotion ofter pester the mobile phone owner. These sms are called Bulk sms, often send from a website or by a software. And with many of these cell phones having capacity to hold 50 sms to 200 sms in inbox as maximum, deleting these sms seem to have been a big punishment for them.

After receiving tonnes of complaints from mobile phone subscribers, the telecom ministry formed a national level directory of "Do Not Disturb Registry". Once you subscribe yourself in this website or send an sms to them, your number is enrolled with them with in 45 days. Once enrolled, you can be sure that "Bulk SMS" donot disturb you anymore.

But the catch is, all bulk sms are blocked. For instance, at EASY Investments we send market updates by sms. It is a convenient way of reaching all our investors, without disturbing them. These sms are sent through a dedicated website. But our sms would not reach the DND enabled mobile numbers. Hence many of the critical informations that could make lots of sense for your investments are being missed out.

What is the way out ?
To start receiving these sms, you need to unsubscribe to DND. In such case, all sms including our SMS would be received within 45 days. No doubt, JUNK sms would also be dumped in your mobile. You need to eliminate unwanted sms, if you want to benefit.

How to Stop receiving Bulk SMS:

Send an sms with message "START DND" to telephone number "1909".
Telephone calls/SMSs to this number are FREE of cost.
The telecom service provider will acknowledge the request within ten days.
Requests will become effective in 45 days from the date of request.

How to Cancel DND and start receiving Bulk SMS:
Subscriber may also cancel their earlier requests by calling or sending SMS with Keywords ”STOP DND” to “1909”. You may find your successful cancellation of registration will effective after 45 days.

To check status of your enrollment for DND, kindly click here.

Short Term Investments in India : Very Attractive Now

2011-03-08T13:51:00.007+05:30

It is normal in business that you profit from an opportunity. With liquidity in the system getting tight, short term investments are yielding spectacular returns.

For instance a plain liquid fund, that invests in pure Bank Certificate of Deposits (Bank CD's) and Call money usually yield lesser than your repo rate of RBI. With Repo rate at 5% or so, your liquid funds should be yielding hardly 4% or so. And a liquid fund doesnot have any entry load or exit load, with no exposure to stock market and riskier assets. Typically it is more like a bank deposit, made through a mutual fund. The bargaining power of an institution like Mutual fund helps you get more returns.

Thanks to the liquidity crunch towards the end of the year, liquid funds are yielding as high as 8% to 9%., even for an investment of a month or so. No doubt this is a rare chance to earn higher returns on your idle funds that are in your Bank SB account or current account. With SB account yieiding just 3.5%, current returns of liquid funds are 200% higher. May be for a month or two, investors can expect such exceptional higher returns.

And when you are investing in a bank deposit, your bank is investing this money in a liquid fund or similar product to earn a trouble free return. In simple terms, your bank is profiting out of your investments. Why not you invest directly and earn good returns out of liquid funds ?

Related news article is updated below for your kind information.

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Karur Vysya Bank - Rights issue - More details

2011-03-08T09:33:00.002+05:30

KVB Rights issue opened for subscription on 28-Feb-2011. The issue closes on 15th March 2011. And as per the communication from KVB, the closing date for the Rights issue of the Bank has been extended by two days, i.e., from 15th March 2011 to 17th March 2011. Also the last date for receiving requests for split forms has been changed from 08th March to 10th March 2011.

Warren Buffet's Visit to India

2011-03-07T09:04:00.005+05:30

The billionaire investor who is visiting India soon to propagate his ‘Giving Pledge’ charity cause, has sought a meeting with the Indian Insurance chief Mr.J.Hari Narayanan, for an unknown agenda. It is to be noted that Mr.Warren Buffet's Berkshire Hathaway runs many insurance and reinsurance companies across the globe.

Although the regulator may not be able to commit on the legislation about raising foreign direct investment in insurance from 26%, it may still figure in the discussions.

Global insurers such as Prudential, Aviva and New York Life have been lobbying with the government for years to raise the FDI cap to at least 49%, but in vain. Although the Manmohan Singh government has agreed in principle, it has failed to implement it due to political constraints.

Buffett, who said “our elephant gun has been reloaded, and my trigger finger is itchy” for acquisitions, operates in India as a corporate agent to sell general insurance products in venture with Bajaj Allianz General Insurance Company. It plans to expand the distribution to health, life and travel cover if the market is receptive. Besides insurance, reinsurance is another area of interest for Buffett.

So far, overseas reinsurers have not entered India and are operating only through liaison offices. Players like Munich Re, Swiss Re and Reinsurance Group of America have liaison offices in India. National Indemnity , a member of the Berkshire Hathaway Reinsurance Group, is selling reinsurance to general insurance companies in India.

Buffett will begin his India trip with a day-long stopover at a small company in Bommasandra, an industrial township on the outskirts of Bengaluru. That will present an opportunity to evaluate the performance of Mr.Warren Buffet's only Indian investment, TaeguTec India , makers of carbide tools for automobiles. It is a unit of Iscar, an Israeli conglomerate owned by Berkshire Hathaway. Mr.Buffett will visit Bengaluru, New Delhi and Mumbai.

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Warren Bufftet in India

2011-03-03T17:50:00.002+05:30

Many investors worldwide are fans of Warren Buffet of USA. No doubt, he is one man who could hold his head steady in adverse situations and turn such moments into great opportunities.

For long, close to six or nine months, there has been rumors that Warren Buffet is to invest in companies like ONGC and Bajaj Allianze.

And today there was news that, Warren Buffet's Berkshire Hathaway 'plans' to enter the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General. Inface a company called Berkshire India has been incorporated to sell and distribute general insurance products in the country.Known for irrational behaviour, Indian Investors fell one over another to buy this stock which ultimately got locked up in the upper circuit of 20%, after gaining Rs.88 in a single day today.

We need to understand the basis of such scrambling and the real logic
(1) Plz note Warren Buffet is not taking a stake in Bajaj Allianze.
(2) He is just getting registered in this insurance firm as a Corporate agent.
(3) There is a difference in being a share holder and a distributor of a company.
(4) There needs to be no necessity for such great urgency in buying these stock, at such frency moment.
(5) If the client of Berkshire India had to make an insurance claim, it is for Bajaj Allianze to settle the claim. Berkshire will not be affected in any way. After all it earned its commissions.
(6) Given these situations, in what way Bajaj Allianze would stand to gain is yet to be seen, but for the fact that one of world's richest person is its corporate agent !

To read related article, click here

Investing in Top 100 Shares in Nasdaq : MOST Share N100

2011-02-26T17:35:00.003+05:30

Gone are the days when Indian investors would be investing only in Indian stocks, commodities and currencies. Hopefully from March 2011, Resident Indian Citizens can look forward to invest across geographies.

Known for innovation, Motilal Oswal Mutual fund has again come up with the innovative ideas of investing in Top 100 stocks of Nasdaq. Following are the highlights:

(1) NASDAQ-100 Index includes 100 largest domestic (U.S.) and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization.

(2) Nasdaq 100 ETF is a fund which will invest in Top 100 Global Non Financial companies. By investing in Nasdaq Top 100 ETF, you invest in companies like Apple, Amazon, Microsoft, Google, Oracle, Cisco, Intel, Qualcomm, eBay, Starbucks, Yahoo etc.

(3) Contrary to popular belief, only 60% of Nasdaq 100 weightage is in Technology sector. There is a healthy mix of Bio-Tech & Consumer as well

(4) The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.

(5) Volatility of Nasdaq 100 is 15% p.a., half of that in Indian markets

(6) Trailing 12 month returns are over 25% with a number of asset allocators now going overweight on developed market Equities

(7) Very low correlation of Nasdaq 100 with Indian indices – Sensex & Nifty – around 0.30 to 0.40 – one of the best diversification options for Indian investors

(8) Nasdaq 100 ETF named as "Most Share N100" will be listed in NSE.

(9) Allotment price will be Approximately 1/1000th of the NASDAQ-100 Index on the allotment date.

(10) Citibank N.A would be the fund's accountant and custodian.

That is a real good news for every Indian Investors who have been longing to diversity across countries and capture the growth potential. When the world recession comes to an end, developed markets are likely to witness growth. Investing in N100 along with Indian equities would give you the perfect blend. N100 would be a sensible diversification for investors portfolio. No doubt, Technology has made Geography : History.

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"MOST Innovative Fund of the Year" Award Goes to .....

2011-02-23T14:32:00.003+05:30

Interview with Mr.Motilal Oswal on 21-Feb-11 in MINT

2011-02-23T11:17:00.008+05:30

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Note: The monthly newsletter of EASY Investments "The FACTS" released on 1st Feb 2011 incendentally carries the same title in the lead article "Buy Right-Sit Tight". It is heartening that "EASY" shares the same wavelength and frequency of their business partner Mr.Motilal Oswal.
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Index Funds Vs Actively Managed Funds

2011-02-22T19:47:00.009+05:30

Many Investors who read a lot are often confused which funds to invest in : Index funds or actively managed funds. This article is aimed at presenting facts for better decision making:

(1) Index funds are passively managed funds, which essentially just reflect an index composition. Fund manager does not make any decisions. Hence the returns of index fund just mirrors the returns of index itself.

(2) Actively managed funds are those which have an active decision making and participation on part of Fund Manager. He / She decides which stocks to buy at what price and when to book profits.

(3) Since Index Funds are passively managed, without any research for stock picking, the fund management cost are least, which is around 0.50%

(4) Where as an actively managed funds involves lots of decision making and research.The fund management fee may be in the range of 1% to 2%

(5) Many books written by western authors, particularly Americans would argue that the fund management fees are too expensive in an actively managed funds. Hence they strongly recommend a Index fund. They further argue that the returns out of an index fund and actively managed fund are more or less similar.

(6) The reader / investor needs to understand that these books are written with american markets in mind. The point they miss out is, if an actively managed fund can generate a return much better than an index fund it simply means the fund manager has done his job. And there is nothing wrong in paying a higher fees for better returns. We need to be focussed on what 'Your Investment earns' rather than what the other person (here the fund manager) earns.

(7) Further, in developed countries the returns are often muted. All news about a stock is priced in the market price, hence they offer limited upside for a stock to spurt. But in a Developing country like India, there are lots of news about companies that are not known to the market or public, but known to a selected few who are in close touch with the industry or company. Many news are like wild cats. The news just springs out at the last moment. Hence these 'News in Advance' acts as a big trigger for the fund manager to invest his money and generate far better return.

For instance, a couple of years back, fund managers bought Ranbaxy @ 400+ just before the Japanese Daichi deal. One fine day when the deal was made public, the stock spurted to as high as 650+. Most of the fund managers sold these stocks and booked profit for the investor. Post the euphoria, the stock price declined back to 400+. At the time of writting this article, Ranbaxy was trading at Rs.476. Sometimes this smartness may backfire. But High returns are always married to High risk.

An illustration :
(a) In the table below you would observe that HDFC Top 200 Fund has delivered 16% annualized return when compared to 9% out of an index fund.
(b) To understand it better, Rs.1,00,000 (One lakh) invested in HDFC Top 200 on 2-Jan-2005 has grown to Rs.2,52,301 (Two Lakh Fifty Two thousand Plus) where as the same One lakh would have grown to just Rs.1,72,008 in HDFC Index fund (One Lakh Seventy Two Thousand plus). Though both funds are managed by HDFC Fund management, the active participation and crucial decision making of fund manager has generated excess returns.
(c) The 9% return hardly matches the inflation levels you see in India.
(d) There is a clear out performance of 77% over index fund.
(e) And this return is net of all fund management expenses.
(f) Hence the entire 16% annualized return is earned by the fund manager for the investor.

Hence Investing and staying invested in Actively managed funds could be prefered by Indian Investors. Index funds may form a part of the portfolio but not entirely. You may consider index fund when you donot have competent fund managers to actively manage your money and grow your wealth. But till such time, have actively managed funds as core of your portfolio.

All that the investor needs to do is to identify 'THE BEST' Fund management company to manage his investment and generage decent excess returns when compared to the benchmark or index. Once you have identified 'THE BEST' Fund and invested, just keep monitoring your portfolio once in a quarter. If there is anything grossly wrong, then you may re-do the investment decision. Otherwise Stay invested. You need to trust the fund manager with all good faith.
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Karur Vysya Bank : Rights Issue - Details

2011-02-19T13:22:00.005+05:30

Karur Vysya Bank (KVB) is to issue Rights equity shares in the ratio of 2:5 (Two rights shares for every 5 shares) held by the shareholders and beneficial owners on the Record date. The price per right share is fixed at Rs. 150/- (i.e. Face value Rs. 10/- with a premium of Rs.140/- per share).

Rights issue Record Date fixed as 18th February 2011 for the purpose of asertaining the shareholders and beneficial owners who are entitled for the Rights Shares.

Rights Issue Opens on 28th Feb 2011
Rights Issue Closes on 15th Mar 2011

Amount to be paid on application is Rs.75 per share
Amount to be paid on allotment is Rs.40 per share
Amount to be paid on final call is Rs.35 per share

Rights application form are likely to reach investors address in next couple of weeks. If they donot receive it, it is wiser to contact the company immediatly, since the time to apply for rights is relatively short.

Do stay in touch with us at easyinvest@gmail.com if you need any assistance.

Note: ITC and Reliance Industries together hold close to 14.9% of total KVB Shares.
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Market Directions - Interview

2011-02-18T13:13:00.004+05:30

ET Now talks to Saurabh Mukherjea, Head of Equities, Ambit Capital on the possible directions Indian markets may take, going ahead.

The intensity of selling that disturbed us and now is the strength of the rally which is mesmerising all of us...

Saurabh Mukherjea : I guess it is going to be a volatile year. One of the calls we made around Christmas time was that 2011 would be way more volatile than 2010. Now it was not that hard a call to make because 2010 was the least volatile year for Indian equities for a decade. So a reversion in volatility was on the cards and it is clearly is happening the rest of the year will also be very choppy. That being said, markets have further to correct.

There is a range of reasons partly linked to politics but partly linked to earnings and an economic growth scare which is on the cards, both the earnings correction, earnings estimate correction for FY12 and a growth scare for Q4 and H1 FY12 is on the cards. That will probably be the key catalyst that will push the Sensex towards 16000. So our advice to investors is that it is not yet time for bottom fishing . There is further to go before the market finds a bottom around 16000-16500.

Suffice to say that what we have seen in the past few days is a technical pullback rather than something which has fundamentally changed because inflation has sit at a high, you do not know what the budget outcome is going to be, fundamentally on ground nothing has really changed.
Saurabh Mukherjea : I think you have hit the nail on the head there. You can clearly see what is happening because valuations are coming off, people are looking for value buys. There is a great deal of logic and that clearly our country structurally is placed on a long term perspective. So for a long term investor who is not really worried about the next 3-4-5 months, this is a good time to buy. However if you want to call the bottom of the market and you want to buy right at the bottom, then my suggestion would be wait for 3-4 months. There are 3 reasons why I think patience is the best strategy at this juncture.

Firstly there is plenty more political news from Delhi from the CBI which will be unpalatable for the stock market. Some of them will be in Feb-March but all the way up to the end of the state election season in June, we will get a drip, drip, drip of bad news from Delhi. So that is the first negative driver. The second one is the last 4-5 months of political gridlock in Delhi has had an impact on industrial production and it will have a negative bearing on economic growth numbers. That will emerge over the next couple of months. That will have a negative affect on the market and finally EPS numbers for FY12 look unrealistic.

The Bloomberg consensus still is around 20-21%, that does not look sensible. 15-16% EPS growth for FY12 is much more likely. So as the EPS numbers start getting pullback over the course of March-April-May, the market will grind back. So 3 reasons, all 3 suggest that June-July is a better time to go bottom fishing.

Question : Purely on a percentage basis, what would be the allocation divide between large caps and midcaps that you would actually do ?
Saurabh Mukherjea: The bulk of the recovery rally whether it starts now or in June, the first area where big ticket investors will look at is large caps because the market has come off 15% since November. The preference would be on everyone’s part to focus on large cap, also large caps have moved protected from the inflationary forces. So at this juncture, I would have the bulk of my portfolio in large caps around 30% in midcaps and say 10-15% in small caps. Even in the first 6 months of the recovery, the recovery will be large cap led this time.

The inflationary dynamic means that small and midcap companies are really up against it in terms of input cost pressures, in terms of input cost pressures, in terms of rising finance costs. So small plus midcap would be a minority of my portfolio anytime between now and the next year or so.

Click here for Original Article

Gold : Intresting Statistics

2011-02-15T19:45:00.002+05:30

KAUN BANEGA CROREPATI - Logic

2011-02-11T12:48:00.003+05:30

Many TV Shows like KBC or Airtel Supersinger are popular these days.
In this show, TV viewers are given the option to send right answer and they stand a chance to win attractive prices. And in some other Shows you are asked to Vote by sending sms to choose a winner.

Many may not have understood the logic of these gimmicks.
Here is an analysis of their business model.

Airtel is charging Rs.6/- per SMS sent for this contest.

Assuming there are only 100 entries from say 10 cities of some 20 districts and 20 states...

6(Rs/SMS) x 100(entries) x 10(cities) x 20(districts) x 20(states) = 6
x 100 x 10 x 20 x 20 = Rs.24,00,000

24 lakhs in 20 minutes.
(And People trying for the 2 lakhs cash prize)

Imagine what if 1000 entries try out from 100 cities?

The figure simply grows by 2 more zeroes and yields a whopping 24 Crores!!!!

If there is going to be such a session after each episode every week, then if it is a 100 week program, then 24 Crore x 100 weeks will earn 2400 Crores.

And the prize money: A mere 2 crore..
(and from whose pocket?)

Smart Businesses. Isn't it ?