Stocks / Sectors to Invest now in India : Nilesh Shah

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.

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Mutual Fund Tax Laws in India : Ready Reckoner

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

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

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

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

Qualcomm-Bharti Airtel Deal

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.

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Foreign Investors can Invest in India

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

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

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

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 ?

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

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"

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. And Telecom Regulatory Authority of India (TRAI) has gone one step further by providing this facility to block unwanted calls for both mobile phones and land lines.

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:

Customers (landline and mobile) who do not want to receive commercial communications can dial or SMS to 1909 (toll free) and register in either of the two categories:
Fully Blocked Category- stoppage of all commercial Calls/SMS
Partially Blocked Category- stoppage of all commercial Calls/SMS except SMS from one of the opted preferences

For registering option using SMS, for 'fully blocked category',
Type "START 0" and send it to 1909.

For 'partially blocked category',
Type 'START' with one or multiple options from the list of seven categories.
There are at present 7 preferences to choose from-
Banking/Insurance/Financial Products/Credit Cards-1,
Real Estate-2,
Education-3,
Health-4,
Consumer goods and automobiles-5,
Communication/Broadcasting/Entertainment/IT-6,
Tourism-7.

For example: To receive messages relating to only Health products, then send SMS "START 4" to 1909. Similarly, for receiving messages relating to Real Estate and Education, send SMS "START 2,3" to 1909.

For more information: visit link : http://www.nccptrai.gov.in/nccpregistry/

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

Short Term Investments in India : Very Attractive Now

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

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

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

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