If you know the likely rate of return of any asset class, dividing 72 by that number gives the period (number of years) in which the investment will double in value.
For eg: if you invest in National Savings Certificate which offers 8% interest, then 72/8 = 9 years : it would take 9 years at the rate of 8% to double your money.
Saturday, October 24, 2009
History of India's Oil Reserve
Our Petrol, Diesel, Kerosen and Gasoline are all derivatives of Oil. Oil is a non-renewal natural resource which is formed as a result of millions of decay of animals. And we should all be thankful to those huge dinosaurs which became extinct all of a sudden (due to various reasons like climatic changes, drought, disease among others). These dinosaurs, like any other living thing seems to have originated out of Africa and seems to have wandered across the globe before they became extinct 65 million years ago. That is simply 650 lakh years ! Having lived in typically tropical climate, huge number of dino's seem to have been burried in today's arabian deserts and those Sheikhs are all luckey.
By simple observation you could see these oil driling companies ( oil wells ) are found predominantly in Arab nations, Russia, Atlanta in US and in some other countries. In second world war, Hitler long war on Russia is to get access to its Oil, since Germany doesnot have any oil. At the end, his army died out of two reasons: unusal weather and lack of oil. Hence oil is equated to liquid gold.
In India, we see bada companies like Reliance Industries and few others like (Edinburgh based) Cairn India, Hindustan Oil Exploration Company, ONGC etc. All these companies are busy drilling around the see beds of India hunting for oil. Inspite of all these efforts India has been importing about 80% of its oil requirements. But oflate, there seems to be a huge oil find by Cairn India, Reliance, HOEL among others.
How come India got such huge Oil reserve, which they say could take care of 60% of India's needs. At this time I stumbled upon the message that: Dinosaurs where once wandering in Indian sub continent too ( Im not sure if India was attached to Africa at that point of time). And one reason why dino's got extinct was the work of natural calamity like volcanoes and fall of giant Meteors from the sky creating huge crater due to the impact.
One such is the massive Shiva basin that is submerged depression west of India that is intensely mined for its oil and gas resources. Some complex craters are among the most productive hydrocarbon sites on the planet.
Prof.Sanker Chaterjee from Texas Tech University has recently presented his finding on Shiva Crater based on which Indian scientist are fast working.
If Chatterjee is right this could be the largest, multi-ringed impact crater the world has ever seen, with a diameter of ~500 km. The diameter of the so far known largest impact crater, the Vredefort Crater in South Africa has a diameter of about 300 km. Furthermore the Shiva crater has an age that makes it a suspect for the killing of the dinosaurs ca. 65 million years ago.
The impact was so powerful that it led to several geodynamic anomalies: it fragmented, sheared, and deformed the lithosphere mantle across the western Indian margin and contributed to major plate reorganization in the Indian Ocean. It initiated rifting between India and Seychelles in the west and created the Laxmi Ridge; it shattered the Indian plate easterly along the Narmada-Son Rift extending 1500 km across, dividing the Indian shield into a southern peninsular block and a northern foreland block. Because of topographic barrier of the Western Ghat Mountain range, the impact-triggered tsunami was restricted along the Narmada-Son Rift at the KT boundary.
What ever said and done, we are happy with Shiva Crater (see attached file). And it makes some more sense to invest in Oil exploring companies in India.
http://my.opera.com/nielsol/blog/2009/10/16/shiva-crater
Thursday, October 22, 2009
Direct Tax Code for NRI's
With the introduction of some new concepts to ensure minimal abuse of the beneficial provisions, the Direct Tax Code (Code) introduced by the Hon'ble Finance Minister, last month has a few but sweeping changes as far as taxation of Non Resident Indians is concerned.
The draft Code does not propose any changes in the basic principles of determination of taxability and scope of income as laid down in the current Income Tax Act. Currently, India follows both residence and source based taxation. The principle of residence based taxation asserts that the taxpayers are taxable in the country in which they establish their residence or domicile regardless of the source of income. Source based taxation is generally applied to non-residents in a country and envisages the taxation of only such income, which is sourced in that country. Under the Code, the residence based taxation has been applied for residents and source based taxation has been applied for non residents.
Under the existing Income Tax Act, basis the physical presence, an individual taxpayer is classified into Non Resident (NR) and Resident and Resident is further divided into Resident and Ordinarily Resident (ROR) and Not Ordinarily Resident (NOR). The RORs are subject to tax in India on their worldwide income but the NORs/ NRs are taxable in India only on their India sourced income. One of the biggest change that the Code has proposed, which will impact the NRIs is the removal of the NOR category of residential status. So now an individual would either be a Resident or a Non Resident based on the rules, which are similar to the existing provisions of the Income Tax Act.
The concept of NOR has been replaced by providing exemption to the individual with respect to the income, which is sourced outside India and not derived from a business controlled or profession set up in India. This exemption will be available to the taxpayer from the financial year in which such individual becomes a resident and the immediately succeeding financial year, if such individual was a non resident for nine years immediately preceding the financial year in which he becomes a resident. So typically, in case of a returning Indian who has been out of India for a long period of time, he may become liable to tax on his worldwide income (if he retains sources of income overseas) from 3rd or 4th year of coming to India. This provision will need to be considered for cross border movements of NRIs who typically come back to India on say short term assignments so that appropriate planning of the assignment duration can be done in case of any proposed secondment to India.
Also, in order to simplify the existing provisions, a unified concept of 'financial year' has been introduced and the existing concept of 'previous year' and 'assessment year' has been done away with. This will specifically put an end to the confusion that generally arises in the minds of non residents (having a tax filing requirement in India) around the fact that while, taxes are paid and compliances are completed for the previous year, filing of the tax return is done in the assessment year.
The draft Code has maintained most of the benefits available to the non residents under the existing law. The interest on deposits in Non-Resident (External) bank accounts is still exempt as per the draft Code subject to satisfaction of certain conditions. The amount of interest payable by a scheduled bank to a non resident on deposits in foreign currency where acceptance of such deposits is approved by the Reserve Bank of India is also exempt from tax.
The Code also exempts the non-resident taxpayer from capital gains tax arising in case of any transfer of Global Depository Receipts (GDRs) between two non-residents outside of India, similar to the provision in the current Income Tax Act. Although the draft Code has extinguished the difference between the long term capital gain and short tem capital gain, it has not restricted the indexation benefit available to non residents at the time of calculation of capital gains tax on transfer of shares, debentures of an Indian company held for more than 12 months.
Once the Code becomes the law of the land, the non-resident taxpayers can continue to file their returns and handle other tax related matters through a Representative Assessee, which can be an authorised agent of the individual. The Code also provides the special rates of withholding tax applicable to non-residents for calculating tax on investment income by way of interest, dividend on which distribution tax has not been paid by the company, capital gain income etc.
Very often Non Resident Indians are subject to double taxation because of taxability in India as a result of sourcing rule. An NRI may be living say in the US for last twenty years and may have a US citizenship now. If he retains some property back home in India which fetches him some rent, he may be liable to pay in the US on his global income based on his citizenship and shall also be liable to pay tax in India because of the sourcing provision. He would be eligible to claim relief from double taxation under the Double Taxation Avoidance Agreement (DTAA) between India and the US. There was no requirement so far for such an individual to obtain any tax residency certificate from the US tax authorities in order to avail the benefit under the DTAA. The Code adds the additional burden for claiming any relief under the DTAA by requiring the tax payer to obtain the Tax Residency Certificate on mandatory basis to be able to claim the relief from double taxation under the applicable DTAA.
One of the pro-Revenue provisions of the Code provides that any taxes due from the non-residents could be recovered from any of his assets even if they are situated outside of India. Further, if there is any amount payable by any person to the non-residents, such payments can also be used for recovery of due taxes.
It is important for the Non resident community to be aware of the provisions in store for them in the Direct Tax Code since, these provisions will have far reaching impact on their tax situation and tax compliances in India once the Code becomes the law of land.
- by Shalini Jain, Senior tax professional, Ernst & Young, India)
The draft Code does not propose any changes in the basic principles of determination of taxability and scope of income as laid down in the current Income Tax Act. Currently, India follows both residence and source based taxation. The principle of residence based taxation asserts that the taxpayers are taxable in the country in which they establish their residence or domicile regardless of the source of income. Source based taxation is generally applied to non-residents in a country and envisages the taxation of only such income, which is sourced in that country. Under the Code, the residence based taxation has been applied for residents and source based taxation has been applied for non residents.
Under the existing Income Tax Act, basis the physical presence, an individual taxpayer is classified into Non Resident (NR) and Resident and Resident is further divided into Resident and Ordinarily Resident (ROR) and Not Ordinarily Resident (NOR). The RORs are subject to tax in India on their worldwide income but the NORs/ NRs are taxable in India only on their India sourced income. One of the biggest change that the Code has proposed, which will impact the NRIs is the removal of the NOR category of residential status. So now an individual would either be a Resident or a Non Resident based on the rules, which are similar to the existing provisions of the Income Tax Act.
The concept of NOR has been replaced by providing exemption to the individual with respect to the income, which is sourced outside India and not derived from a business controlled or profession set up in India. This exemption will be available to the taxpayer from the financial year in which such individual becomes a resident and the immediately succeeding financial year, if such individual was a non resident for nine years immediately preceding the financial year in which he becomes a resident. So typically, in case of a returning Indian who has been out of India for a long period of time, he may become liable to tax on his worldwide income (if he retains sources of income overseas) from 3rd or 4th year of coming to India. This provision will need to be considered for cross border movements of NRIs who typically come back to India on say short term assignments so that appropriate planning of the assignment duration can be done in case of any proposed secondment to India.
Also, in order to simplify the existing provisions, a unified concept of 'financial year' has been introduced and the existing concept of 'previous year' and 'assessment year' has been done away with. This will specifically put an end to the confusion that generally arises in the minds of non residents (having a tax filing requirement in India) around the fact that while, taxes are paid and compliances are completed for the previous year, filing of the tax return is done in the assessment year.
The draft Code has maintained most of the benefits available to the non residents under the existing law. The interest on deposits in Non-Resident (External) bank accounts is still exempt as per the draft Code subject to satisfaction of certain conditions. The amount of interest payable by a scheduled bank to a non resident on deposits in foreign currency where acceptance of such deposits is approved by the Reserve Bank of India is also exempt from tax.
The Code also exempts the non-resident taxpayer from capital gains tax arising in case of any transfer of Global Depository Receipts (GDRs) between two non-residents outside of India, similar to the provision in the current Income Tax Act. Although the draft Code has extinguished the difference between the long term capital gain and short tem capital gain, it has not restricted the indexation benefit available to non residents at the time of calculation of capital gains tax on transfer of shares, debentures of an Indian company held for more than 12 months.
Once the Code becomes the law of the land, the non-resident taxpayers can continue to file their returns and handle other tax related matters through a Representative Assessee, which can be an authorised agent of the individual. The Code also provides the special rates of withholding tax applicable to non-residents for calculating tax on investment income by way of interest, dividend on which distribution tax has not been paid by the company, capital gain income etc.
Very often Non Resident Indians are subject to double taxation because of taxability in India as a result of sourcing rule. An NRI may be living say in the US for last twenty years and may have a US citizenship now. If he retains some property back home in India which fetches him some rent, he may be liable to pay in the US on his global income based on his citizenship and shall also be liable to pay tax in India because of the sourcing provision. He would be eligible to claim relief from double taxation under the Double Taxation Avoidance Agreement (DTAA) between India and the US. There was no requirement so far for such an individual to obtain any tax residency certificate from the US tax authorities in order to avail the benefit under the DTAA. The Code adds the additional burden for claiming any relief under the DTAA by requiring the tax payer to obtain the Tax Residency Certificate on mandatory basis to be able to claim the relief from double taxation under the applicable DTAA.
One of the pro-Revenue provisions of the Code provides that any taxes due from the non-residents could be recovered from any of his assets even if they are situated outside of India. Further, if there is any amount payable by any person to the non-residents, such payments can also be used for recovery of due taxes.
It is important for the Non resident community to be aware of the provisions in store for them in the Direct Tax Code since, these provisions will have far reaching impact on their tax situation and tax compliances in India once the Code becomes the law of land.
- by Shalini Jain, Senior tax professional, Ernst & Young, India)
Tuesday, October 13, 2009
IPP on 12-Oct-09
The data released by the government on Monday showed that the August IIP (index of industrial production) figures registered a growth of 10.4%. This is the fastest pace of growth in about 22 months. The government has revised upwards July IIP growth to 7.2% from an earlier estimated 6.8%. Experts argue that the latest IIP figures gives hope for a faster than expected recovery in the domestic economy cheering investor sentiments.
The BSE consumer durable index was the highest gainer on Monday up by 3.72% on expectation that higher growth will result in increased consumption. The auto sector gained 1.47% with M&M climbing 2.83% while Maruti gaining 2.80%. India’s largest public sector bank State Bank of India was the biggest gainer, up Rs 106.55 or 5.16%.
The robust growth in the IIP figures indicates that the manufacturing sector is expanding. This has raised the expectation of investors on the second quarter earnings of India Inc/
The domestic equity bourses started the week on a solid note after the latest data showed a surge in industrial output in August 2009. The 30 share Sensex of the Bombay Stock Exchange (BSE) surged 384.01 points or 2.31% to end the trading session above the psychological 17,000 level at 17,026.67 points. On the other hand, the broader 50 share Nifty of the National Stock Exchange (NSE) closed the day at 5,054.25 points, gaining 2.21% or 109.05 points.
The BSE consumer durable index was the highest gainer on Monday up by 3.72% on expectation that higher growth will result in increased consumption. The auto sector gained 1.47% with M&M climbing 2.83% while Maruti gaining 2.80%. India’s largest public sector bank State Bank of India was the biggest gainer, up Rs 106.55 or 5.16%.
The robust growth in the IIP figures indicates that the manufacturing sector is expanding. This has raised the expectation of investors on the second quarter earnings of India Inc/
The domestic equity bourses started the week on a solid note after the latest data showed a surge in industrial output in August 2009. The 30 share Sensex of the Bombay Stock Exchange (BSE) surged 384.01 points or 2.31% to end the trading session above the psychological 17,000 level at 17,026.67 points. On the other hand, the broader 50 share Nifty of the National Stock Exchange (NSE) closed the day at 5,054.25 points, gaining 2.21% or 109.05 points.
Sunday, October 11, 2009
Gold is a Bargain, Even Above $1,000 ................ says Michael J. Kosares, USAGOLD
For all those questions about buying gold at current levels, here is an argument in favor of the same. Michael J. Kosares is the Founder President of USAGOLD - Centennial Precious Metals, Denver. In a recent interview to CNBC, Michael defends the logic of buying gold even at current level. Read on and benefit...
The excess liquidity created by the world central bankers invariably culminating into inflation, the inevitable demise of the dollar, the pressing need for central banks to diversify into a lesser owned gold – has the tendency to take gold prices much higher from the current levels. The gold rush is on….though it may be punctuated by brief corrections, which would be an opportune time to add to the yellow metal.
The inflation-adjusted price of gold at its 1980 peak is just over $2350 — that leaves a considerable amount of headroom just on the basis of making up for past inflation, let alone the prospect of continued inflation.
The gold rally of 1970-1980 began in much the same way as the current rally, eventually catching up with inflation, ultimately pushing significantly higher to price-in future inflationary expectations. Having said that, we could indeed still be a long way from any potential top.
The new gold market began in 2002 and is now in its 7th year (in 2009). In terms of cycles, the gold market may have years left to run, consistent with the bullish implications of inflation-adjusted gold.
Jim Rickards, director of market intelligence for Omnis, said in a recent CNBC interview that the Fed is going to have to manage a 14-year devaluation of the dollar – by as much as 50% — with the goal of inflating away a portion of our massive and still growing debt.
I believe Rickards chose a 14-year timeline because it equates with 3.5% to 4.0% inflation over the period. An oppressive inflation rate to be sure, but shy of true hyperinflation. If Rickards’ assessment is accurate, it likely equates with at least 14 more years in gold’s bull run.
Unfortunately in this age of instant gratification, most investors tend to focus on the short-term, when it is the long-term that really matters. Examining the more familiar secular bull market in U.S. equities provides an opportunity to perhaps ascertain where we might be within the current bull market in gold.
The first gold bull market lasted about 13-years, beginning in the late-1960s and lasting to the early-1980s. After a few years of adjustments, the bull market in stocks began around 1982 and lasted until 2007, with a brief respite when the tech-bubble burst in 2000, which was quickly offset by extremely loose monetary policy.
During the 25-year bull market in stocks, the DJIA went from a low of 770 to a 14,480 high — up nearly 19 times. In its first seven years, 1982 to 1989 stocks rose roughly 3.6 times — or roughly 15% of the complete move. Similarly, gold during its first seven years has appreciated roughly 4.0 times having started its bull move at $250 and trading in 2009 at just over $1000 (1032 high as of this writing), and we are not yet at the end of the year.
Some analysts believe the DJIA/Gold ratio is heading back to a not unprecedented 1 to 1 ratio. The chart above shows that such a move is very feasible and could be attained by a dramatic rise in gold, a dramatic drop in the DJIA, or more likely some combination of significant gold gains and significant stock market losses.
If gold were to continue to track the stock market’s bull market performance, gold would top over the next years in the vicinity of $4750 per ounce. Will $1000 gold represent less than 25% of the gold market move?
Of course, any number of events could intervene to prevent gold from reaching that level, or vault it even higher.
As an example of the latter, take into consideration the nightmare German inflation that took hold in the period between the First and Second World Wars. Famed economist John Maynard Keynes summed it up nicely: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”
At the beginning of World War I in 1914, an ounce of gold cost 86.8 marks. By November of 1923, the hyperinflationary blowoff drove the price of an ounce of gold to a staggering 63,016,800,000,000 (paper) marks. (Yes, that’s 63 TRILLION marks!)
The following chart shows the ascent of one gold mark in relation to one paper mark. Invert the chart, and you have an illustration of the demise of a fiat currency in just a few short years. Similar events are unfolding even today, where an ounce of gold was not available at any price in terms of Zimbabwe dollars as a result of massive money printing.
I’m not suggesting things are likely to get as bad as Weimar Germany in the 1920s, but none of the conditions that have shepherded gold above $1,000 on several occasions now have suddenly gone away. In fact, one could argue that they have accelerated of late, resulting in the first ever monthly close above $1,000 (September 2009).
At the end of the aforementioned CNBC interview, host Joe Kernan says to Jim Rickards, “You just made a heck of case for buying gold right at $1,000…”
Gold Update on 10 Oct 2009
Q. How do you see Gold prices panning out in near future?
• Gloomy US dollar outlook
Gold is traded in US dollar term but major consumption of gold is outside
US. Hence weakening US dollars makes gold cheaper for Non- US
investors and thereby increases demand for gold.
• Higher inflation expectation
Regulators have pumped in huge amount of liquidity to avert recessions.
During the political meeting held in London recently it was restated that G-
20 countries intend to maintain loose money policies unit economies
recover clearly. The rising inflation expectation benefits gold as gold is
seen as a good hedge against inflation.
• Increase in investment demand
Gold has limited stastistical correlation with any of the assets classes as
factors driving gold prices are different from factors driving other markets.
Hence gold acts as an excellent portfolio diversifier.The average share of
gold in global portfolios is quite low and given the present fundamental
setup it is undoubtedly going to go up, leading to higher gold demand.
Again gold prices have exhibited astonishing performance during recent
financial turmoil and that has managed to attract lot of investor’s attention.
Such investors are investing in gold by way of exchange traded products
and physical gold bars and coins.
• Central banks buying activity
We have seen Central banks diversifying away from US dollar and
increasing its share of gold reserves to safeguard against depreciating
dollar. China has announced that it has increase its gold reserves by
around 75 per cent, since 2003 and now holds around 1054 tones of gold
reserves but gold reserves still account for less than 2 percent of its
overall reserves. China is expected to continue increasing its reserves and
similar action is expected from other countries with high forex reserves
and that will result in higher gold prices.
The longer term outlook for gold prices seems extremely positive because of the
above mentioned reasons.
Q. The Chinese government has started accumulating Gold on a large scale
and has also been encouraging its people to do so which seems to be a
move of the government to strengthen its currency in the international
market vis-à-vis dollar. How will all this impact gold prices?
Though Chinese government has started accumulating gold they hold less than
2% of its total foreign reserves in Gold. Many experts believe they should hold
somewhere between 5% to 10% of its reserve in gold. If they intend to increase
gold reserves to such levels then they can eat away few years of mine supply
and that should be extremely bullish for gold prices.
It is widely believed that dollar is likely to depreciate in coming years and if US
dollar depreciates as predicated it will deplete countries Forex reserves. Ideally
central banks should diversify and increase its holding in other strong currencies.
But in absence of any strong alternative currency, gold benefits the most as it
acts as a good alternative to currencies. .
Hence if Chinese government is accumulating gold and encouraging its people
to do the same., such pragmatic notion will increase gold demand and benefit
gold prices.
Q. Despite the general prevalent belief that mining stocks run ahead of gold
prices why has Reliance come up with Gold ETF instead of gold fund which
invest in global mining stocks?
Major differences between gold mining stocks and physical gold /gold ETFs are.
• Gold mining stocks move along with equity markets and are adversely
impacted by financial crises and other factors affecting equity markets.
However fundamentals affecting gold prices are totally different from the
factors affecting other financial markets. Hence gold tends to act as an
excellent portfolio diversifier but gold mining stock may not.
• Gold mining companies can be negatively impacted by environmental
issues, labor related issues, political issues in mining countries and issues
relating to mining licenses. However any such issues with mining
companies are likely to be benefit gold prices as that would deter gold
supply.
• Expense ratio: ETFs have lower expense ratio compared to other gold
schemes.
• Investing in Gold ETFs reduces company specific risk. Management can
greatly influence the gold mining company outlook. Again many
companies need to hedge their sales to avail finance and hence will not
get the full benefit of higher gold prices.
• Generally the volatility is higher among prices of gold mining shares then
on gold prices. And hence its skews the risk adjusted returns in favor of
physical gold.
Because of the above mentioned reason it makes more sense for investors to
invest in gold ETFs than in gold mining companies and hence Reliance Mutual
Fund has come up with Gold ETF instead of gold fund.
Q. Apart from US dollar and demand - supply scenario, which other factors
according to you could possibly have a significant influence on the gold
prices?
As discussed above the higher inflation expectation, increase in investment
demand and central banks activity are likely to influence gold prices.
Q. India is the largest gold consumer. Indian consumer being price
sensitive how do you expect the Indian customer to behave in relation to
the rise in gold prices in terms of further buying or selling off of gold?
India is the largest gold consumer since ages. Indian consumers are very pries
sensitive. However a paradigm shift is required in weighing the fundamentals that
drive gold prices. Till recently, Jewellery demand use to be main determinant of
gold prices. However, despite weak jewellery demand over the last few quarters,
gold prices have performed well on the back of strong investment demand. Again
lot of jewellery demand remains uncatered as buyers were expecting a major
prices correction, which never actually materialized. Such uncatered jewellery
demand should cap the downside for gold prices and investment demand is
expected to be main factor influencing gold prices at higher levels.
Q. What is your view on Gold as an important asset class vis-à-vis equity?
What sort of asset allocation would you recommend between equity and
Gold?
Gold should be looked upon as a portfolio diversifier as gold does not have
statically significant correlation with any other assets class. Factors affecting gold
prices are different from factors affecting other asset classes. Hence including
gold in one’s portfolio should stabilize portfolio returns and give better risk
adjusted returns. Ideally a portfolio should have 5 to 10 % of its investment in
gold.
To sum it up, we are convinced that over a period of time Gold Etfs will become
more popular with the Indian investors as an asset class and not merely as a
portfolio diversifier.
Tuesday, September 29, 2009
Glenmark Pharma
Glenmark Pharma is one stock which one should buy from 3-6 month perspective.
The stock is near it 200 days moving average and has been consolidating for a week. The stock has got good support at 164 and major support at 116.
The target would be 348(1st target) and major target would be 514.
The major support for stock is at 116 and as market is look good at current level one should buy this stock in two phases.
Cash Rich Companies:
What is cash rich company?
Cash and bank balances indicate the amount of cash that a company has on its books at a specific point in time. The position of cash and bank balances net of debt is one of the indicators of financial strength and liquidity of the company. Cash and bank balances include balance with bank, term deposit with banks and cash in hand/others.
Importance of cash rich company
Analysts suggest that a cash rich company is a sign of financial strength while a small cash position is a possible caution or warning sign. The cash rich companies have an edge over cash strapped companies as cash can be used to fund operations and acquisitions, to buyback shares and to repay debt. It also helps the company to survive in torrid times of recession. A dark side of cash rich company is that too large of a cash position can often signal waste of funds as the funds are placed idle or produce very modest return.
We have taken all the listed companies on the Bombay Stock Exchange. We have taken only those companies whose cash value net of debt is greater than Rs 300 crore and sorted the top 50. We have not taken the investment value into consideration since some companies have invested in government bonds or group companies.
Interestingly, 8 companies out of top 10 cash rich companies by value were PSU companies. You can safely assume these companies to be worthy investment bets.
Thursday, September 17, 2009
Fundamentals backed Rally
NSE touched 5000 pts today and BSE is in striking distrance of 17000. Many may wonder why is markets frenzy so crazy. Many investors 'feel' the markets are in excess and it has rallied beyond a point. Let us clarify the facts and figures.
In the first place, stock market rally usually preceeds market news by a few months. As a result we saw the markets pick up momentum as early as April 2009 and the rally is continuing.
When fundamentals are good, investors ( particularly FII's ) pour money. As a result markets spurt in a short span of time.
The current market rally is 'supported' by such fundamental : one such being higher advance tax payments, which indicates recovery in business and profits of corporate companies.
For instance,
State Bank of India paid 71.5% higher advance tax at Rs 1,832 crore compared with the corresponding period last year.
TCS has paid 315% higher advance tax at Rs 220 crore in the second installment. Mahindra & Mahindra has paid 540% higher advance tax at Rs 112 crore in the second installment.
Tata Motors paid advance tax of Rs 100 crore in the second installment, much higher than Rs 19 crore last year.
Bank of India paid Rs 470 crore as against Rs 230 crore.
Bank of Baroda paid Rs 412 crore compared to Rs 255 crore.
Yes Bank paid Rs 58 crore as against Rs 33 crore.
BPCL paid Rs 312 crore as against 40 crores.
Lupin paid Rs 49.7 crores as against 11.4 crore in the same period a year ago. Ambuja Cements paid an advance tax of Rs 150 crore as against Rs 70 crore in the previous quarter.
This clearly shows that the India business houses are recovering and hence the market took the cue from the fundamental cue and rallied heavily for the past few days.
Outlook:
Correction might take back seat for a while and the market is expected to rally further on the back of advance tax numbers.
The September quarter results may give further strength to the market.
Typically this is a Buy on dip market.
Use any market correction to make your investment in suitable companies / Mutual funds
In the first place, stock market rally usually preceeds market news by a few months. As a result we saw the markets pick up momentum as early as April 2009 and the rally is continuing.
When fundamentals are good, investors ( particularly FII's ) pour money. As a result markets spurt in a short span of time.
The current market rally is 'supported' by such fundamental : one such being higher advance tax payments, which indicates recovery in business and profits of corporate companies.
For instance,
State Bank of India paid 71.5% higher advance tax at Rs 1,832 crore compared with the corresponding period last year.
TCS has paid 315% higher advance tax at Rs 220 crore in the second installment. Mahindra & Mahindra has paid 540% higher advance tax at Rs 112 crore in the second installment.
Tata Motors paid advance tax of Rs 100 crore in the second installment, much higher than Rs 19 crore last year.
Bank of India paid Rs 470 crore as against Rs 230 crore.
Bank of Baroda paid Rs 412 crore compared to Rs 255 crore.
Yes Bank paid Rs 58 crore as against Rs 33 crore.
BPCL paid Rs 312 crore as against 40 crores.
Lupin paid Rs 49.7 crores as against 11.4 crore in the same period a year ago. Ambuja Cements paid an advance tax of Rs 150 crore as against Rs 70 crore in the previous quarter.
This clearly shows that the India business houses are recovering and hence the market took the cue from the fundamental cue and rallied heavily for the past few days.
Outlook:
Correction might take back seat for a while and the market is expected to rally further on the back of advance tax numbers.
The September quarter results may give further strength to the market.
Typically this is a Buy on dip market.
Use any market correction to make your investment in suitable companies / Mutual funds
Thursday, September 3, 2009
Profit out of Panic Selling :
Yesterday (2-sept-09) there was a bout of selling and buying (war between bulls and bears) and finally the Sensex settled losing 83.73 points or 0.54%, off close to 155 points from the day's high and up close to 80 points from the day's low.
Interestingly BSE clocked a turnover of Rs 5412 crore, lower than Rs 7547.38 crore on Tuesday, 1 September 2009.If this trend continues ie market going down on lower volumes we may see an upmove sooner than later.
What to do when the sensex goes down. Some times panic selling happens and great investors use this kind of rare opportunity to build wealth.
Warren Buffet, the world's smartest investor known for his investment philosophies, says "The most common cause of low prices is pessimism – sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer."
As I read this, some of Warren Buffett’s well-known investing principles come to my mind:
1. Use the market to your advantage:. Judge the company by its performance, and not by stock price. However if Mr. Market gives you an opportunity to buy the company at lower price use it to your advantage. Buying the company at lower price rewards in the long term.
2. Don’t worry about the economy. Stop discussing and debating whether the economy is poised for growth, or tilting toward a recession. Buffett dedicates no time or energy to analyzing the economy. However recession comes in you can plan and invest in companies you like as the recession gives an opportunity to buy at wonderful pricing.
3. Buy a business, not a stock. Consider first if the business is easy to understand. Then determine if it has a consistent operating history and favorable long-term prospects. What about its management? Is it rational, candid with shareholders, and able to avoid the herd mentality? Look at the financials, focusing on return on equity, not
on earnings per share. Buffett seeks out companies that generate cash in excess of their needs and companies with high profit margins, which reflect not only a strong business but a management with a tenacious spirit for controlling costs. Other financials to look at: retained earnings, estimated cash flows, and the value of a business. Once you have determined the value of a business, the next step is to look at the stock price. Buffett’s rule is to buy the business only when the stock price is at a significant discount to its value. Note that only
at this final step does Buffett look at the stock’s price.
4. Focus on few stocks: Do not plan to buy 100 companies but select a handful of companies and invest in the strong business. Webinar members know how we presented data on Zydus when it was at Rs 80+ just about 2 months back and the same stock is trading around Rs 180! So pessimism in stock quotes are great otherwise you would have to fight
for the price.
Based on this, I could only come to one conclusion. Warren Buffett and other savvy investors always position themselves to take advantage of the sale in the stock market. They are certainly analyzing financial data, looking for sound businesses whose stocks are battered by the current down market but whose businesses are sound, strong and
profitable, making them excellent candidates for strong long-term growth.
At EASY Investments we wish every investors makes sensible investment decisions. By doing so,Your Money Makes Money. Stay in touch with us for any assistance in the process.
Interestingly BSE clocked a turnover of Rs 5412 crore, lower than Rs 7547.38 crore on Tuesday, 1 September 2009.If this trend continues ie market going down on lower volumes we may see an upmove sooner than later.
What to do when the sensex goes down. Some times panic selling happens and great investors use this kind of rare opportunity to build wealth.
Warren Buffet, the world's smartest investor known for his investment philosophies, says "The most common cause of low prices is pessimism – sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer."
As I read this, some of Warren Buffett’s well-known investing principles come to my mind:
1. Use the market to your advantage:. Judge the company by its performance, and not by stock price. However if Mr. Market gives you an opportunity to buy the company at lower price use it to your advantage. Buying the company at lower price rewards in the long term.
2. Don’t worry about the economy. Stop discussing and debating whether the economy is poised for growth, or tilting toward a recession. Buffett dedicates no time or energy to analyzing the economy. However recession comes in you can plan and invest in companies you like as the recession gives an opportunity to buy at wonderful pricing.
3. Buy a business, not a stock. Consider first if the business is easy to understand. Then determine if it has a consistent operating history and favorable long-term prospects. What about its management? Is it rational, candid with shareholders, and able to avoid the herd mentality? Look at the financials, focusing on return on equity, not
on earnings per share. Buffett seeks out companies that generate cash in excess of their needs and companies with high profit margins, which reflect not only a strong business but a management with a tenacious spirit for controlling costs. Other financials to look at: retained earnings, estimated cash flows, and the value of a business. Once you have determined the value of a business, the next step is to look at the stock price. Buffett’s rule is to buy the business only when the stock price is at a significant discount to its value. Note that only
at this final step does Buffett look at the stock’s price.
4. Focus on few stocks: Do not plan to buy 100 companies but select a handful of companies and invest in the strong business. Webinar members know how we presented data on Zydus when it was at Rs 80+ just about 2 months back and the same stock is trading around Rs 180! So pessimism in stock quotes are great otherwise you would have to fight
for the price.
Based on this, I could only come to one conclusion. Warren Buffett and other savvy investors always position themselves to take advantage of the sale in the stock market. They are certainly analyzing financial data, looking for sound businesses whose stocks are battered by the current down market but whose businesses are sound, strong and
profitable, making them excellent candidates for strong long-term growth.
At EASY Investments we wish every investors makes sensible investment decisions. By doing so,Your Money Makes Money. Stay in touch with us for any assistance in the process.
Subscribe to:
Posts (Atom)
