Indian Stock Market

India – A cyclical slowdown, but favorable valuations

2012-01-22T18:11:00.000-08:00

Macro Headwinds continue:

Markets continue to face slew of negative news during the month starting with IIP, GDP growth target, currency, fiscal deficit, govt. backtracking on FDI in Retail, the Lokpal fiasco and a hasty clearance of the Food Security Bill (that aggravates the fiscal pain).

Rate action and policy impetus to be key drivers :

Dec monetary review saw the monetary stance shifting towards addressing growth concerns with RBI indicating reversal in monetary tightening cycle.
Tactical readjustment of polity required to get the structural India story on track. We believe the directional reversal in policy making to be subject to test of political will, on the backdrop of impending state elections is critical for change in the market sentiments.

Valuations offering a solid entry point :

We continue to prefer bottom up stock picking with core beliefs in terms of quality (business, management & cash flows), prudence (cash utilization) and agility (timing and allocation). We prefer to look for businesses with strong franchise value, large consumption compulsion canvass opportunity and penetration potential and remain alert to opportunities that provide tactical returns on Asset plays at attractive valuations and rate sensitive given impending policy response.

Weekly Overview About Equity Market

2012-01-09T18:01:00.000-08:00

Highlights for the week :
• The benchmark Sensex closed higher (up 2.7%) for the week. Mid-cap Index (up 2.4%) and Small cap Index (down 2.8%) marginally under-performed its large cap peers for the week.
• BSE Bankex (up 6.4%), BSE Capital Goods (up 5.9%) and BSE Metals (up 5.2%) were the better performing indices, while BSE FMCG (down 0.1%), BSE Auto (up 0.4%) were the worst performing indices.
• Food inflation entered the negative territory for the first time in nearly six years, raising hopes that the RBI might ease back on lending rates soon. The WPI for food articles plunged to -3.36% as on December 24, on the back of a sharp fall in the price of mass consumption vegetables.
• In a bid to give India Inc respite from possible pressures arising from redemption of FCCB, RBI said eligible borrowers can raise these bonds for up to US$750mn or equivalent per financial year for permissible end-uses.
• Government data shows that STT collections have fallen by over 26% during April-December 2011.
• Exports during November 2011 grew at the slowest pace in two years, registering an increase of just 3.87% over the same month in 2010 to US$22.32bn.

Buy Axis Bank

2011-12-22T06:52:00.000-08:00

 Buy rating on Axis Bank is maintained with a target price of Rs.1353 over one year. The stock is currently traded in the range of Rs.850.
 It seems that the correction in the stock is highly unwarranted it continues to be the top pick. During the past one month, the stock price is down 11.9% as against the decline of 8.4% in the Bankex and a drop of 5.9% in the Sensex.
 Stress points exist on the quality of the assets but nothing alarming. Currently, non performing loans (NPL) are sector specific risk rather than bank specific risk.
 For the bank, higher exposure in power and SME segments appear to be the major weakness. In the power sector, bank’s exposure is 5% of total loans as against the industry average of 7%. Delay in loan servicing in some projects may be possible but large scale defaults by power projects are unlikely.
 Bank’s exposure in the SME (small, medium enterprises) segment is higher than that of peer private banks but this is unlikely to spiral under control as the bank has adopted very cautious approach about SME loans.
 Investors are advised to concentrate on positives rather than just negatives as it is basically a sector wide problem.
 On the positive side, the bank’s CASA deposits have consistently been strong and growing. CASA growth has been supported by the increase in branch network. It has increased branch network by 40% during the last two years.
 Axis has one of the most diversified fee based income stream among private sector banks
and it is expected to grow at 20% plus.
 Bank’s net interest margin (NIM) may moderate to 3.4 – 3.5% in 2HFY12 from 3.78% in 1H. However, the drop is only seasonal and not a cause for concern.
 At the current level, the valuation seems very attractive and hence, the ‘buy’ is reiterated with a target price of Rs.1353 over one year.

Indian Stock Market Remain Sluggish

2011-12-13T18:22:00.000-08:00

As expected, the Indian markets remained sluggish last week as it declined 4 percent led by the crisis in the euro-zone and signs of slowdown in the domestic economy. The Sensex and Nifty closed at 16,213 and 4,867 declining 633 and 183 points respectively.

The week started off flat due to profit bookings at higher levels. Political pressures that forced the government to roll back its proposal to allow 51% FDI in multi-brand retail too weighed on investors’ sentiments. The markets later slipped into the red on reports that the industrial output had declined by 7% in October 2011. Also, the warning by French leader that the risk of euro-zone explosion is very real and S&P putting a number of large European banks and European Union on watch for a downgrade of its AAA credit rating weighed on the market outlook.

The domestic market continued its downtrend after the government conceded that the Indian economy had hit a rough patch. The Finance Minister announced that the GDP expansion in 2011-12 could be lower at around 7.5% as the sharply deteriorating global economic environment had a dampening effect on India. The markets slipped further after the European Union leaders failed to agree on the much awaited treaty that would toughen fiscal rules and impose automatic sanctions on countries violating budget limits.

Market Slip Because of Bad IIP Data

2011-12-12T07:48:00.000-08:00

Bad IIP data took their toll on the markets with both benchmark indices breaching their psychologically important levels of 16,000 and 4800, respectively. Barring IT, all sectoral indices closed negative with metal being the worst among them. Other sectors with substantial losses were oil & gas, banking, realty, auto and capital goods. The Sensex closed at 15870, down 343 points from its previous close, and the Nifty shut shop at 4765, down 102 points. The CNX Midcap index closed with 2.1% loss while the BSE Smallcap index was down 1.5% in today's trade. The market breadth was negative with advances at 263 against declines of 1037 on the NSE. The top Nifty gainers were Wipro, TCS, HCL Tech and Infosys while the biggest losers included Tata Power, Hindalco, SAIL and JP Associates.

Now on 15th Advance Tax and on 16th RBI policy two most important factor comes if it is positive market jump very fast if not market slip down likely nifty 4200 to 4300 and Sensex touch likely 14000 to 12000.

Equity Market Update

2011-12-10T08:04:00.000-08:00

Global Market Update :

o Equity Markets lost the upward momentum from last month as fears of EU sovereign debt crisis reemerged. Concerns on EU debt contagion accelerated as cost of borrowing for large nations like Italy, Spain and France rising which affected investor confidence. However, the markets rebounded from the month lows at the end of month on the back of news that central banks eased dollar funding and resilient US economic data.
o The worst preforming markets in November were Hong Kong and India which corrected by 9.5%. The BSE Sensex hit a 23 month low, YTD down 21% and is one of the most performing equity markets.
o The US Markets (Dow Jones) was the best performing market with 0.76% returns in November and the one of the only developed market which has delivered positive returns YTD in 2011.US

US Economy Update :

Resilient US macro data and policy cooperation held the market

• Better-than-expected macroeconomic data of the US
- US consumer confidence jumped from a previous 40.9 to 56.
- US ISM manufacturing index rose to 52.7in November from 50.8 in October.
• The Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated central bank response to the continent’s sovereign debt crisis. The new interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points.
• Payroll gains in the U.S. improved last month, while an increase in the number of Americans leaving the workforce helped push the jobless rate down to 8.6 percent, the lowest level since March 2009.

Euro Region: Key developments :

• UK PMI Manufacturing decreases for the second successive month to 47.6 points in November, following 47.8 points registered the in October.
• S&P reduces its credit ratings on 15 big banking companies, mostly in the Europe and the US as the result of an overhaul of its ratings criteria.
• UK budget office cuts the country’s economic growth forecast for 2011 to 0.9% from the 1.7% it had predicted in March, and trims the 2012 forecast to 0.7% from 2.5.
• Greek Prime Minister George Papandreou gave in to pressure from France, Germany and from within his own country and scrapped a referendum on a bailout package for the country proposed by the European Union (EU).
• Private sector activity in Euro zone declined for the third straight month in November, coming in at 47.2 thus remaining below the 50.0 (the level that distinguishes expansion from contraction).
• The sale of German govt. bond or bunds failed on Wednesday (23rd November) with the German govt. being able to sell only €3.644 bn of the €6 bn in 10 years bunds on auction for an average yield of 1.98%
• The UK economy rebounded with the GDP growing at 0.5% in the third quarter both over the second quarter as well as on an annual basis. The growth was driven by stock building and government spending.
• European Central Bank cut in the euro zone’s benchmark interest rate from 1.5% to 1.25%, while warning of a mild recession.
• Fitch Ratings says France's AAA rating would be at risk if the euro-zone debt crisis intensifies; also downgrades Portugal's rating to junk status to BB+ from BBB-.

BUY : Bharat Electronics Limited (BEL)

2011-12-10T07:37:00.000-08:00

BUY : Bharat Electronics Limited (BEL): Target Rs. 1725/-, CMP Rs. 1500/-

 BEL, set up to meet specialised electronic needs of Indian defence services, has over the years, grown into multi-product, multi-technology, multi-unit company serving needs of customers in diverse fields in India and abroad.
 Company derives 80% of sales from defence and this ratio is expected to prevail in future as well as both (defence & retail) businesses will grow in line. Being a defence PSU, BEL is likely to be the key beneficiary of substantial increase in defence expenditure. Infact, First time buys (relevant to BEL) - Rs. 234,000 crore, Offset opportunities - Rs. 40,000 crore and upgrades of Mirage & Jaguar fighter planes - Rs. 30,000 crore will open up > Rs. 300,000 crore worth business opportunities over next 10 years for the company and it is confident of capturing > 50% of such opportunities.
 Defence offset, requiring 30% of order to be sub-contracted domestically, to be another booster. BEL’s PSU status makes it a preferred offset partner for many contracts. Accordingly, company is looking at such opportunities in aerospace sector, especially big contract like Medium Multi Role Combat Aircraft. As a result, export order book is expected to swell to US $ 300-500 million (US $ 42.3 million of total export order book of US$ 66.4 million in FY 2011) in next 5 years.
 All the factors mentioned above aptly get reflected in strong order book of Rs. 28,000 crore as on Sep. 30, 2011 (Rs. 23,000 crore at beginning of FY 2012), providing visibility of sales growth of 15% (+) for next 5 years. BEL expects further order inflow of ~ Rs. 5,000 crore in FY 2012.
 Sensing huge business opportunities on high end defence side (eg. Battlefield surveillance, tactical communication, Akash Weapon, etc), company has significantly stepped up R&D spend (grown @ CAGR of 25.7%) in past 4 years (FY 2007-2011) and accounts for ~ 7% of FY 2011 sales. Strengthening of R&D will improve BEL’s ability to remain competitive even as the government opens up defence sector to private players.
 BEL also plans to venture into green field areas like energy sector (Solar, Nuclear), Infrastructure.

Valuation :

 In view of robust order book, steady demand from existing products, enhanced high value product offerings and growth opportunities in civil & export segment, BEL is expected to grow @ CAGR of 15% for next 4-5 years .
 Its cash rich company. As on Sep. 30, 2011, company had cash balance of Rs. 5,875 crore, i.e. > Rs. 734 per share, which is ~ 50% of its current market price.
 At CMP, share is trading at 11.26 times FY 2012 expected EPS of Rs. 133.16 and 10.21 times FY 2013 expected EPS of Rs. 146.98. Considering excellent future prospects, it is an “Excellent Buy from 2-3 years perspective”.

Weekly Market Review

2011-12-06T17:40:00.000-08:00

Global: Financial markets got a boost from efforts to boost dollar liquidity, signs of stronger policy responses and monetary easing in key emerging markets. Equity markets rallied sharply from recent lows and yields eased at the short tend. Commodity prices moved up and the US dollar gave up some of the recent gains.

India – Equity: Domestic indices, especially the large cap ones, rallied sharply on the back of positive global sentiment. GDP data pointed towards a slowdown led by weakness in manufacturing, while services sector maintained strength. At these levels, strong policy actions (read reforms) can act as a positive trigger and also help in addressing infrastructure bottlenecks.

India – Debt: Yields fell across the curve on increased hopes of an easier monetary policy, even as liquidity remained tight. The rupee benefited from the dollar's weakness and the auction of new FII investment limits witnessed strong demand. Fiscal deficit numbers came in higher than last year levels for the same period.

Hold on Mphasis

2011-12-06T08:31:00.000-08:00

 Weak numbers for 4QFY11 (August – September). Revenue growth at 1.6%qoq was lower
than market expectation of 2.4% qoq due to poor volume sales and lower realized USD/INR rate.
 EBIT margin at 14.7% missed street estimates by 200 bps.
 However, EPS has beaten market expectations because of forex gains.
 Growth continues to suffer from sluggish HP channel sales, which declined 4.4% qoq. This segment provides 62% of total sales.
 Headcount also declined despite the addition of about 2000 Wyde employees. Lower headcount is an indication of worsening demand.
 At the current price, the stock does not seem expensive. Moreover, it has net cash of USD 344 million, which may provide support to the stock price.
 Hence, ‘hold’ rating is maintained despite weak quarterly performance.

Eurozone: Contagion Pressures Intensifying

2011-11-29T05:03:00.001-08:00

Long gone, unfortunately, is the initial wave of enthusiasm surrounding the Euro Summit of late October, when a series of initiatives to deal with the Eurozone’s problems was announced. While somewhat short on details, that announcement included an enlargement of the European Financial Stability Facility (EFSF) that had been supported by Germany’s parliament, a European bank recapitalization plan, and a proposal for a larger voluntary haircut on Greek debt. The initial stock market reaction was quite positive, with bourses around the world rallying strongly for a few days post-summit. But that was short-lived and indeed October 28 proved to be the high water market for most stock markets. Since then, continued problems in the Eurozone have led to surging sovereign bond yields across much of Europe and a November stock market decline across much of the globe, with the S&P 500 declining by -10.2%, the Euro Stoxx down by -17%, the DAX falling -15.4% and the Nikkei dropping -10.8%. Even developing economy stock markets have suffered, with the Shanghai CSI 300 down -12% in November and Brazil down -8%. Commodity-based nations have not escaped the downdraft, either, with Australia’s stock market down -9% thus far in November and Canada dropping by the same percentage.

Europe remains the epicenter of systemic risk, and the European sovereign bond market is increasingly refl ecting high levels of market disappointment and frustration with the absence of a lender of last resort, as neither a European Central Bank (ECB) nor Eurobond-oriented solution appears to be forthcoming. Having already contributed to leadership changes in Italy, Spain and Greece, the bond market is seeking the reassuring presence of a more defi nitive credit backstop, given that is unlikely that even an expanded EFSF will be suffi cient to manage contagion spreading to a larger Eurozone nation, such as Italy. Meanwhile, over the past weekend Germany, the Netherlands and Finland suggested that the International Monetary Fund play a bigger role in absorbing losses from the Eurozone as it has become apparent that the market will require a higher level of subordination in the EFSF in order to be enticed to buy bonds. But the request for IMF member nations to share more fully in the sharing of sovereign credit risk comes across as a bit disingenuous, since Germany has consistently refused to pledge more than its initial contribution of €211 billion to the EFSF and seems intent on limiting its direct exposure to Eurozone sovereign bond downside.

In what is now becoming an all too familiar pattern, European leaders unfortunately continue to take action only when the bond market forces them to. And that bond market pressure continues to intensify, with Italy bond yields breaking through 8% and German bond yields rising by 43 basis points over the past 10 days, a period during which, by contrast, yields on U.S. Treasury bonds declined by 9 basis points. Since November 15,
then, German 10 year bonds have gone from being priced 14 basis points below their US counterpart to 38 basis points above at the close of last week.

While the rise in Germany bond yields could refl ect a view that Germany will eventually have to accept the concept of a Eurobond (which would increase the fi nancial pressure on Germany, being put in a position forced to absorb what would be unlimited liability for the debts of other Eurozone nations) it is also conceivable that the bond market is sending a signal that the boundaries of contagion are wider than was once thought possible. In any event, bond markets continue to be the major driver of change, because
policy initiatives continue to be reactive as opposed to proactive. In that sense, it is conceivable that continued bond market pressures will eventually reach a breaking point and force some more defi nitive action, either through the Eurozone offi cials ultimately acquiescing that there will be a lender of last resort or through either a downsizing of Eurozone members or (less likely but not necessarily able to be defi nitively ruled out)
a potential break up of the Eurozone itself. The latter still appears unlikely, because it would probably be more costly than either the ECB or Eurozone offi cials agreeing to establish a lender of last resort (whether unlimited bond purchases by the ECB or an agreement to move towards Eurobonds). As a result, it now appears to be just a matter of time before a combination of a European recession and unsustainable bond yields across more of the Eurozone force offi cials to move closer to a more permanent solution, as the bond markets are demanding.

Meanwhile, the UK has, aside from its ongoing commitment to the IMF, largely stayed out of direct involvement in the Eurozone fray, remaining focused on its own issues and policy. UK policy has a dual emphasison government austerity and quantitative easing, in the hope that accommodative monetary policy will both refl ate asset prices and stimulate economic activity. Economic growth has been positive for the third consecutive quarter, up 0.5% in third quarter, but a key issue for the UK economy is whether it can continue to grow when one of its largest trading partners, the Eurozone, falls into what seems almost certain to be an upcoming recession.

The Next Phase for China

2011-11-29T04:58:00.000-08:00

China’s economic slowdown appears to have stabilized,reducing the risks of a hard landing despite what hasturned out to be an overextension of credit formation since 2008 that has resulted in an oversupply of commercial and residential real estate. Although both traditional and shadow banking has resulted in excessive credit formation that will almost certainly result in credit losses, China has adequate fi nancial resources in the form of large capital reserves to absorb such losses. Now, facing another threat from a European recession that will reduce China’s export trajectory, the world’s second largest economy may be ready to begin restimulating economic growth in 2012 in order to avoid a slowdown in other parts of the world, in a smaller version of what it did in 2008.

However, the next wave of China stimulus will probably be much more centrally controlled at the federal government level and more focused upon sectors that are not currently overcapitalized. Stated another way, the next wave of expansionary initiatives is likely to be done through state controlled banks as China attempts to rein in shadow banking, and likely directed at sectors and industries that represent the next stage in China’s planned growth into a its next stage as a more advanced developing economy. That means that the next phase of hinese expansion is likely in the technology and information industries, moving beyond last decade’s focus on core durable goods manufacturing industries. China had previously announced that it had seven “emerging industries” in mind that it wanted to expand, and it is conceivable that its desire to offset a likely European recession combined with its apparent success in reducing infl ation and achieving a soft landing may make 2012 the right time for China to launch that initiative.

Indian Market Open Gap Up

2011-11-28T06:20:00.000-08:00

The Indian market closed the first day of a new week at the high point of the day on the back of good global cues which led to positive trade across the board. The broader markets, too, participated in this rally. Sensex closed at 16177, up 481 points (provisional) and Nifty at 4851, up 141 points (provisional) from the previous close. CNX Midcap index was up 1.95% and BSE Smallcap index was also up 1.9%. The market breadth was positive with advances at 994 against declines of 314 on the NSE.

After gap up open market through out go up and most of mid cap and small cap stock recover very fast like Hindalco, IDFC, Educomp etc. Now other U.S. and Europe market also looks positive trend so this week looking good for Indian market upto 17200 of sensex and nifty touch likely 5200.

Sector looks good : Cement

2011-11-22T18:18:00.000-08:00

 Three big cement stocks –ACC, Ambuja Cement and Ultratech have outperformed the Sensex by 22 -29% since August 2011. However, it seems that performance of these stocks is not in line with fundamentals of the industry.
 The industry is witnessing a scenario of weak demand for the product, increasing capacity addition and falling capacity utilisation.
 It seems that cement demand recovery is not yet in sight as weakness is seen most of the cement consuming sectors. Profit margin of cement companies is under pressure and the industry is not in a position to hike cement prices because of the rising threat of government intervention. In this scenario, premium valuations of cement stocks are unjustifiable.
 It seems that stock prices are anywhere close to 2007 peak levels, but industry fundamentals are nowhere close to that of 2007.
 Factoring deteriorating fundamentals of the industry, ‘reduce’ rating is assigned to ACC and Ambuja Cement while Ultratech is recommended to ‘hold’.
 Also recommended to reduce exposure in to the sector as current valuation of cement stocks is at heavy premium.
 It seems that ACC is at higher risk of volume and price declines as it has the highest exposure to the southern region.
 Ultratech is recommended to hold on as the company is expected to benefit from volume growth from its capex getting commissioned by FY14.
 Capacity utilization in the industry at multi – year low and any breakdown of co-operation among producers may lead to sharp decline in cement prices.
 Any unfavorable result of the ongoing investigation on cartelization also poses a threat to premium valuations.

U.S. Budget Update

2011-11-16T17:12:00.000-08:00

Lost in the intense investor attention being devoted to the sovereign debt issues of the Eurozone, have been the on-going federal budget debates in the U.S. While it is likely that President Obama and Congress are happy to have attention devoted elsewhere, there are some critical dates rapidly approaching which are likely to refocus attention back on Washington. By way of review, it should be recalled that under the law passed last July (called the Budget Control Act or BCA),which raised the debt ceiling, a sequester mechanism was created which will cut federal spending across the board starting January 1, 2013 unless Congress can agree to $1.2 trillion in budget savings, spread over 10 years, the end of this year. To assist in this process, the BCA created a commission of Congress, called the Joint Dei cit Reduction Committee, composed of 3 democrats and 3 republicans from the House of Representatives and 3 democrats and 3 republicans from the Senate. This Committee (popularly called the budget super committee) is required to make its ecommendations back to Congress by November 23, and Congress must then approve or reject the recommendations by December 23 with no opportunity for amendment. Those ecommendations that are approved then go to President Obama for signature and become law. In the meantime, the BCA gave the President the authority to raise the dei cit ceiling further starting in January 2012 (within limits) to keep the government operational in 2012 and beyond. So, what if the budget super committee makes no recommendation? After all, it takes a majority of 7 members to recommend and the committee is equally divided by political party. It is also possible that Congress will approve only some or even none of the recommendations. What then? That is when the sequester mechanism kicks in. The BCA charges the budget super committee to deliver $1.5 trillion of budgetary savings. However, if they deliver less than $1.2 trillion and/or Congress approves less than $1.2 trillion, the automatic, across the board sequester mechanism starts to cover any shortfall. A simple example will illustrate how the sequester mechanism might operate. There is some consensus that the budgetary super committee might agree on a small mix of $500 billion or so of spending cuts and modest revenue increases (mostly involving higher user fees or highly specii c taxes). Assuming a $500 billion savings number, the following is an example (in billion $)

$ 1,200.0 (Total Sequester)
- 500.0 agreed to dei cit reduction
= 700.0
÷ 9 years (no sequester in FY 2012)
= $77 * total annual sequester

*ignores any interest expenses which are exempt from sequester.

buy’ GSPL –Target Price Rs.140

2011-11-16T08:35:00.000-08:00

 2QFY12 revenue at Rs.281 crore has beaten market estimates on better than expected gas
transmission tariff of Rs.835 /tcm as against the market expectation of Rs.750 /tcm.
 Volume of 35.2 mmscmd was below the street estimate of 37 mmscmd.
 EBITDA of Rs.258 crore and EPS of Rs.2.3 have beaten market estimate by 11% each.
 However, it seems that the market has not enthused much from better than expected numbers
because of stagnated volume over four quarters. Better than expected margin and EPS are primarily due to higher than market expected tariff and it is unlikely to sustain.
 The stock is trading below the fair value because the market expects the regulator to cut gas transmission tariff to a level lower than the market expected tariff of Rs.750 /tcm.
 The stock is recommended with a target price of Rs.140 over one year. Risks to the target price are lower than expected gas transmission volume and lower than expected transmission tariff.

Kingfisher to collect Rs 800cr through fresh equity

2011-11-14T17:42:00.000-08:00

Bankers to the cash-strapped Kingfisher airline today asked its promoters to infuse Rs 800 crore worth of fresh equity if they are to consider a second restructuring of existing debt, as opposition mounted to any bailout of the private carrier.
The Kingfisher Board also had a crucial meeting in Mumbai to work out a debt restructuring plan on the eve of the announcement of its latest financial results.
The bankers have asked the troubled airline to come out with a "credible" plan. The lenders a 13-bank consortium led by SBI, who were yet to decide on ways to soften the troubled airline's Rs 7057.08 crore debt burden, are due to meet Kingfisher management here tomorrow.
The bankers have made it clear that the promoters have to put in at least Rs 800 crore worth of fresh equity as the lenders cannot act as promoters of the airline. "Bankers want more information on their fleet, equity, continuation of fuel supply. Banks can come in as lenders not promoter.
We will respond how it unfolds," said Pratip Chaudhuri, Chairman of SBI which leads the 13-bank consortium that has financed Kingfisher.
Kingfisher is big trouble if they do not collect the money through fresh equity because lenders comes to KFA and collect their money.

Market Out Look

2011-11-11T23:52:00.000-08:00

After three days working weeks i hope Indian market bounce back because all global market ends positive only Indian market close ends at very low level. U.S. market shut near 2% also Europe market lead to U.S. market with 2% to 3% up words movement only Indian market suffer a big correction with some Asian market.

Now on Monday sharp up trend see with gap up opening because it is a very crucial level and a good support level of nifty at 5180 it is stable on Friday. Most of stock correct very sharply specially Banking and Metal stock bounce back comes in those stock and market recover very fast it is quit possible.

Buy Prestige Estates Projects Ltd (PEPL) –Target Price Rs.100

2011-11-09T19:31:00.000-08:00

 Prestige Estates Projects Ltd (PEPL) is recommended to buy with a target price of Rs.100 over one year. There is nothing commendable about 2QFY12 results. However, the bright spot is the momentum in sales / leasing numbers.
 Quarterly revenue at Rs.140 crore is down 46% qoq as project delay (Neptune Courtyard, Kochi) has significantly impacted 2Q revenue recognition.
 EBITDA margin is 18.7% in Q2 versus 14% in 1Q. The company has sold 1.98 million sq ft of residential area in 2Q as against 0.4 million sq ft in 1Q.
 Average sales price (ASP) is Rs.3587 /sq ft versus Rs.4720 sq ft in 1Q. The decline is due to the shift towards mid income house projects from premium house projects and this shift looks positive from the long term view.
 It has also leased 0.8 million sq ft in 2Q versus 1 million sq ft in 1Q.
 The company has unrecognized sales balance of Rs. 2450 crore, which is 1.5 multiple of FY11 revenue.
 Contracted sales in 2Q is Rs.780 crore and the company is short of only Rs.500 crore to reach its contracted sales target of Rs.15 -16 billion for FY12.
 Net debt of the company increased by Rs.100 crore because of capex incurred on office assets and incremental land payments.
 The stock is currently traded at 13.5 multiple of FY12 expected earnings and at 11 multiple of FY13 expected earnings.

Indian Stock Market Suffer From Friday Fear

2011-11-05T20:53:00.000-07:00

The markets made moderate gains today with metal being the top performer in today's session. Other sectors with substantial gains included capital goods and banking and oil & gas was the only sector that closed negative. The Sensex closed at 17563, up 81 points from its previous close, and the Nifty shut shop at 5284, up 18 points. The CNX Midcap index closed with 1% gain while the BSE Smallcap index gained 0.4% in today's trade. The market breadth was positive with advances at 818 against declines of 612 on the NSE. The top Nifty gainers were Ambuja Cements, Hero MotoCorp, Hindalco andCairn while the biggest losers included Ranbaxy, Tata Power, Reliance Infra and Dr Reddy's.

Just mid cap selected stock move up very sharply at bear trend there is some good news to move up otherwise market lost all gain because of three days week after friday.

‘buy’ IRB Infra – Target Price Rs.240

2011-11-03T19:06:00.000-07:00

 Buy rating on IRB Infra is maintained with a target price of Rs.240 over one year, as against
the earlier target price of Rs.250.
 With the sale of 30 million shares of the promoter group, the overhang of distressed sale of pledged shares has been significantly reduced.
 The chairman of the company along with his family has increased their stake in the company to 60%.
 As the overhang on pledged shares is substantially removed, investors could now focus on
fundamentals, which are strong in this weak environment.
 Any project win from its Rs.16 billion plus project bid pipeline, earning surprise from its construction business or interest cost savings would be positive catalysts for the stock.
 Goa project is excluded from estimates because of persisting uncertainties over land
acquisition and the target price has been reduced to Rs.240 from Rs.250.
 Risks to the target price are lower than expected growth in traffic or daily collections in new projects, lower EPC margins, project delays etc.

‘buy’ Zee Entertainment – Target Price Rs.150

2011-10-19T18:40:00.000-07:00

 Buy rating on Zee Entertainment is maintained with a target price of Rs.150 over one year. The stock is currently traded at Rs.112 range.
 2QFY12 revenue has been lower as expected. However, EBITDA has beaten market
expectation because of lower costs.
 Advertising revenue declined by 4% yoy on weak ad spends, lower rating and lower sports
contribution. Subscription revenue also missed estimates due to accounting change.
 EBITDA margin has beaten market forecasts because of lower sports losses, accounting
change and cost efficiencies.
 Zee has lost viewership share in three of its key channels - Zee TV, Zee Cenema and Zee
Marathi. To counter this, Zee is increasing its programming hours on Zee TV and is looking
more aggressive in movie acquisition. This along with lower ad spend may impact near term
margins.
 However, subscription revenue will be benefited from digitization.
 Better subscription revenue and lower sports losses are expected to aid profitability of the company.
 Based on these assumptions, buy call on Zee Entertainment is maintained with a target price of Rs.150 over one year.
 At the current price of Rs.112 range, the stock is traded at 17.5 P/E of FY12 expected earnings and at 14.8 P/E of FY13 expected earnings.

Stock at Bottom Buy Aban

2011-10-15T19:05:00.000-07:00

Aban Offshore – Target Price Rs.579

 Buy rating on Aban Offshore is reiterated with a target price of Rs.579 over one year.
 Aban Offshore is expected to charter four rigs by the middle of 4QFY12 as against the earlier expectation of 2QFY12. Tenders have been announced for two rigs.
 Potential re-charter of the ONGC rigs is expected to boost the cash flow clarity. Re-charter of rigs will reduce the uncertainty on FY12 and FY13 cash flows.
 EBITDA margin is expected to stabilize at 63% over FY12-14. However, EPS estimates FY12 –FY14 are cut due to conservation assumptions.
 Working capital requirements increased in FY11 due to payment delays. However, this would normalize at 80 days of revenue.
 Debt financing seems imminent but valuations look attractive. Even at a conservative approach towards re-chartering of rigs, it seems that there is upside potential to the stock from the current level because Aban is currently traded at its trough valuation.

Indian Market Push At Afternoon

2011-10-14T17:47:00.000-07:00

The markets gained momentum in the afternoon after a subdued session in the morning and closed with substantial gains. IT and oil & gas led the rally and banking, auto and FMCG, too, played their part in supporting the indices. Realty, metal and capital goods closed with moderate declines. The Sensex closed at 17083, up 199 points from its previous close, and the Nifty shut shop at 5132, up 54 points. The CNX Midcap index closed with 0.4% gain while the BSE Smallcap index was up 0.3% in today's trade. The market breadth was negative with advances at 705 against declines of 718 on the NSE. The top Nifty gainers were Jindal Steel, Wipro, TCS and Bharti Airtel while the biggest losers included Sesa Goa, Tata Steel, DLF and Coal India.

TREND ON Q2 RESULT BUY SOBHA DEVELOPERS

2011-10-11T18:14:00.000-07:00

 Buy recommendation on Sobha Developers is maintained with a target price of Rs.375 over
one year. The stock is currently traded in the range of Rs.203 range.
 Sales volume continues to increase and the company could maintain sales guidance.
 During 1HFY12, the company sold 1.6 million sq ft, a yoy increase of 13%.
 The company sold 0.94 million sq ft during 2QFY12 as against 0.74 million sq ft in 2QFY11 and 0.67 million sq ft in 1QFY12.
 Sobha is maintaining its contracted sales guidance of 3 – 3.5 million sq ft for FY12. In value terms, this is amounted to around Rs.1500 crore.
 NCR (National Capital Region) and Mysore (newer markets to the company) have contributed
12% of 1QFY12 sales.
 Bangaluru volume also recorded healthy growth of 23% yoy and 35% qoq. Average sales
price excluding NCR region recorded moderate 3% growth.
 Of the newly launched projects of 3.25 million sq ft, around 20% (0.65 million sq ft) is sold in 1HFY12.
 Contracted sale of Rs.790 crore in 1HFY12 is up 48% yoy. Current inventory is 4.5 million sq ft.
 Buy rating is maintained with a target price of Rs.375 over one year and it seems that
company’s entry in to new markets would drive growth while continued improvement in cash
flow driven by the residential segment and better execution may lead to a re-rating of the
stock.

VALUE STOCK BUY AT BOTTOM

2011-10-05T18:58:00.000-07:00

Buy NTPC – Target Price Rs.204

 NTPC is recommended to buy with a target price of Rs.204 over one year. The stock is
currently traded around Rs.164.
 Company’s 2QFY12 performance is expected to be weak because of lower than expected
power generation in the quarter due to unforeseen disruption of operations in its Ramagundamand Korba power plants.
 However, the issues could be sorted out soon and operations would be resumed shortly.
Considering the disruptions, EPS estimates for FY12 has been reduced marginally.
 Disruptions in operations have weakened the stock price in the market and it seems that this is an attractive opportunity to accumulate the stock.
 Resumption of operations and capacity additions would drive the stock price up over a few months time. Additional capacity of 3.6 GW is expected to be added in FY12.
 The stock is well positioned in terms of fuel security at times of coal shortage. This coupled with strong balance sheet and earnings visibility, the stock appears to be a good defensive play.
 After the correction, valuation of the stock is also looking very attractive. At the current level, the stock is trading very close to the trough valuation. Currently, the stock is traded at 1.7 multiple of FY13 expected P/BV, which is lower than its seven year average.
 Risks to the target price are delay in completion of new power plants and lower plant availability due to fuel shortage.

BUY HINDALCO TARGET PRICE Rs.186

 Management has reiterated commissioning of Mahan project by December 2011. The project
is at an advanced stage of implementation.
 Operations at Renukoot and Renusagar projects are going smooth.
 Mahan project’s production guidance is 5 – 8% higher than market estimates.
 Mahan project’s coal block is expected to get environmental clearance shortly. The stock may be re-rated as it happens.
 Sharp decline in aluminium price due to volatile macroeconomic situation could be a major risk to the target price. However, this is unlikely to happen due to strong cost support and the company could sustain its earnings.

Buy’ on Idea – Target Price Rs.120

2011-09-29T19:50:00.000-07:00

 ‘Buy, call on Idea Cellular is maintained with a higher target price of Rs.120 over one year, as against the earlier target price of Rs.110.
 Idea has gained revenue market share in every circle of its operation in the last three years and has been a pure GSM operator.
 The company has the highest proportion of active and rural subscribers, which will enable the company to outperform its peers.
 Low mobile penetration in rural India (around 35%) and rising rural income may help telecom operators to penetrate the rural market and raise tariff rates.
 An analysis has revealed that the company has increased its revenue market share in each of its 22 circles in the last three years.
 The stock appears to be the top pick to play in the improving outlook for the Indian telecom sector.
 The company is expected to report 29% CAGR in revenue growth, 32% CAGR in EBITDA and 42%
CAGR in EPS, which appears to be the highest in the telecom industry.
 Company’s capex intensity is likely to moderate as much of the capex for 3G has been taken care of in FY12.
 TP has been hiked to Rs.120 from Rs.110 because of higher earnings estimates.
 The target price is at 7.5 multiple of FY13 expected EV/EBITDA.

Sector outlook – Telecom

2011-09-28T19:17:00.000-07:00

 The telecom sector is poised for better revenue growth and margin improvement, backed by tariff hike and revenue from 3G services.
 Impact of recent tariff hikes has been analyzed and its effect on revenue side is positive.
 Despite a weak start, it seems that building blocks on 3G are falling and revenue growth is gaining momentum.
 Profitable revenue growth from tariff increase and 3G revenue is expected to increase free cash flow of companies, which will help debt reduction.
 Competitive intensity in the industry is falling and there is increased scope for resurgence.
 Price driven revenue growth will improve margin and better free cash flow. Lower capex requirements may also help free cash flow.
 Besides tariff hike, urban cycle revenue is expected to get a boost by data (internet) while there is further potential for rural mobile penetration.
 As the industry prospects are improving, Indian telecom companies are expected to report 50% plus increase in EPS in FY13. Based on this, target prices on Idea and Bharti have been hiked.

PIC RIGHT STOCK : Buy Oberoi Realty

2011-09-24T09:08:00.000-07:00

Buy Oberoi Realty – Target Price Rs.268

 Initiated coverage on Oberoi Realty with a target price of Rs.268 over one year. The stock is currently traded in the range of Rs.221.
 The ‘buy’ rating is based on many positives to the company while compared to peers and
looks the top pick in the realty space.
 One major positive for the stock is the healthy cash balance of the company. Its cash balance at Rs.1560 crore is around 20% of its market capitalization.
 Checks suggest that the company’s execution capacity is superior to others and order
cancellation risk is limited.
 The company has the highest RoE in the coverage universe and new land acquisitions at
current prices would help the company to maintain strong RoE, going ahead.
 The company has launched two new projects in Mumbai (one in Mulund and another one in
Worli), together constitute 25% of current land bank.
 It has also leased out almost 80% of its rent generating assets.
 Acquisitions of new land parcels are underway. These three are expected to be the immediate catalysts to the stock price.
 The target price of Rs.268 implies 22% appreciation from the current level and at a price / book value multiple of FY13 expected book value.

Buy NHPC At Attractive Level

2011-09-18T19:28:00.000-07:00

 Buy call on NHPC of target price of Rs.30, Target price is lowered due to delay in project execution and its impact on P/BV ratio.

 ‘Buy’ on the stock is maintained due to its outperformance over the MSCI India index and considering the fact that ongoing capacity addition is not reflected in the current market price of the stock.

 Over the last six months, the stock has outperformed the MSCI India index by 15%. In 2010, the stock underperformed the index because of poor execution records of the company.

 It seems that poor execution has already priced in the current stock price. At the current price in the range of Rs.24, the stock appears at a 13% discount to the worst case scenario price of Rs.28. This reflects the pessimism over the execution capabilities of the company.

 However, the company is now showing some progress in the execution front and 678 MW additional capacity is expected to be added by the next six months. Of this, 231 MW Chamera 3 and 44 MW Chutak plants are expected to commence operations by next month.

 These capacity additions may lead to a possible re-rating of the stock, though the capacity additions are slightly lower than the market’s earlier estimates.

 The stock is currently traded at 14.3 multiple of FY12 expected earnings and at 12.2 multiple of FY13 expected earnings.

OIL SHARE IN NEWS : Buy HPCL and BPCL

2011-09-15T18:37:00.000-07:00

HPCL – Upgraded to ‘buy’ with Target Price of Rs.420

 Hindustan Petroleum (HPCL) has been upgraded to ‘buy’ from the earlier ‘reduce’ recommendation. The target price is Rs.420 over one year. The stock is currently traded in the range of Rs.362.

 The upgrade is based on potential decline in subsidy burden and recent decline in share price despite favorable crude outlook for oil marketing companies.

 Over the last one year, HPCL stock has fallen by 11% versus 9% drop in the market.

 Besides all the above, duty cuts and fuel price hikes have assisted oil marketing companies to reduce under- recoveries.

 HPCL is favored over BPCL because of improved EBITDA of HPCL in the event of declining oil prices. As the oil prices are falling, HPCL is expected to generate 70% EBITDA from its marketing business while it is expected at 55% for BPCL.

 The stock is attractive on valuation front as well. Standalone basis, the stock is currently traded at 0.8 multiple of FY12 expected P/BV as against its five year average of 0.9 P/BV.

 Apart from upgrading the stock to ‘buy’ from ‘reduce’, the target price has also been hiked to Rs.420 from Rs.366 earlier.

 The standalone business is expected to contribute Rs.356 to the target price and the rest is expected to come from investment in MRPL and Oil India Limited.

BPCL – Upgraded to ‘hold’ from ‘reduce’ –TP Rs.695

 BPCL has been upgraded to ‘hold’ from the earlier recommendation to ‘reduce’. TP has been revised upward from Rs.547 to Rs.695.

 The share has not been upgraded to ‘buy’ because positives on the exploration and production front have already reflected in the current price of the stock. As against 9% fall in the market over the last one year, the stock price has gained by around 8% at the current valuation of Rs.656 range.

 For the near term, no major triggers are visible on the exploration and production (E&P) front and hence major upside on the stock price is unlikely.

 Company’s lower exposure to marketing is another factor limiting the upside.

 However, softening crude prices, lower subsidy burden and reduced under- recoveries are minor positives that may help the stock to some extent.

Market Outlook – Market correction provides value buying opportunities

2011-09-13T05:26:00.000-07:00

 In these days of market correction, long term investors are searching for value buying opportunities.

 An analysis of stocks from different sectors reveals that there have been many stocks that are trading below or close to their ‘net current asset value’.

 Attractive opportunities are available in plenty in sectors like IT, engineering and construction, real estate, metals etc.

 It may be difficult to predict short term performance of these stocks. However, it seems that many stocks have significant re-rating catalysts over the medium term.

TCS - downgraded to ‘reduce’; Target Price of Rs.830

2011-09-12T20:05:00.000-07:00

 TCS has been downgraded to ‘reduce’ from the earlier ‘buy’ call as the price may drop to Rs.830 range over one year.

 Though the demand environment for IT companies remain unaffected for the time being, it is difficult to believe that demand situation may continue to remain unaffected in the current scenario of deteriorating macroeconomic variables such as severe job cuts in financial services segment, faltering consumer and manufacturing data etc. These areas contribute about 72% of revenue of the company.

 It seems that the current price of the stock does not factor in weak demand scenario for IT services and several other adverse factors such as the debt crisis in Europe, US banking issues etc that may impact the stock price. Hence the target price is reduced to Rs. 830 over one year.

 Company’s overexposure in to financial services sector is another cause for concern because demand from this segment is faltering. While it is in the range of 26 -35 % to its peers, it is around 43% for TCS.

 Issue related to new US visas is another problem for Indian IT companies. Checks indicate that getting US new visas is more difficult than earlier. Companies may overcome this problem by hiring from the US but this is more costly and will lower margins.

Reduce rating for Infosys and HCL Technologies

2011-09-07T18:13:00.000-07:00

 Infosys has been downgraded to reduce with a target price of Rs.2000 over one year. The downgrade is on ground that the stock is likely to be available at lower prices than the current prices and it seems prudent to book profit at the current level.

 Many economists see that a recession in the US is very likely and this would adversely affect revenue and profitability of IT companies including Infosys.

 Though the company circles have viewed that near term demand for products and services may not be affected, it has not quantify the medium term impact of the probable recession in the US on the company’s financials.

 In this scenario, the stock price is expected to drop from the current level and the stock may be available cheaper.

 Based on the same reasoning as above, HCL Technology has also been downgraded with a target price of Rs.300 over one year. Currently, the stock is being traded at a price range of around Rs.397.

Indian Market in Big Pressure

2011-08-27T09:36:00.000-07:00

Another week of selling pressure and both benchmark indices and all sectoral indices closed in the red. The Nifty touched its 18-month low level and both benchmark indices breached some important psychological levels.

The Sensex lost 1.7% while the Nifty closed with 2% loss over the week. The CNX Midcap index lost 1.25% and the BSE Smallcap index was down 1.4% during the week. The BSE Realty was down 4.1% and BSE Metal closed with 5.3% loss.

After touch new low Indian market suffer very big down trap and there is no clue to bounce back and start bull run because all world market go up but only Indian market crash every day. As per technical support Indian market have big support at 15500 or on dip another support 14500.

Value Stock Buy

2011-08-12T08:44:00.000-07:00

Some good stock at lower level it has a good value to get attractive return.

CENTRAL BANK OF INDIA #

52 week High/Low : 211.94 / 101.30
CMP : 108.00
Target : 139.00

JSW STEEL LTD #

52 week High/Low : 1400.00 / 647.00

CMP : 676.00
TARGET : 884.00

US credit rating downgrades from AAA to AA+

2011-08-05T20:45:00.000-07:00

WASHINGTON: The United States has lost its coveted top AAA credit rating.

Credit rating agency Standard & Poor's on Friday downgraded the nation's rating for the first time since the US won the top ranking in 1917. The move came after Congress haggled over budget cuts and the US government borrowing limit _ and failed to cut enough government spending to satisfy S&P. The issue has contributed to convulsions in financial markets.

The drop in the rating by one notch to AA-plus was expected. The three main credit agencies, which also include Moody's Investor Service and Fitch, had warned during the budget fight that if Congress did not cut spending far enough, the country faced a downgrade. S&P said that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation. Moody's said Friday it was keeping its AAA rating on the nation's debt, but that it might still lower it.

One of the biggest questions after the downgrade was what impact it would have on already nervous investors. Many financial analysts said investors were expecting a downgrade. But some selling was expected when stock trading resumed Monday morning. The Dow Jones industrial average fell 699 points this week, the biggest weekly point drop since October 2008.

``I think we will have a knee-jerk reaction on Monday,'' said Jack Ablin, chief investment officer at Harris Private Bank.

One fear in the market has been that a downgrade would scare buyers away from US debt. If that were to happen, the interest raid paid on US bonds, notes and bills would have to rise to attract buyers. However, even without its AAA rating, US debt is seen as one of the safest investments in the world. And investors clearly weren't being scared away this week. While stocks were plunging, investors were buying Treasurys. The yield on the 10-year note, which moves opposite its price, fell to a low of 2.39 percent on Thursday.

The government fought the downgrade. Administration sources familiar with the discussions contended that the S&P analysis was fundamentally flawed. They spoke on condition of anonymity because they weren't authorized to discuss the matter publicly. S&P had sent the administration a draft document in the early afternoon Friday and the administration, after examining the numbers, challenged the analysis.

In a statement, Treasury said, ``A judgment flawed by a $2 trillion error speaks for itself.''

S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade to AA would occur if the agency sees smaller reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.

In its statement, S&P said that it had changed its view ``of the difficulties of bridging the gulf between the political parties'' over a credible deficit reduction plan.

S&P said it was now ``pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon.''

US Market Trouble After Deal Done

2011-08-02T18:37:00.000-07:00

The deal reached by the US Congress to raise the $14.3 trillion debt ceiling has spared the nation an immediate catastrophe while potentially setting a path for longer-term disasters.

Financial markets' initial euphoria over the deal faded quickly. The S&P 500 index of US stocks declined for the sixth day in a row, losing 0.4% Monday to close at 1,286.94. The dollar gained against the euro and the yen but declined to a record low against the Swiss franc.

The markets' response underscores an unfortunate reality: While the US government may have averted a self-inflicted disaster, it hasn't solved fundamental problems and appears to have created new ones. What the US needs is a deficit-reduction plan to address its long-term fiscal gap without weighing too heavily on a weak recovery.

Instead, it's getting the opposite: immediate spending cuts that threaten the recovery in the short term but aren't substantial enough to fix the long-term budget problems. Under the deal the House approved Monday, the government must find $21 billion in new spending cuts next year, and possibly much more.

If legislators fail to agree by the end of this year on at least $1.2 trillion in further deficit reduction, the country will face indiscriminate cuts in domestic and defence programmes. The cuts could hamper the recovery, especially given $250 billion in expiring unemployment benefits, the end of the temporary payroll-tax cut and the winding down of the stimulus programme.

Growth was barely evident in the first half, and a manufacturing report on Monday showed a steep deterioration in both activity and hiring plans in July. A growing economy is crucial to fixing the government's finances. Economic output is the denominator in the US government's debt burden, which currently stands at almost 100% of GDP, according to the International Monetary Fund -- the highest level since the aftermath of World War II.

Even if the economy doesn't falter under the cuts, the deal provides far too little future deficit reduction to put the government's finances on a sustainable path, and possibly too little to maintain its AAA credit rating.

Economists estimate the US structural budget deficit - the gap that must be closed to achieve long-term stability - at about 5-6% of GDP. The $2.4 trillion in deficit reduction envisioned in the compromise plan amounts to 1% of projected GDP over the next decade.

Make no mistake: The US is a wealthy country that can afford to solve its budget problems. Closing the fiscal gap will require political leaders to embrace more ambitious policies and to build popular support for the sacrifices they will entail. These tasks will only be more painful if markets ultimately force them on us.

Us market crash very sharply, there is no support to market from deal investor lost their faith on US economy because of that market down like :
Nasdaq 2,669.24 -75.37 -2.75%
S&P500 1,254.05 -32.89 -2.56%
Dow Jones Ind. Avg. 11,866.62 -265.87 -2.19%

Buy and Hold Value Pics for more than 1-3 years

2011-07-29T23:50:00.000-07:00

Buy Hindustan Construction Company –Target Price Rs.49

 Hindustan Construction Company (HCC) is recommended to buy with a target price of Rs.49 over one year. The stock is currently traded in the range of Rs.31.

 The company has reported revenue of Rs.1060 crore for 1QFY12. Revenue is higher by 6.3% yoy but lower than street estimates. For the company, the first two quarters of the financial year are seasonally weak.

 Order book stands at Rs.17000 crore, excluding Rs.1940 crore Sawalkote project and the order book is 3.7 multiple of FY12 expected revenue. Water and hydro projects dominate order book constituting 60% of oreder backlog.

 EBITDA at Rs.140 crore increased 9.7% yoy and better than market estimates. EBITDA margin has increased by 40 bps yoy to 13%.

 Interest expenses at Rs.93.25 crore increased 61% yoy due to higher interest from FCCB refinancing and 200 bps increase in interest rate on average.

 Tax rate for the quarter was 53% versus 22% in 1QFY11 due to disallowance of certain interest expenditure related to its subsidiaries.

 PAT declined by 83% yoy to Rs.4.87 crore.

 Debt increased 7% qoq and 23% yoy to Rs.3710 crore.

 HCC has divested 14.5% stake in its BOT holding company for Rs.240 crore. The BOT holding company has been valued at Rs.1650 crore and HCC had 85.5% stake in it. The company had invested Rs.653 crore in the equity of the BOT company. More funds will be infused in the BOT holding company in the coming 12 -18 months.

 Based on the quarterly performance, it seems that the core business of the company continues to suffer and Lavasa is the lone driver for the stock.

 The scrip is recommended to buy with a one year target price of Rs.49. Target price would be revised in due course.

Good Value Buy Tips : HCL Tech – Target Price Rs.600

2011-07-28T19:09:00.000-07:00

 Company has reported strong performance for 4QFY11 (Year end in June) with revenue, EBITDA and net profit exceeding market expectations by around 3%.

 EBIT margin expanded by 110 bps against the guidance of 100 bps expansion. Thus the management has kept up its promise.

 USD revenue growth at 5.3% qoq is above street estimate and also at the higher end of the peer group( USD revenue growth of the peer group ranges from 1 -7%.

 The company has signed 20 new transformational deals in 4Q and this suggests continued revenue visibility.

 The market expects EBIT margin expansion of 50-100 bps for FY12 though the management has not committed on it. This seems achievable as the business prospects are improving and current margin is substantially lower than that of FY10.

 USD revenue growth of 5.3% was mainly from 10.5% growth in infrastructure services, which constitutes 25% of revenue. This has offset the lower than expected growth of 4.3% from software and - 4.2% revenue growth from BPO.

 Among the verticals, the standout areas are energy, utilities, public sector, publishing and entertainment.

 The company is undergoing a positive long term transformation and this has increased attraction on the stock. After the revamp of BPO business in FY12, the company will have the most balanced portfolio among peers with a healthy mix of enterprise solutions, applications, infrastructure services and engineering services.

 The only concern is regarding current depressed margins and this need to be addressed.

MARKET OUTLOOK

Stock market slip very sharply because of that some good fundamental stock at good low value. it is good opportunities for value buy pics.

Several fundamentally strong midcap stocks are trading at attractive valuations. Among midcaps, our preferred stocks are IRB Infrastructure, Indian Hotels, Sintex Industries, Shree Renuka Sugars, Sobha Developers, KEC International, Persistent Systems etc

Stock Buy : Balrampur Chini Mills

2011-07-27T07:15:00.000-07:00

Buy Balrampur Chini Mills : Target Price lowered to Rs.85

# Buy call on Balrampur Chini Mills is retained with a reduced target price of Rs.85, for
1QFY12.

# Company missed EBITDA and net income estimates of the market for 1QFY12 because of lower than expected distillery income as well as lower sugar realization.

# EBITDA margin declined to 7.7% in 1QFY12 as against 11.6% for 1QFY11.

# Distillery realization declined to Rs.23.8/ kg, 9% lower qoq due to onetime disruption in supplies. Now, it has recovered to Rs.26/kg.

# Sugar realization was lower at Rs.27.2/kg as against the market expectation of Rs.27.7/kg.

# On the positive side, profit from co-generation segment increased 36% yoy due to increase in volume. Realisation from this segment has increased 3% yoy.

# On a medium term perspective, the outlook on the stock will be impacted by regulatory decisions such as regulated sugar cane prices, deregulation of the sector etc. For the near term, sugar cane prices may continue to remain high in view of upcoming Uttar Pradesh election. On the other side, any news on deregulation of the sector would be a positive catalyst on the stock and the management expects that some of the regulations like levy quota and release mechanism would be done away with.

# Company expects sugar cane price de-regulation by the next crushing season.

# Production for FY12 is expected at 26 million tons versus 24.3 million tons in FY11. Sugar production in FY11 increased 30% yoy and it is likely to increase 10 -12% in FY12. Company expects that FY12 would be another volume driven year.

# As on June 30, 2011, long term loans are at Rs. 720 crore and working capital loans are at Rs.680 crore.

# Balrampur Chini is preferred due to its strong balance sheet, low capex and high contribution from power division.

# Considering the earnings miss in 1QFY12, the target price is lowered to Rs.85 from Rs.100 earlier. The target price is at 1.5 multiple of its long term average price/ book value ratio.

MARKETS CRASH AFTER RBI CREDIT POLICY

2011-07-26T09:51:00.000-07:00

After declare RBI credit policy market crash very sharply and not get back at the end of day sensex shut door at 18518 down 353 point and Nifty close at 5575 down 105 point.

• Markets today opened on a quiet note & traded flattish in the early morning session awaiting the RBI credit policy, which announced a rise of 50bps in the repo & reverse repo rates while keeping the CRR unchanged at 6%. The unexpected rise in the interest rates led to a steep fall in the markets and the stocks of interest rates sensitive sectors like realty, banking and auto declined significantly. Earlier, US markets ended in negative while Asian indices closed in green. European markets displayed mixed and volatile trade.

• Asian Indices: China +0.53%, Hong Kong +1.25%, Japan +0.47%, S Korea +0.85%, Taiwan +1.28%.

• European Indices*: France ‐0.45%, Germany +0.15%, UK +0.09%.

• Bse Sectoral Indices: Losers: Realty ‐3.55%, CG ‐3.49%, Bankex ‐2.46%, Auto ‐2.14%, Power ‐1.88%, FMCG ‐1.56%, PSU ‐1.42%, Oil & Gas ‐1.28%, Metal ‐1.27%, CD ‐1.10% Laggards: IT ‐0.10%

Review of RBI Monetary Policy Q1FY12

2011-07-26T09:44:00.000-07:00

Key Policy Action & its Backdrop

RBI has increased the repo rate under the liquidity adjustment facility (LAF) by 50 basis points from 7.50% to 8% with immediate effect.

The reverse repo rate under the LAF, determined with a spread of 100 bps below the repo rate gets automatically adjusted to 7% with immediate effect.

The Marginal Standing Facility (MSF) determined with a spread of 100 bps above the repo rate, automatically adjusts to 9%.

RBI has maintained the baseline projection of real GDP growth at 8% for FY12 on the assumption that the buoyancy in consumption and exports performance, if continued, will contain growth moderation. However, considering the domestic demand-supply balance and global trends in commodity prices, RBI has revised its expectation for WPI inflation for March 2012 to 7% (from 6% indicated in May 3 policy).

The current trends in money supply (M3) and credit growth has remained above the indicative trajectory of the RBI. Keeping in view the evolving growth-inflation dynamics, RBI has revised the indicative projection of M3 growth for 2011-12 downwards from 16.0% to 15.5% and Non-food bank credit growth projection from 19.0% to 18.0%.

The rate hike come in a back drop of:

# Actual inflation being higher than expected,

# Recent increase in domestic administered fuel prices and the minimum support prices for certain food items will keep inflation under pressure,

# Sharp revision in non-food manufactured products inflation during Feb-April 2011 confirms strong demand pressures, and

# Crude oil prices remain volatile

Good Stock Tips Advice : Hold Hindustan Zinc – Target Price Rs.147

2011-07-25T09:02:00.000-07:00

 1QFY12 result is in line with market expectations. Revenue and EBITDA are slightly lower than market expectations. However, PAT higher than street estimates by 5% because of higher than expected other income.

 Production declined from the expected level because of unplanned two weeks shutdown at the flagship Rampura Agucha mine.

 Operating cost /ton declined slightly because of a qoq decline in royalty.

 However, cost pressure is expected to continue in FY12&13 because of increased share of production from lower grade underground mines, start of initial work on underground mining at Agucha and continued strength of coal prices.

 The outlook for Zinc may continue to remain weaker than that of lead as Zinc is expected to stay surplus in 2011&2012.

 It seems that current zinc prices are substantially above the marginal cost and the price may move lower as the risk appetite wanes.

 On the other hand, demand –supply for lead would be in balance in 2012 and may be a deficit of 2lakh tons by 2013.

 EPS estimates for FY12 has been cut by 5.4% and it has been increased by 3.7% for FY13, factoring slower ramp up in Dariba and revised metal price assumptions.

 The stock is currently traded at 9.5 multiple of FY12 expected earnings and at 7.6 multiple of FY13 expected EPS. Thus, it seems that the stock is expensive while compared to global peers and does not look a compelling buy.

Value tips for Stock Market : Dish TV as the valuation is expensive

2011-07-24T04:56:00.000-07:00

Dish TV as the valuation is expensive – Target Price Rs.75

 current market price of Rs.85 range, Dish TV appears expensive and the price would decline to Rs.75 in one year. Hence, it looks better to pare exposure in the stock.

 The company has reported strong result for 1QFY12. Revenue grew 51% yoy with profit
margins improving to 24.4%. Net loss has been reduced to Rs.18.3 crore.

 The company has added 7.2 lakh subscribers during the quarter and the subscriber acquisition cost has been reduced by 7.5%.

 However, programming cost has increased above the expected level due to renewal of two content agreements.

 Sales commissions were lower due to reduction in commission rates and lower new connection sales.

 increase in inactive subscribers is a major concern and this has led to a decline in net addition to 4 lakh subscribers, the lowest in the last five quarters. Inactive subscribers issue may continue for another two quarters.

 Strong performance of the company business, target price of the stock has been reduce only Rs.75 from the earlier estimate of Rs.40. However, the current price is higher than the target price and the stock is looking expensive at the current rate.

Upgraded Petronet LNG to ‘hold on’ – Target Price hiked to Rs.171

2011-07-23T19:49:00.000-07:00

 Petronet LNG has been upgraded to ‘hold’ from the earlier ‘reduce’ recommendation and the target price has also been hiked to Rs.171 over one year. In the earlier ‘reduce’ recommendation, the price was expected to drop to Rs.115 level.

 The upgrade is after the robust performance of the company in the last two quarters, beating consensus profit estimates of the market with better than expected profit margin at 20%.

 Responding to positive surprises, the stock has outperformed the market by about 20% in the last six months.

 Earlier, it was assumed that the utilization level of Dahej plant would peak at 100% and the average blended reras margin was expected at USD 0.73 / mmbtu (Million Metric British Thermal Unit).

 As against this, the company achieved utilization level of 120% in June 2011 with a marketing margin of USD1/ mmbtu. Earnings have been revised accordingly.

 Demand for spot LNG is expected to remain strong owing to better economics compared to liquid fuel. Further, expected shortfall in RIL’s KG –D6 volumes in FY12/13 may lower the availability of cheaper domestic gas and this would be advantageous to Petronet LNG.

 During 1QFY12, the company has reported its highest ever PAT of Rs.257 crore, which is 130% higher yoy and 24.4% up qoq. The jump in profit is due to superior marketing margin of around USD1/ mmbtu and better margin from regas services.

 EPS for FY12 has been upgraded by 40%, assuming higher utilization level of 104% for the year, as against 100% in the year before and better marketing margin of USD1/mmbtu.

 Revised target price of Rs.171 is at a P/E multiple of 14 of FY13 expected earnings. This factors a strong earnings growth of 20% over FY11-14.

 The company is likely to enter in to a contract with Qatar for 2-4 mtpa of gas for its Dahej/ Kochi terminals. The entry in to such a contract would be a short term trigger on the stock price.

IRB Infra – Result beats estimates; reiterate ‘buy’ with TP Rs.250

2011-07-23T09:35:00.000-07:00

 IRB Infra has reported better than expected numbers for 1QFY12. Buy rating is maintained with a target price of Rs.250 over one year. The stock is our top pick in this space.

 Company has reported 1Q revenue of Rs.800 crore, an increase of 50% yoy and above the street estimates.

 EBITDA increased 22% yoy to Rs.330 crore and well above market estimates.

 Net profit increased 14% yoy to Rs.130 crore, beating market expectations.

 Strong performance was led by the construction division. Construction revenue increased 81% to Rs. 600 crore with better margin.

 EBITDA margin of the construction division at 25.9% is 590 bps higher than market estimates. Better margin from Surat – Dahisar project has helped the company to report better than expected margin from the construction division.

 Toll revenue increased 14% yoy to Rs.230 crore, mainly due to 18% toll hike in Mumbai – Pune project. Surat – Dahisar project reported 6.8% increase in toll revenue to Rs.94.2 crore, Bharuch – Surat project reported 12.8% yoy increase in toll revenue to Rs.33.6 crore. Tumkur – Chitradurga project operational since June also contributed Rs.11.4 crore to toll revenue.

 However, interest expenses were 33% higher than market estimates and this has led to 33% miss in tolling PAT.

 As mentioned in the earlier report, four major projects worth of Rs.9300 crore are coming up for bidding in the near term. It includes Rs.5400 crore Kishangarh – Ahmedabad project and Rs.1900 crore Jabalpur –Rewa project. Any project win will be a major catalyst for the stock price.

 IRB Infra is preferred in this space because of its execution capabilities and access to financing. Buy rating on the stock is reiterated with a target price of Rs.250 over one year.

OUT LOOK ABOUT COMMODITY MARKET

2011-07-22T19:52:00.000-07:00

GOLD :

Medium term outlook for Gold prices remain neutral. It is likely to remain volatile in the range of Rs.22800 & Rs.23300.

SILVER :

Medium term outlook for Silver prices remain neutral. It is likely to remain volatile in the range of Rs.56600 & Rs.60700.

CRUDE OIL :

Yesterday WTI Crude prices moved past $100 for the first time since 16th June 2011. Sustaining above $99/Rs. is key to keep its immediate up-move intact.

VALUE PICKS BUY

2011-07-21T19:41:00.000-07:00

NUCLEUS SOFTWARE EXPORTS LTD

52 Week H/L : 154.00 / 72.60

Face Value : 10

CMP : 79

Target : 106

Nucleus Software looks good for short term target of rs. 106 very good company in software development.

CADILA HEALTHCARE LIMITED

2011-07-20T08:02:00.000-07:00

Cadila Healthcare Limited. (Cadila) has reported dismayed set of numbers for the quarter ended June’11 after a strong performance in FY11. The company has recorded revenues of Rs. 12456.9 mn with a growth of 9.9%, with PAT growing to Rs. 2298.2 mn, a growth of 15.4%. The following are the key highlights of the results which are summarized below:

Key Highlights of Q4FY11

· Revenues grew by 9.9% YoY from Rs. 11337.8 mn in Q1FY11 to Rs. 12456.9 mn in Q1FY12. The company witnessed disappointing growth of 4.8% in its domestic formulation business as compared to a growth of 8.5% in its export formulation business.
· Domestic Business excluding Bayer JV registered a meager growth of 4.9% from Rs. 5675 mn in Q1FY11 to Rs. 5946 mn in Q1FY12. The domestic formulations segment was dissatisfying with a mere 4.8% growth on the back of transfer of a few products to the Bayer JV and higher sales in the previous quarter. Consumer business during the quarter exhibited a muted 7% growth, largely due to higher material cost, disruption of sales on account of plant closure for 2 weeks. Nutralite also saw a 15% price increase in the quarter, the immediate response to which was not pleasing. However, the company’s management is optimistic of achieving 15% growth in the domestic formulations business and a 15-20% growth in its consumer business.
· Export formulations business registered a growth of 8.5% to Rs. 4136 mn on the back of a strong growth witnessed in select geographies mainly Europe (22%), Brazil (21%), and Japan (26%). However, the company witnessed a sluggish growth of 7.5% in US formulations and 18% de-growth in the emerging market formulations. The management is optimistic of reverting back to historical strong growth rates in the US and emerging markets. On the export API front, the company saw a 25% decline in revenues mainly on account of decline in sales from the Zydus-Nycomed JV.
· Cadila registered a threefold growth in its JV business at Rs. 1127 mn with the major contributor being the Hospira JV. The quarter also saw the commencement of operations of the Bayer JV.
· Higher employee cost and other expenses caused operating margins to decline to 24.3% from 25.8% YoY resulting in mere 3.2% growth in operating profits to Rs. 3023.9 mn as against Rs. 2930.2 mn in Q1FY11.
· Net Profit grew by 15.4% YoY from Rs. 1991.8 mn to Rs. 2298.2 mn in Q1FY12 whereas margins were at 18.4% on the back of lower tax rate and interest cost during the quarter.

OUTLOOK & VALUATION

We view the muted growth in Q1FY12 as a pause from the aggressive sales activity taken up by the company for achieving the $ 1 bn target in FY11. With a vision of the management of tripling its business by FY15, we believe Cadila's future growth is still intact and will be led by increased traction in its international businesses, a ramp-up in supplies to Hospira and a sustained double-digit growth in the domestic formulations and consumer businesses. However, we believe the stock performance may remain muted in the near term on the back of lower sales growth momentum and the warning letter overhang on its Injectibles facility. We maintain our FY12E & FY13E estimates as we believe it is fairly achievable and recommend a HOLD on the stock with a target price of Rs. 960 (based on 20x its FY13E EPS of Rs. 47.9). It is currently trading at a P/E of 18.4x its FY13E EPS of Rs. 47.9.

INDIAN EQUITY MARKET

2011-07-18T19:38:00.000-07:00

• Indian share indices ended lower on Friday on weak global cues and FII selling on
fears of more interest rate hikes by RBI in its policy review to curb high inflation.

• IT stocks were the movers of Nifty with TCS (the top gainer), HCL and NIIT
ending up 1-5%.

• However, stocks of auto, real estate, and FMCG pulled the indices down with Tata
Motors, Bajaj Auto, Sterlite, Sesa Goa and HUL, ending 1-2% down.

• DB Realty ended 0.6% lower on news that the Pimpri Chinchwad New Town
Development Authority has annulled the bidding process for a township project,
which the company's joint venture was to develop.

• Among financial stocks, ICICI Bank, HDFC and Kotak Mahindra Bank declined 1-
2% while that of HDFC Bank ended up 0.6% ahead of its Apr-Jun earnings next
week.

• Among other stocks, SKS Microfinance and VST Industries surged 10% and 9%
respectively.

Key Domestic Economic Data Releases

2011-07-09T19:30:00.000-07:00

Industrial production

􀂾 As per new series grows by 6.30% in April against rise of 8.80% last month

Eight Infra Industries

􀂾 Posts growth of 5.30% in May against 4.60% growth in April

Exports

􀂾 Jump by 56 93% in to Source: Mospi 56.93% May USD 25.94 bn

Headline WPI inflation

􀂾 At 9.06% for May against 8.66% in April

Rupee strengthens

􀂾 By 0.80% over the month to Rs 44.70 against US dollar
􀂾 Forex reserves dropped by USD 1.20 bn to USD 309.02 bn as on June 24 from May 27

Bank credit

􀂾 Stands at Rs 40,01,521 crs as on June 17, growth of 0.50% over the fortnight and rise of 20.70% over the year

Key Global Economic Data Releases

2011-07-09T19:27:00.000-07:00

US

􀂾 US economy grows at a 1.9% pace in first quarter of 2011.
􀂾 ISM Manufacturing for June rises to 55.3 from 53.5 last month
􀂾 Advance retail sales fall 0.2% in May compared with rise of 0.3% last month

Euro-zone

􀂾 Euro-zone trade swings to a deficit Euro of 4.1 bn Euros in Apr’11 from 1.6 bn Euros trade surplus in Mar’11 and a deficit of 700 mn Euros in Apr’10
􀂾 Inflation in 17-nation euro region remain at 2.7% for a second month
􀂾 German unemployment declines for a 24th straight month in June

Asia

􀂾 Japan's GDP falls at an annualized 3.5% rate in first quarter of 2011.
􀂾 China’s inflation accelerates to 5.5% in May’11 to 34-month-high
􀂾 Bank of Korea raises benchmark seven-day repurchase rate to 3.25% from 3%

Indian Equity Market Sentiments

2011-07-09T00:25:00.000-07:00

Persistently high inflation and RBI’s active monetary policy stance coupled with global recovery uncertainty weighed on investor sentiment. Also, Euro zone issues continued to remain on investor radar. The BSE’s key index breached the psychological 18000 mark
during the month as investors offloaded positions ahead of the earnings season. Investors feared to bet on corporate earnings that seemed to be impacted by higher input and borrowing costs. The index however managed to regain the key level and ended with moderate gains as investors breathed a sigh of relief after Greece took a step closer to avoiding the euro zone’s first sovereign default. Further, FII flows in Indian equities also suggested that risk appetite was back. FIIs turned net buyers in Indian equities to the tune of Rs. 2487 crore after selling equities worth over Rs. 6000 crore in the month of May (Source: www.sebi.gov.in). On the sectoral front, performance was highly skewed. Realty and Oil & Gas shed 7.3% and 4%, respectively. On the other hand, capital goods led with 6.2% gains followed by consumer goods at 4.9% (Source: BSE). Further, weak performance of small and midcap indices suggested that there is still some amount of caution prevailing in the market. Despite the prevailing uncertainty, Indian markets performed better than most of the major global markets.

Market on Way

2011-07-07T18:46:00.000-07:00

At 7th July 2011 market go up very sharply now market on track with bull to try achieve a new level today sensex trying to touch a big resistance of 19200 for big upword movement.

According to me that if market stay above 19200 for few days it's pick new high very shortly but here some good mid cap stock move very high level instead of large cap means mid cap gives better return then large cap some good stock are available near 52 week low like Punj Lloyd (77) Suzlon (52).

For investment this is the best time to put your money at right place.

Market Suffer with Heavy Weight Stock

2011-07-05T19:40:00.000-07:00

BHEL :

BHEL dropped down more then 5% in a day but Auto support market. Sell BHEL with a target of Rs 1880 and stop loss of Rs 2020, says Ashwani Gujral, technical analyst.

RIL :

Weakness in RIL and negative cues from Asia took their toll on the markets, with both benchmark indices losing about quarter of a percent.

There was good upward movement in auto and some banking counters, which lent support to the indices. The Sensex closed at 18744 (provisional), down 71 points from its previous close, and the Nifty closed at 5631 (provisional), down 20 points. The CNX Midcap index was down 0.4% while the BSE Smallcap index gained 0.2%. The market breadth was positive with advances at 655 against declines of 645 on the NSE

ITC high on Q4 profit, expert says will smoke in 15% upside

2011-05-21T01:33:00.000-07:00

Trouncing the expectations of the industry, FMCG and hotel major ITC announced its overwhelming fourth quarter (January-March) results on Friday.

ITC Q4 beats street, net up 25% to Rs 1,281.48 crore

On the back of strong growth in cigarette sales and reduced losses in other FMCG business, the company’s net profit surged 24.6% year-on-year to Rs 1,281.48 crore. Its quarterly earnings were also boosted by robust growth in hotels business revenue The net sales of he company were up 15.5% to Rs 5,836.26 crore for the three-month period. The sales of the Kolkata-based company’s FMCG base business rose 14% from a year ago to Rs 4079.85 crore. Reacting to the results, Kaustubh Pawaskar, an FMCG Analyst with Sharekhan told CNBC-TV18 that the company’s results have been in line with his expectations,“I was expecting around Rs 1,287 crore of bottom line for the quarter and PAT came in around Rs 1,282 crore,” he added.

In an exclusive interview with CNBC-TV18, research analyst of ICICI Direct, Sanjay Manyal says that this year, “the 15% price hike contributed very well to the margins of ITC” He expects to see “an upside of 15% odd” in the stock.

Good IIP Data : Mraket Close at Day Low

2011-05-12T03:59:00.000-07:00

IIP Data: The IIP data for March has come in at 7.3% versus 3.6%, reports NDTV Profit. March capital goods growth is at 12.9% versus 36% (YoY), mining sector growth is at 0.2% versus 12.3% (YoY) while manufacturing sector growth is at 7.9% versus 16.4% (YoY), it adds.

IIP Data: March electricity sector growth is at 7.2% versus 8.3% (YoY), basic goods growth is at 4.3% versus 10.2% (YoY), intermediate goods growth is at 5.4% versus 13.5% (YoY), consumer goods growth is at 7.7% versus 9.3% (YoY), consumer durable goods growth is at 12.3% versus 32.6% (YoY) while consumer non-durable goods growth is at 5.7% versus 1.5% (YoY), reports NDTV Profit. February IIP data has been revised to 3.7 from 3.6%, it adds.

Inspite of good IIP data market slip very sharply. Most of share close at day low. Now this is not a good sign for indian equity market for near term because sensex close 250 down at 18336 and Nifty down 79 point and close at 5486 it's just under basic supprt of 5500 level.

Markets For You

2011-05-10T04:23:00.000-07:00

GLOBAL INDICES

• At 9.00 am in the morning, Asian markets were trading mixed, with Nikkei trading 0.24% down and Hang Seng trading 0.76% higher.
• Nikkei fell on Monday on concerns of potential power shortages, after Japan's PM
called for the closure of in Chubu Electric due to worries that a large earthquake could trigger another nuclear crisis.
• Hang Seng index ended higher on Monday helped by stablizing global crude prices, though gains got capped on concern over key economic data due from
China.
• FTSE index fell on Monday as energy group Centrica PLC lowered its earnings forecast and after HSBC Holdings reported a lower underlying first-quarter profit.
• Dow Jones rose on Monday as recovery in commodity prices helped to lift the stocks of energy and materials companies.

INDIAN EQUITY MARKET

• At 9.00 am in the morning, the SGX Nifty was trading 0.04% higher.
• Indian stock indices ended volatile session flat on Monday as investors kept position light due to sharp recovery in the prices of crude oil.
• Shares of oil retailers declined on worries over rising under-recoveries of the companies on retail fuel sale with HPCL, IOC and BPCL falling 1-3%.
• Auto and banking stocks were the worst hit due to profit booking with Maruti Suzuki, Tata Motors, Bajaj Auto, Axis Bank and PNB ending down around 2% each.
• HUL gained 3% after the company posted better than expected Jan-Mar net profit.
• Eicher Motors shares surged 12% as the company's Jan-Mar consolidated net profit rose 82%.
• Piramal Healthcare shares ended nearly 9% down on the company's decision to enter the financial services sector.
• Jyothy Lab declined 4% on concerns the acquisition of loss-making Henkel India may weigh on the balance sheet of the company.

DOMESTIC NEWS

• IMF hails moves by India's central bank to hike interest rates in an attempt to curb
the rising cost of living.
• OECD says that India's economy is likely to lose pace even as China and the US are expected to see good expansion in the coming months.
• Government sets a target to raise Rs.40000 cr through disinvestment in FY12.
• RBI Governor says that it is unrealistic to expect the central bank to deliver on an
inflation target in the short-term given that the drivers of inflation largely emanate
from supply-side.
• An EPFO official says it would not be possible to retain the 9.5% rate paid for 2010-11, this year.
• India's domestic passenger car sales growth moderated to 13.2% on year to 162,825 vehicles in April, the slowest in 2 years, and 16.2% lower than the 194,199 units sold a month ago.
• Assocham urges government not to levy the proposed 5% countervailing duty (CVD) on coal as it may impact power tariff.
• SAIL asks its subsidiary, Maharashtra Elektrosmelt, to raise ferro-alloys production in line with the growing requirement of SAIL's steel plants.
• According to SEBI, Corporate India raised Rs.67608.5cr through 91 issues in 2010-11, as against Rs.57555.1cr through 76 issues in 2009-10.
• US-based iGate Corp increases its shareholding in Patni Computer to 81.29% by acquiring 20% more stake in the company through an open offer.
• Jyothy Labs offers to acquire up to 20% more stake in Henkel India in an open offer at Rs.41.20 per share.
• CRISIL says the microfinance institutions sector is likely to see consolidation over the medium term, since small players may find it difficult to operate in a strict regulatory environment.

DERIVATIVES MARKET

• Nifty May futures (near future) closed up against the spot index with around 8 point premium; it however witnessed 0.39 mn decrease in open interest (OI).
• Put Call Ratio (OI) rose to 0.97 on May 9 from 0.94 on May 6.
• Nifty 6000 May Call strike continued to witness the highest OI.
• Nifty 5500 May Put strike witnessed the highest OI.
• India VIX (volatility index based on the Nifty 50 Index Option prices) rose to 21.50% on May 9 from 20.97% on May 6.

INDIAN DEBT MARKET

• Call rates ended at 7.40-7.50% on Monday as banks borrowed funds to cover their cash reserve requirements for the new Reporting Fortnight in the first week itself.
• Banks borrowed Rs.64305 cr from RBI’s repo window vs Rs.29245 cr on Friday.
• The RBI has discontinued the second set of daily LAF auctions.
• Banks can now also borrow from the Marginal Standing Facility, introduced by the RBI to help banks meet their fund needs when liquidity is tight.
• Gilt yields rose sharply on Monday as the recovery in crude oil worsened sentiment ahead of a likely hike in local fuel prices, which is expected to push inflation higher.
• The benchmark 7.80%, 2021 bond ended at Rs.96.90 or 8.2624% yield, down from Rs.97.48 or 8.1741% yield on Friday.
• Local oil marketing companies have been mulling a fuel price hike as the relentless surge in global crude prices was resulting in huge revenue losses.
• After market hours, RBI announced the auction of 7.83%, 2018 paper worth Rs.4000 cr; 7.80%, 2021 paper worth Rs.5000 cr and 8.30%, 2040 paper worth Rs.3000 cr on May 13.

Currency Overview

• The Indian rupee rose against the US dollar on Monday as a slight rise in the euro and expectation of robust dollar inflows in Power Finance Corp’s FPO prompted dollar sales; sporadic dollar sales by exporters also supported the rupee's rise.
• But persistent dollar demand from oil importers weighed on the rupee.

Commodity Overview

• Crude oil prices rose $5.37 to settle at $102.55 a barrel on the NYMEX on news that the CME Group is raising the margin requirement for a wide variety of crude-oil contracts.
• Gold prices rose as some weakness in the U.S. dollar and concerns over European debt woes lured investors back to it.

INTERNATIONAL NEWS

• US Treasury Secretary says that China was making progress but needed to change its economic growth model.
• European Union is looking to lower interest rates on bailout loans to Greece and Ireland and is working on a second rescue for Athens in an effort to prevent a disorderly debt restructuring.
• S&P cut Greece's rating to B from BB- over concerns that a debt restructuring is increasingly likely.
• Bank of China receives regulatory approval to issue up to 32bn yuan of subordinate debt to improve its capital structure.

Monetary Policy Announcement by RBI

2011-05-04T09:22:00.000-07:00

Repo Rate, a Policy Rate, is increased by 50 basis points to 7.25% with immediate effect.

Reverse Repo Rate is increased by 50 basis points to 6.25% with immediate effect.

In line with the Deepak Mohanty Committee’s recommendations, the RBI has introduced a new Marginal Standing Facility (MSF) for banks to borrow up to 1% of their NDTL at 100 basis points over the new Repo Rate. This may enable banks who do not have surplus SLR to borrow over-night money from the RBI at 8.25% pa.

Savings Rate has been hiked from 3.5% pa to 4% pa

Both CRR and Bank Rate has been left unchanged at 6%

Market Reaction:

Market participants found the RBI’s tone and language a bit hawkish than past credit policy tones. Clearly, for the RBI, the priority is to rein in headline inflation as early as they can even at the cost of lower growth going forward. This is a marked departure from their previous Monetary Policy stance of supporting growth while containing inflationary pressures. The RBI has acknowledged that apart from higher global commodity prices, the single important risk may be higher oil prices that will test the assumptions of the budget estimates for the FY2011-12. The RBI is cognizant of the fact that if global commodity prices remain at current level for a longer period, then it will have significant negative implications on government finances going forward.

Given this backdrop, the bond market’s initial reaction was cautious. The benchmark 10Y yield hardened from 8.14% pa before the Policy to 8.21% pa after the Policy. The 5Y OIS level also hardened by 10 basis points to 8.35% pa.

We expect bond prices to remain range-bound with a declining bias in the near-term as market participants may await a revision in the fuel prices and its impact on headline inflation. A lot depends on the trajectory of economic growth and the monsoon, going forward. Although there is perception of a slowdown in the overall economy, market participants are not sure if it is a mid-cycle slowdown, which may result in more rate hikes later when economy accelerates or a cyclical slowdown, which may result in the rates being closer to their peak levels.

IPO

2011-04-30T20:50:00.000-07:00

Vaswani Industries

Issue Terms :

Issue price / Floor Price (Rs) 45-49
Application per share (Rs) 45.00
Minimum investment amount (Rs) 5,400.00
Minimum bid (no of shares) 120 shares and in multiples of 120 thereafter
Maximum Shares for Retail 4440-4080

Issue Date and Size :

Issue opens 29-Apr-11
Issue closes 03-May-11
Listing on BSE, NSE
Issue size (Rs cr) 45-49
Mkt cap at issue price (Rs cr) 105.71-115.10

Shares on Offer Lakhs :

Total shares offered 100.00
Of above, offered to public 100.00
Post-issue shares 234.91
Post-issue promoters' holding(%)57.43

Company Financials (Rs cr) 2009-12-31

No of months 7
Turnover 68.78
Net profit / (loss) 2.69
Borrowings 70.45

Lead Managers & Registrar :

Lead Manager(1) Ashika Capital Limited
E-mail vil.ipo@ashikagroup.com
Lead Manager(2) N.A.
E-mail N.A.
Registrar : Link Intime India Pvt Ltd
E-mail: vil.ipo@linkintime.co.in

NEWS HEADLINES

2011-04-30T01:44:00.000-07:00

GENERAL

1)In a bid to promote two-way engagement and build better
understanding with the overseas Indian community, a uni-
que institution - Pravasi Bhartiya Kendra - will come up in
New Delhi by next year.

CORPORATE / INDUSTRY

2)Biocon Ltd, India's biggest biotechnology company, agreed
to sell a majority stake in its German unit AxiCorp GmbH
for e40 million (Rs 263.2 crore) because it didn't need the
company's services to sell Biocon's insulin products in the
European nation after an alliance with the world's biggest
drug maker Pfizer Inc.

3)Auto component maker Motherson Sumi Systems Ltd(MSSL)
on Thursday said it will merge three group firms with itself
as it looks to consolidate its business. The company, which
has set a target of becoming a $5-billion entity by 2015,
said its board of directors has approved the merger of Sumi
Motherson Innovative Engineering (SMIEL), MSSL Global
Wiring and India Nails Manufacturing with itself.

MONEY & BANKING

4)Paring all of its initial gains, the rupee closed flat on
Thursday at 44.43/44 against the US currency due to late
dollar demand from importers, in tandem with local equities
amid increased capital outflows.

5)The interest rate on saving bank deposits, the last bastion
of administered rate of interest, is set to be deregulated,
with the Reserve Bank of India(RBI) kicking off a discussion
for a market driven rate. The rate has remained at 3.5
per cent since March, 2003.

6)India's largest private lender ICICI Bank Ltd on Thursday
announced a 44% rise in its net profit in the fourth quarter
(Q4) ended 31 March, bolstered by growth in fee income
and lower provisions for bad loans, even as it saw a loss in
treasury revenue and a rise in operating expenses. Net
profit for the quarter stood at Rs 1,452 crore, up from
Rs 1,006 crore in the year earlier. Provisions during the
period declined 61% to Rs 384 crore from Rs 990 crore.

7)Strong growth in advances, coupled with a robust jump in
net interest income, buoyed Bank of Baroda's net profit
in the fourth quarter ended March 31, 2011. Net profit
for the quarter increased 43 per cent to Rs 1,294 crore,
against Rs 906 crore in the corresponding quarter last
year.

INSURANCE

8)Insurance sector regulator IRDA has decided to appoint research
organisations to analyse the pattern of claims to help the re-
gulator put a lid on the insurance fraud in the healthcare sec-
tor.

9)Mukesh Ambani-controlled Reliance group is in talks to
buy out Bharti in the life insurance firm Bharti Axa Life.
Reliance, which has spelt out its aspirations to build a
financial services empire, is understood to be in advanced
stage of negotiations with the Mittals-led Bharti which has
been looking for an exit for the past one year.

MARKETS

10)Indian shares dropped for the fourth day, shedding 0.8% in
a choppy session on Thursday as monthly derivatives contracts
expired and high inflation strengthened expectations of a tight
monetary stance by the central bank. Reliance Industries ex-
tended losses a day after an oil ministry source said the
energy giant could face a penalty for falling short of the
targeted gas production at its D6 block off the east coast.
The stock, which weighs the most on key indexes, slipped
1.4%, taking losses for the year to date to 8.2%. The 30-
share BSE index fell 0.81%, or 156.67 points, to 19,292.02
points, with 25 components closing in the red. It had
started higher.

MUTUAL FUNDS

11)The popularity of exchange-traded funds, or ETFs, worldwide
in the past two years is now rubbing off an Indian investors,
too. In the year ending March 31, 2011, when assets under
management (or AUM) of most product categories of local
mutual funds either shrank or remained unchanged, money man-
aged and investor folios under ETFs, including gold-backed
schemes, more than doubled.

12)Having run out of new equity themes, mutual fund (MF)
houses are trying to jump on to the commodity wagon. Fund
houses are either latching on to gold, the only commodity
they are permitted to launch funds on, or launching funds
underlaid by global commodity stocks.

CORPORATE SCORE

13)BANGALORE-HEADQUARTERED biopharmaceutical company,
Biocon Ltd has registered a 25 per cent rise in its net profit
to Rs 101 crore in the fourth quarter of financial year 2010-
11 as compared with Rs 81 crore in the corresponding period
last year.

COMMODITIES

14)Gold advanced to a record after the US Federal Reserve
pledged to keep interest rates near zero to bolster the re-
covery, weakening the dollar and boosting demand for precious
metals as an alternative investment. Immediate-delivery gold
gained as much as 0.4 per cent to $1,534.05 an ounce, and
traded at $1,532.53 at 10:05 a.m. in London.

15)Food inflation went up to 8.76% for the week ended April 16,
raising fears of another hike in the key policy rates by the
Reserve Bank in its annual policy to be announced next week.

16)Despite soaring gold prices, jewellers are gearing up to meet
the demand from consumers on Akshaya Tritiya, which falls on
May 6. Though prices of 22 carat gold used in making jewellery
have gone up by 30% year on year, jewellers, in expectation of
good sales, have introduced new offers and schemes to attract
consumers. Some are offering advance booking to neutralise
the impact of rising prices. Gold coin sales, which have
picked up in the recent months, also earn good revenue for
jewellers.

17)GOLD set a new record at Rs 22,470 per 10 gms today on
brisk buying by stockists and jewellers for the upcoming
'Akshaya Tritiya' and marriage season, driven by a record
rally in global markets. Silver also surged Rs 3,400 to
Rs 72,000 a kg. The white metal had hit a record level
of Rs 74,300 on April 25.

REAL ESTATE

18)Mumbai home sales dropped to a two-year low in the first
quarter as record prices and interest rates at the highest
since 2008 crimped demand, increasing the number of unsold
units to a record, according to Liases Foras Real Estate
Rating & Research.

COMMUNICATIONS

19)Telecom tariffs may fall again as sector regulator Trai begins
the review of interconnect charges, or the amount one mobile
operator pays another for using the latter's network to orig-
inate, terminate or transit a call. These charges constitute
about 75% of the total call cost.

INFORMATION TECHNOLOGY

20)Polaris Software Lab Ltd has reported a 26 per cent increase
in net profit to Rs 58 crore for the fourth quarter ended
March 31,2011 as against Rs 46 crore for the corresponding
quarter, last year. Revenue increased by 25 per cent to
Rs 438 crore (Rs 351 crore).

21)Hexaware Technologies has reported an almost five-fold in-
crease in net profit for the first quarter ended March 31,
2010 as it increased billing rates for services rendered
and gained from currency volatility. Net profit for the mid-
size IT services company stood at Rs 53.8 crore against
Rs 11.6 crore in the same quarter a year ago.

INTERNATIONAL

22)The Bank of Japan (BoJ) kept monetary policy unchanged on
Thursday even as it lowered growth forecasts and estimated
the economy tipped into recession early this year, disappoint-
ing analysts who felt the grim readings after last month's
earthquake called for more policy easing.

23)TOP Asian car makers Honda Motor and Hyundai Motor painted
vastly different portraits on Thursday, with Hyundai turning in
a stellar quarterly performance while Honda struggled to over-
come supply woes after Japan's earthquake.

Market For You

2011-04-29T06:52:00.000-07:00

GLOBAL INDICES

• At 9.00 am in the morning, Asian markets were trading mixed, with Hang Seng
trading 0.2% lower.
• Nikkei ended higher on Thursday, boosted by strong earnings from Advantest and
other technology companies.
• Hang Seng index fell on Thursday, reversing earlier gains, on renewed concerns
about further monetary tightening policy from Beijing.
• FTSE index ended almost flat on Thursday as gains in miners were cut short by
disappointing results from AstraZeneca PLC, Unilever PLC and Whitbread PLC.
• Dow Jones ended higher on Thursday despite modest US economic growth in the
first quarter.

INDIAN EQUITY MARKET

• At 9.00 am in the morning, the SGX Nifty was trading 0.1% higher.
• Indian stock indices slumped on Thursday on account of selling on the last day of
the April futures contract expiry and on fear of higher-than-expected interest rate
hike by the RBI in its annual policy statement.
• All indices ended in red with BSE Realty and BSE Metal leading the fall.
• Among realty stocks, Unitech fell nearly 8% and DB Realty fell more than 4%.
• Fertiliser shares like National Fertilizers rose 1.3% and Coromandel International
added 2.3% after the Cabinet approved revision in the nutrient-based subsidy rates
of phosphatic and potassic fertilisers for 2011-12 (Apr-Mar).
• ICICI Bank ended up 1% as the bank's Jan-Mar net profit was in line with market
expectations, while Vijaya Bank and Bank of Baroda ended nearly 6% and 5%
down respectively.
• Shares of Southern Petrochemical Industrial Corp gained 18% and Orient Paper
and Industries were up 3.7% on better than expected earning results.
• Cox & Kings India ended up nearly 4% after the board approved a two-for-one
stock split while Pipavav Shipyard closed over 1% higher after it signed a MoU
with UK's Babcock group to build aircraft carriers for the Indian Navy.

DOMESTIC NEWS

• India's primary articles inflation rate rose to 12.08% for the week ended April 16
from 11.96% a week ago; food articles inflation rate also increased slightly to
8.76% from 8.74% a week ago.
• Economic Affairs Secretary says that the threat of runaway inflation toppling
India's growth remains real, and while the government has done all it could on the
fiscal side, more measures to combat price rise are likely from the RBI.
• Economic Affairs Secretary informs that government will begin divestments in
FY12 with PFC's FPO in May; will also launch cooking gas, kerosene smart cards
in FY12.
• RBI, in a discussion paper says deregulation of savings bank deposit rate will
improve transmission of monetary policy, but warns that it could lead to unhealthy
competition among banks and hurt their profitability.
• EPFO to pay 9.5% interest rate on claims till new rate is decided for FY12.
• World Gold Council says that at the end of March, gold exchange-traded funds
held 2,110.3 tn gold worth $97.6 bn, compared with a high of 2,167.4 tn at
December end, indicating a net outflow during Jan-Mar.
• Pipavav Shipyard enters into a preliminary agreement with UK's Babcock Group to
jointly work on the possibility of building aircraft carriers for the Indian Navy.
• HCL Tech signs a new agreement with NASDAQ-listed JDA Software Group for
supply chain management.
• Bank of Baroda plans to increase the number of overseas branches to 100 in FY12
from 85 now.
• Japan International Co-operation Agency to extend a soft loan of Rs.14100 cr for
the third phase expansion of Delhi Metro Rail Corp.
• Monnet Ispat plans to raise around Rs.1300cr by selling up to 20% stake in its
power arm by June next year.
• Future Ventures’ issue gets subscribed 1.52 times with HNIs, bidding 7.8 times the
offer reserved for them.
• Welspun Infra Projects acquires a 35% stake for Rs.470cr in Leighton Contractors.
• Jyothy Labs says that it is still awaiting the outcome of its bid to acquire 50.97%
stake in Henkel India from its parent firm Henkel AG.
• Biocon to divest its entire 78% stake in German unit AxiCorp for $58.2 mn.

DERIVATIVES MARKET

• Nifty April futures (near future) expired slightly down against the spot index; it also
witnessed 3.05 mn decrease in open interest (OI).
• Put Call Ratio (OI) fell from 1.24 on April 27 to 1.09 on April 28.
• Nifty 6000 April Call strike continued to witness the highest OI.
• Nifty 5700 April Put strike continued to witness the highest OI.
• India VIX (volatility index based on the Nifty 50 Index Option prices) fell from
21.35% on April 27 to 20.92% on April 28.

INDIAN DEBT MARKET

• Call rates ended at 6.85-6.95% on Thursday against 6.85-6.90% on Wednesday on
strong demand from banks to meet cash reserve needs for the fortnight ending May 6
and also as view that RBI may raise key policy rates persisted.
• Banks borrowed Rs.30385 cr from RBI's repo tenders vs Rs.37035 cr on Wed.
• Gilt prices fell on Thursday as some selling took place on expectation that RBI will
hike key rates in its Monetary Policy Statement for 2011-12 on May 3.
• The 10-year 7.80%, 2021 paper ended at Rs.97.93, or 8.1057% yield compared with
Rs.98.04, or 8.0895% yield on Wednesday.
• Sentiment took a hit after Economic Affairs Secretary highlighted the problems
faced due to inflationary pressures and said that RBI is expected to take further steps
to contain inflation.
• Weekly primary articles inflation data did not affect gilt prices much.
• Intraday, large positions were avoided ahead of RBI’s policy statement, keeping
prices in a tight range.
• Meanwhile, RBI announced the auction of 77-day cash management bills worth
Rs.6000 cr on April 29.

Currency Overview

• The Indian rupee erased intraday gains and ended flat on Thursday due to persistent
dollar purchases by oil companies to meet their month-end requirements.

Commodity Overview

• Crude oil prices rose 10 cents to settle at $112.86 a barrel, a 31 month high, on the
NYMEX.
• Gold prices rose on signs of continuing accommodative monetary policy from the
US Federal Reserve.

INTERNATIONAL NEWS

• US economic growth slowed sharply in the first quarter to a rate of 1.8% after
growing at a 3.1% pace in the fourth quarter of 2010.
• IMF says that many Asian economies have been slow to raise interest rates and
clamp down on credit and they need to act promptly to avoid overheating; also says
that the Asian economy would grow 7% in 2011-12 even as it grapples with risks
including inflation, turmoil in the Middle East and the effects of Japan's tsunami.
• Bank of Japan expects the economy to expand 0.6% in the current business year
ending March 31, 2012, down from the rate of 1.6% the bank had forecast in
January; keeps its overnight call rate range at 0 to 0.1% by unanimous vote.
• World Bank projects China's real GDP growth at 9.3% this year, revising its
previous projection of 8.7%.

Economic Insights

2011-04-27T10:49:00.000-07:00

U.S. Sovereign Risk: Never Say Never?

Sovereign risk has been almost a daily fi xture in the headlines for over a year, although until this past week most of it was focused on Europe. Europe’s headline dominance has been due both to the severity of its debt crisis and the diffi culty in fi nding a satisfactory resolution from the perspective of the capital markets. Despite numerous resolution efforts and initiatives by the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Union (EU), the situation remains far from resolved. Spreads on Greece, Ireland, Portugal, and Spain bonds all reached record levels last week amidst widespread market expectations that bondholders will not get made whole, especially on Greek bonds. And Portugal has joined Greece and Ireland in needing to tap into the European bailout fund. Globally, there have 26 downgrade rating actions for sovereigns but only fi ve upgrades thus far in 2011.

But that is the rest of the world. This week it was the United States’ turn to grab the
sovereign risk headlines as Standard & Poors (S&P) reaffi rmed its AAA ratings on $9
trillion of publicly held U.S. government debt, but more importantly changed its outlook
to negative.

S&P’s accompanying report noted that “...our rating on the U.S. sovereign signals that we believe there is a likelihood of at least one-in-three of a downward rating adjustment within two years.” An obviously unhappy Obama administration and Treasury probably took little comfort in the added note from S&P that “if we do lower the rating, it would be by no more than one notch to AA+.” Ironically, S&P’s warning that it might downgrade the U.S. to a level below AAA for the fi rst time since government ratings began in 1941 came on the heels of efforts by both Republicans (led by Congressman Paul Ryan) and the Democrats (led by the Obama administration) to put proposals on the table to reduce government debt and defi cits. But those proposals are widely divided, especially on the issue of using tax hikes to help resolve the fi scal challenges facing the federal government.

5 great investing lessons from Warren Buffett

2011-04-24T05:22:00.000-07:00

In no chairman's annual statement to his shareholders will you find attached a letter from the chairman's grandfather to his uncles. This is what makes Warren Buffett's letter so unique.

Every value investor eagerly waits for this annual letter from Buffett, the chairman of Berkshire Hathaway, a group with a market cap of $208 billion. It holds companies in industries as diverse as insurance, airlines and candies.

We picked up Buffett's most recent letter to his shareholders and highlight just five lessons from this letter, though every line of it has something to teach.

The market value and intrinsic value will converge, though it could take years. Stick to the rule of picking stocks below their intrinsic value.

Margin of safety: The doomsayers have suggested that in a 'new normal world,' future stock returns would not replicate past averages. But Buffett emphasises: "Market price and intrinsic value often follow very different paths -- sometimes for extended periods -- but eventually they meet."

Many academic research papers say the same thing, but coming from a practitioner who himself has made billions of dollars from stocks, it should instil your faith in equities

However, note that deciding factor of stock returns is 'intrinsic value.' Buffett's philosophy in picking stocks is he buys 'a dollar bill at 40 cents'.

Here, 'a dollar' is the intrinsic value, and if you buy a stock worth a dollar at 40 cents, you can hope to make profits. The huge discount at which you are buying the stock is called 'margin of safety.'

But how do you find the intrinsic value of a stock? Buffett measures the performance of his company's stock using 'book value' (we guess he must be using similar tools to measure the performance of many of his other investments too).

Combine the two things and it suggests that you could make profits if you are able to pick a stock trading below its book value.

However, you should use book value selectively. In some cases, book value is not a good proxy to the company's value, for instance, in IT companies whose main resources are humans.

Derivatives are not all that bad. But they can be 'weapons of mass destruction', if not understood properly.

"Derivatives are weapons of mass destruction." Buffett has been quoted saying so in the aftermath of the credit-led financial crisis of 2008. Some of his critics believe this is misleading, as Buffett's company Berkshire Hathaway itself has forged many derivative contracts.

The latest financial statement of the company reports 203 of them. But there is something very unique to them.

His company has 39 'equity puts' on global indices such as S&P 500 and FTSE 100. This means he has sold insurance to investors who fear against the fall in these indices.

Obviously, looking at the present uncertainties, the odds of these indices falling is significant. But the duration of these contracts is as long as 10-15 years, highlighting Buffett's belief that equity delivers in the long term.

Assume a slack period for equities through this new decade and that the S&P 500 and FTSE 100, after 10 years, remain at the level where they are today.

Buffett would lose absolutely nothing. In fact, Berkshire would make a huge profit. The company raked in a premium of $4.2 billion from selling these puts.

If the indices remain at the same level, Berkshire would lose $3.8 billion, which is the settlement value of the contract. The net gain is, therefore, $400 million!

Berkshire also designed the contracts to its advantage, in such a way that it does not have to pay any collateral for these contracts.

Can you do the same? First, let's admit that very few of us properly understand the risk when we enter into derivatives contracts. It's true for companies too.

Hexaware Technologies and Ranbaxy Laboratories suffered huge losses due to these complex instruments.

Also, you can't take such a long view in India. Contracts are of shorter duration, and you can only roll it over, further complicating the matter. Also, in derivative contracts, you pay margin, which can ruin your wealth if the value of underlying asset moves in an unexpected direction.

Management matters. It decides how the company will use retained earnings. If a company's stock can't deliver return higher than the index, you are better off holding the index.

Management is important

Buffett benchmarks the performance of his company to S&P 500. If stocks of Berkshire are not able to deliver a return higher than S&P 500 consistently over the long term, the shareholders would be better off investing in an index fund.

Buffett says managements "should establish performance goals at the onset of their stewardship. Lacking such standards, managements are tempted to shoot the arrow of performance and then paint the bull's-eye around wherever it lands."

You carefully go through press releases of Indian companies and transcripts of analyst conferences after every quarterly result, and quite often you would observe this phenomenon.

But firms with good management, like Infosys Technologies, give some guidance on their future performance, even though it's for the short term.

All About Day Trading

2010-12-08T22:11:00.000-08:00

Day Trading is the act of buying and selling securities intra-day with the expectation of making fast profits within minutes to hours. Popularized during the bull market of the late 1990s, day trading is the practice of buying and selling stocks over a very short period of time, typically one day. Once the domain of floor traders and investment banks, the availability of inexpensive computers and fast Internet access has brought day trading to the masses.

Day traders come in all shapes and forms, using mechanical to systematic day trading systems, and can place anywhere from one to thousands of trades per day.

Day trading strategies typically follow one of two approaches: beating the spread or attempting to catch short term trends. The spread is the difference between what is being offered for a stock (the bid) and the price being asked for the stock (the ask). Spread trading attempts to buy at the bid and sell at the ask, over and over again. Spread traders may make hundreds or even thousands of such trades a day. With the advent of spreads as low as one penny, spread trading has become much less profitable than it once was.

Counter-trend traders will look for signs that a stock is topping or bottoming out before they place a trade in the opposite direction. For example, reversal traders use tools such as the TICK, TICKI, Put Call Ratio, volume, etc. to anticipate a change in trend.

The term “day trading” is a widely misused and misunderstood term. Real day trading means not holding on to your stock positions beyond the current trading day; in other words, not holding any position overnight. This is really the safest way to do day trading because you are not exposed to the potential losses that can occur when the stock market is closed due to news that can affect the prices of your stocks.

Unfortunately, many people who claim to be “day trading,” hold stocks overnight because of fear or greed, thus setting themselves up for the catastrophic elimination of their capital. When day trading currencies, the term “day trading” changes slightly. Since currencies can be traded 24-hours-a-day, there is no such thing as “overnight” trading. Thus, you can have open positions for longer than a day with active stop losses that can be activated at any time.

Day trading is an investment tactic that does online daily stock trading with a relatively short investment. Those who do day trading usually buy and sell securities during the same market day and, as a general rule, do not hold stocks overnight. Many day traders make dozens of trades every market day hoping to capture profits that arise from small intraday price fluctuations..

You basically watch the stock market all day long, buy and sell multiple times throughout the day, trying to buy it low and selling it high and then rebuying it when it drops back down, etc. Very dangerous, and hard to do. Studies have shown day traders do worse in the long run than buying stocks and holding onto them for longer terms. Plus you have to pay commission or fees every time you buy and sell, and taxes on your capital gains are higher for stocks held for less than a year.

Why FMPs give better post-tax returns than FDs

2010-12-08T22:03:00.000-08:00

Those who invest in fixed income securities such as bank fixed deposits (FDs) and small savings schemes are constantly looking out for new alternatives that will provide better post-tax returns without significantly compromising on security.

One alternative that they can definitely consider are fixed maturity plans or FMPs offered by mutual funds that typically mature in around one to 36 months.

Sometimes FMPs are also called FTPs or fixed term plans.

The monies collected under such schemes are typically invested in debt products like commercial papers (CPs), corporate debentures, certificate of deposit (CDs), bonds, government securities and even bank deposits.

Typically the investment is in paper that has a minimum security rating (normally not less than AA) that is mentioned in the offer document and hence the safety of the money is reasonably ensured.

How these plans can improve your post-tax returns?

The reasons are mentioned below...

Even if the fund was to invest in bank fixed deposit it gets a much better rate as they are able to place a bulk deposit. As an individual you cannot get such interest rates from the banks.

Also FMPs have fund managers and the bulk funds to get much better yields from the debt market than you have as an individual.

Add the fact that mutual fund structure is very tax efficient for such plans. Typically they do not declare any dividends and are redeemed only on maturity that is longer than a year.

Thus the interest earned by the fund is returned as appreciation in the value of the units to you.

Since the units are held for more than 12 months these are considered as long-term capital assets and you pay tax at a maximum rate of 10 per cent (or 20 per cent after indexation if that is more beneficial for you).

Here is an example to illustrate the point:

If you have Rs 50,000 to invest for around 12 months (and one day) you will at the most get around 8 per cent per annum from a good bank which means your deposit of Rs 50,000 will give you a return of Rs 4,000.

If you are a taxpayer your net post-tax return will work out to Rs 2,764, Rs 3,176 or Rs 3,588 if your marginal tax rate is 30.9 per cent, 20.6 per cent or 10.3 per cent respectively.

Now if you put it in an FMP and the fund house accumulates the savings of many investors like you and invests it back in the same bank or in other equally safe instruments for a period that matches the tenure of the fund (12 months and 1 day in our example) they are likely to be able to get a return of 8.5 per cent which means they will make a return of around Rs 4,250 on your money post tax.

Even after reducing the fund management charge of around 0.25 per cent the return left will still be higher at Rs 4,125, which is still higher than if you had invested on your own.

The real value of course comes from the tax treatment.

Since this will be taxed as a long-term capital gain the maximum tax you will pay is at 10.3 per cent which means the post-tax return in this example will be Rs 3,700 which is higher for all categories of tax payers than what they could have managed on their own.

The actual tax liability could be even less if the indexation benefit is high but since that is a complicated exercise we will ignore the possible benefits from that exercise.

Even in the dividend option where they declare dividends the fund pays a dividend distribution tax of 12.875 per cent for individuals and the dividends are not thereafter taxable in the hands of the recipients.

Thus if you pay a higher rate of tax even the dividend option can be beneficial to you.

This is one of the main reasons why these plans are so popular.

6 checkpoints before buying a mediclaim policy

2010-12-08T22:02:00.000-08:00

1. Individual and Family Floater

In individual policies each family member is insured for a specific amount whereas in family floater the whole family is insured for a particular amount. Before deciding on which one to opt for, there are certain points to consider.

In case of family floater, when the primary person insured or the eldest member of the family reaches a specific age, the policy is closed and even the members who are still younger cannot renew the same policy.

The same is applicable in case of death of primary insured. Here the maximum renewability age in case of family floater is also quite less. Also, after a certain age, children cannot be a part of the family floater policy.

The age generally varies from 21 to 25. After this age, children have to buy a separate policy for themselves. Both these conditions leave the family uninsured for any risk arising out of hospitalisation. And it is quite possible that getting insurance at that age is not possible anymore due to various health conditions.

In individual polices, the individual is insured and he is evaluated on individual parameters. The attainment of specific age or death will not impact the mediclaim policy of other family members and their renewability.

2. Renewability age

The life expectancy of an average Indian is increasing due to better health facilities and improved living conditions. Health insurance is something which one needs at a later stage of life much more than when he or she is young.

Although the mediclaim policies are normally only for a period of one year, in actual practice it is a long term relationship with benefits accruing to you as the relationship with the insurance companies progresses. So your mediclaim policies should cover you as you age as it will be difficult to buy a policy from another provider at that age.

If your policies do not cover you at that point of time, then buying such a policy will not give you real peace of mind. Thus, one should always try to buy a policy that provides renewability till lifetime.

Currently only United India, Apollo Munich, Star Health and Max Bupa are offering this facility.

3. Sub-limit

This is one of the most significant clauses in health insurance policies. It might happen that you have taken the maximum sum assured, but at the time of claim you may end up getting only a part of your claim even though the particular treatment was completely covered by the policy.

These kinds of differences are usually related to sub-limits. Sub-limits are broadly categorised under two main sub categories:

The first set of sub-limits is on things like room rent, doctor's fees and medical OT charges.

Suppose your sum assured is Rs 5 lakh and they have a clause of sub-limit which says that they will pay a maximum of 1 per cent of sum assured per day for room rent implying that the insurance company will pay a maximum of Rs 5,000 per day for room rent and anything additional would be paid by the insured. These kinds of sub-limits are not there in all policies so you should prefer policies that do not have such sub-limits.

The second set of sub-limits is on diseases.

There are certain diseases that are covered within the policy but with a certain limit. For example a policy may say that it would cover cataract operation but with a limit of only Rs 15,000. This means that whatever cost you incur due to hospitalisation for cataract, the maximum you can claim is Rs. 15,000.

Most policies will have these sub-limits so understand what these are before taking up a particular policy.

This clause simply means that the bill amount has to be shared between the hospital and the insured in a pre-mentioned proportion.

Again this means that you will not get full value for your sum insured even though the total claim is within the sum insured.

For example if the company has a co-pay requirement of 20 per cent and you have a insurance policy for Rs 5 lakh and the hospital bill is for Rs 2 lakh the insurance company will give you only Rs 1.6 lakh and you will need to pay the balance Rs 0.4 lakh from your own pocket.

This clause is not there in every policy so such policies should be avoided, if possible.

Permanent exclusions are those set of conditions that are never covered by the health insurance policy. Most of these conditions are common across most of the policies. But at times some of them may carry some unusual permanent exclusion that is not similar to other policies.

These exclusions may become quite critical at times. So study the permanent exclusions given in the prospectus carefully.

Temporary exclusions mean certain conditions that are not covered for certain period. For example the policy may say that cataract or knee replacement surgery would be covered only after a period after 2 years.

Almost all policies have these temporary exclusions so you should be aware of what you are getting into.

6 tax-saving tips for working couples

2010-12-08T21:59:00.000-08:00

We are just a few months away from the financial year end, and most of us have by now started this year's tax planning.

For a working couple, an efficient tax plan can be achieved by jointly making use of their dual income to invest, and the income tax rules to their advantage. Here are six smart tips from Investment Yogi, to help couples save more and maximise wealth.

1. Using investments efficiently

If spouses fall in different tax brackets, it is advantageous for the spouse in the higher tax bracket to claim deductions from the tax-saving investments, which the couple has invested in together.

For example, let us consider the case where both spouses make investments for a tax deduction of upto Rs 1,00,000, respectively. In case one of the spouses has insufficient investments to fully meet his limit of Rs 1,00,000, then the investments made should be used for a claim by the spouse earning more. In this way, a lesser amount of his salary will be attracting the high tax bracket rate.

When seeking a home loan, it is advantageous for couples to opt for joint loans. By this, spouses can individually claim a maximum deduction of Rs 1 lakh on the principal repayment and Rs 1.5 lakhs on interest payment, for the same home loan.

Thus, together the couple gets to claim Rs 2 lakh principal repayment and Rs 3 lakh interest repayment. The income tax benefits are applicable in proportion to the ownership structure.

For example, if the ownership in a property is 50:50, the loan amount will split accordingly and this ratio will be applicable while calculating tax benefits on interest/principal repaid on this loan.

It is advantageous to make use of one's house rent allowance (HRA) as it is partially exempt from tax, provided rent is actually paid.

If, one of the spouses owns the house, the other spouse could pay rent to him/her, to claim HRA, thereby reducing his taxable income.

If the couple resides in a rented house, the HRA exemption for the rent paid can be shared by the couple.

As per the current rules, LTA benefits can be claimed twice in a block of four calendar years.

While claiming LTA (Leave Travel Allowance), spouses should claim exemption alternately each year. This way, together they can claim an LTA exemption of four journeys in a block of four years.

There is no need for them to take the precaution of not travelling twice during the same year.

Have you and your spouse received gifts that are considered taxable?

Then starting an HUF can prove to be quite a saving. Any income received by an individual as a member of a HUF (Hindu Undivided Family) is taxable only in the hands of the HUF and not in an individual capacity. The HUF income has the same slabs and exemptions as for an individual.

Thus, through an HUF, couples can get an additional, separate exemption of Rs 1,60,000.

Spouses can get additional exemptions by creating a trust as per section 164 of the Income Tax Act.

A private trust can be created for an unborn son or daughter, or for the future spouse of an existing son or daughter, by allocating funds to the trust through transfer of property, rent of which shall be income of the trust.

To conclude...

The Income Tax department gives us various avenues to help save tax. Optimally using these avenues and structuring finances sure does provide a great deal of monetary gain.

Motor insurance: What is best for you?

2010-10-20T23:26:00.000-07:00

A prompt and fair settlement of claims is the hallmark of good service to the insuring public. Motor insurance comes on the top of the list when it comes to insurance. It is for effective claims that we get our cars insured.

We know from the previous article - that there are very little chances of us getting the full loss amount. However, we can still try and figure out ways where we can get the maximum reimbursement.

When our vehicle gets damaged, we are often confused about the choice between a cashless claim and a reimbursement claim. Since, we know that certain amount has to be shelled out from our pocket, which one would be a better option?

Cashless claims

For cashless claims; most of the insurance companies have their own garage network, which they use to repair the vehicles, insured by them. The expenses are dealt directly between the garage and the company.

The owner of the vehicle does not have to worry about the expenses other than the accessories, which are not covered under the policy. They have to make the payment of only the difference amount as confirmed by the claims manager to the garage.

"In a cashless claim, after completion of repair at company's preferred garage, we will make payment of their share of the loss directly to the garage. The insured will have to pay the excess mentioned in the policy and depreciation, salvage, etc informed by the customer service manager," informs Kartik Jain, head, marketing, ICICI Lombard.

Advantages

"A cashless claim is a complete responsibility of the company. It reduces the worry of the owner of the vehicle," says Kartik.
The surveyor would take the car to the garage, get it repaired and return it to the owner.
The company's garage network is generally reliable.
The service provided by them is much better than any other local garage.

Disadvantages

A lot of formalities take place before any action takes place.
Often, the reparations are delayed since the surveyor may do the complete inspection and then take any decision.
The garage, which they may choose might be expensive and since, the owner has to pay some percentage of the expenses, he may end up shelling out more money than usual.

Reimbursement claims

If the car is serviced in a garage outside the purview of the company's network, then you can claim reimbursement for the same. You choose your own preferred garage and get your car repaired with your choice of mechanic.

You then forward the original bill to the insurance company -- claims manager/surveyor. In case of reimbursement or non cashless claim, original bills and payment receipts are to be submitted to the insurance office.

"The liability and reimbursement amount working will be done by insurance company. Payable amount, along with detailed statement of calculation, is forwarded to the claimant," says V Ramakrishna, managing director, India Insure Risk Management Services Pvt. Ltd.

Advantages

You may get your car repaired at your preferred garage by your trustworthy mechanic.
An immediate action can be taken place just after the inspection.
The garage may fall into your budget as well since even you have to pay for certain expenses.
You may also repair your other parts of the vehicle which were not damaged at the time of accident.

Disadvantages

You have to take the entire responsibility if in case the car is not repaired the way it was expected.
The product replacements done by a local garage may not be as dependable as a renowned garage.
Many a times, faulty bills are made of bigger amounts are claimed by the TPA (Third Party Agent) on behalf of the owner. He pays the owner for reparations and keeps the additional money with himself. "For example, if the expense were of Rs 5,000, he would claim Rs 8,000 from the insurance company and keep the additional Rs 3,000 with himself," says the DO (development Officer) of one of the renowned insurance company.

Based on these advantages and limitations of both options, it is extremely important that you conduct an appropriate research before giving your car to any garage and get the terms and conditions cleared from the insurance company's representative before taking any action.

Dummies guide to car insurance

2010-10-20T23:23:00.000-07:00

All of us having motor vehicles have to go through the yearly ritual of buying insurance on our car. This article attempts to demystify the jargons of motor insurance and processes involved.

The basic jargon:

Insured: Owner of the private car

Insurer: The insurance company

Under the provision of the Motor Vehicles Act all vehicles -- owned by individuals -- should be covered by an insurance policy. The car insurance policy can be either

Third party or
Comprehensive insurance policy.

Third party car insurance policy covers only the inter-alia accountability of the vehicle owner for loss or damage to life or property of the third parties.

Whereas comprehensive car insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and other specified dangers.

Motor insurance policy covers

Section 1 - Loss of or damage to the vehicle insured

The company will reimburse the insured against the loss or damage to the vehicle insured for the following:

by fire, explosion, self ignition or lightning
by burglary, housebreaking or theft
by riot & strike
by earthquake
by flood, typhoon, hurricane, storm, tempest, inundation, cyclone
by accidental external means
by malicious act
by terrorist activity
whilst in transit by road, rail, inland-waterway, lift, elevator or air
by land slide, rockslide

Cost of protection to the nearest car repair service - Rs 1500.

Vehicle valuation

The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less.

Factors determining premium of a car

Cubic capacity
Year of car
Geographical location
Value of car proposed
Various extensions opted for

What does company pay in case of claim for comprehensive cover?

In case of an accident, the insurance company pays for cost of damaged parts which are to be replaced and the labour cost to repair the vehicle.

Will I be eligible for complete reimbursement?

No, it is all subject to a deduction or depreciation at the rates mentioned below in respect of parts replaced

1	For all rubber/nylon/plastic parts	50%
2	For fiber glass components	30%
3	For all parts made of glass	Nil

For all other parts depreciation will be as below

Age of the vehicle	% of Depreciation
Below 6 months	Nil
6-12 months	5%
1-2 Years	10%
2-3 Years	15%
3-4 Years	25%
4-5 Years	35%
5-10 Years	40%
Exceeding 10 Years	50%

The insurance company will not be liable to make any payment in respect of:

Consequential loss, depreciation, wear and tear, mechanical or electrical breakdown, failures or breakages
Damage to tyre and tubes unless the vehicle is damaged at the same time, in which case the liability of the company shall be limited to 50 per cent of the cost of replacement
Any accidental loss or damage suffered whist the insured or any person driving the vehicle under the influence of intoxicating liquor or drugs

Section II - Liability to third parties

Death of or bodily injury to any person including occupants carried in the vehicle (provided the occupants are not carried for hire or reward)
Damage to the property other than property belonging to the insured

Section III - Personal accident cover for owner diver

Due to bodily injury/death sustained by the owner-driver of the vehicle by violent accidental external and visible means which independent of any other cause shall within six calendar months of such injury results in

Sl. No	Nature of injury	Scale of Compensation
1	Death	100%
2	Loss of two limbs or sight of two eyes or one limb & sight of one eye	100%
3	Loss of one limb or sight of one eye	50%
4	Permanent total disablement from injuries other than named above	100%

Apart from the above covers the private car insurance policy can include the following endorsements at discounts and payment of additional premium:

Discount for membership of recognised automobile associations
Installation of anti-theft device
Personal accident cover to the insured or any named person other than paid driver or cleaner
Personal accident to unnamed passenger other than insured and the paid driver and cleaner
Personal accident cover to paid drivers

Deductibles

It means the minimum amount which cannot be claimed:

Compulsory deductible - Rs 500 for each and every claim
Voluntary deductible - The client whilst taking a policy can decide on voluntary deductibles through which the insured may avail a discount on the premium
Legal liability to employees of the insured other than paid driver who may be traveling or driving in the employers

Mutual funds are still the best bet

2010-10-14T19:35:00.001-07:00

Though there are more than 3,000 mutual fund schemes, these are well classified across the risk-return spectrum, says Manavendra Prasad.

In an article "Who cares for mutual funds" (Business Standard, September 1), Subir Roy takes what participants in the stock markets call a contra view - an approach contrary to popular belief and understanding to get the best results for the investor.

Let us look at what Mr Roy says while restricting himself to discussing investments in equity-focused schemes.

There are more than 3,000 mutual fund schemes compared to some 500 actively traded shares and, therefore, it is difficult to select the right mutual fund scheme. If one can research mutual fund schemes, it is possible to research stocks too.

The questions are: what is the right tenure of the investment and how does the churn get affected by the performance of the scheme? The performance of the scheme can be affected by a change in fund managers. Choosing stocks of the 20 best-known companies and holding them for a long term are more likely to give handsome returns compared to returns from mutual funds.

This is a crude way of looking at mutual funds, which is arguably the simplest, cheapest and the most regulated way of creating wealth. Let us see why.

Researching mutual funds is a very simple thing: pick up five or six of the most well-known fund houses and you can be confident of robust system and processes with well-defined products with a consistent performance.

Compare this with picking stocks: it involves numerous variables from understanding financial ratios, to the business franchise, to the global macroeconomic environment. It is not possible for a lay investor do so. After all, even equity research analysts specialise in a limited number of adjacent industries.

Though there are more than 3,000 mutual fund schemes, these are well classified across the risk-return spectrum. Choosing two or three different schemes in each category from the well-known fund houses is far simpler than choosing the top 20 companies that will best negotiate vagaries of economic change over the next five to seven years. Unlike stocks, good mutual fund schemes come at no extra cost. On the contrary, they have the wherewithal to keep costs in check.

Organisations with well-established processes, which India's [ Images ] better-known fund houses can now claim to have, do not let their investment performance suffer because of a change in personnel. Such organisations neither create nor promote rock-star fund managers.

Investing in index funds is a passive way of participating in the market and they are judged by how closely they track the respective index. However, the better performing schemes have for the larger part of the last few years outperformed the market. Therefore, passive investments are yet to become attractive in the domestic markets.

A lay investor should arrive at an asset allocation for her investment portfolio depending on her risk profile and returns requirement. Some model asset allocations suggest a 70 per cent exposure to equity and the rest to debt for an investor in her late twenties or early thirties. The allocation to equities reduces progressively as one grows old.

The investor should review her asset allocation once every quarter and rebalance her portfolio to the model asset allocation. This approach helps book profits and enables higher investments when equity markets are doing badly. This discipline frees one of the decisions of the tenure of investments and insulates one from any mis-selling.

Fortunately, the Indian mutual fund industry has evolved greatly in the last few years and the regulator has pushed it to become more transparent and investor-friendly. This ensures that many investor misgivings are addressed. Though there have been quite a few cases of miss-selling, expected regulations and guidelines for mutual fund advisors will largely address this issue.

Investment is a science, it cannot be done on the basis of one's perceptions of companies or the economic environment. It needs expert advice and holding directly held securities in ones portfolio is for the high-net-worth individuals who can afford it.

For lay investors, mutual funds are the best vehicle to participate in the capital markets. Mutual funds bring with them the advantages of professional management. They offer high liquidity and reduced costs because of economies of scale and most importantly, reduce risk through adequate diversification.

For small investors, a systematic investment plan while sticking to the discipline of reviewing and realigning the asset allocation is the best way to create wealth.

How to select a profitable sector to invest in

2010-10-14T19:32:00.000-07:00

To find the right stocks to invest in, it's not enough to simply start looking for specific companies that are doing well. Reason: even a good company in an underperforming industry, or one facing adverse economic and technological challenges, will find it tough to sustain its out-performance.

Which is why it is important to first identify strong performing or otherwise favorably placed industries, and then look for leading companies in those sectors to invest in...

The importance of industry analysis is slowly dawning on the Indian investor as never before.

Previously, investors purchased shares of companies without concerning themselves about the industry it operated in.

And they could get away with it three decades ago. This was because India was a sellers' market at that time and products produced were certain to be sold, often at a premium.

Those happy days are long over. Now, there is intense competition.

Consumers have now become quality, cost and fashion conscious.

Foreign goods are easily available and Indian goods have to compete with these. There are great technological advances and 'state of the art' equipment becomes obsolete in a few years, if not months.

In the same way, technological advances in one industry can affect another industry. The jute industry went into decline when alternate and cheaper packing materials began to be used.

The popularity of cotton clothes in the West affected the manmade (synthetic) textile industry.

An investor must therefore examine the industry in which a company operates because this can have a tremendous effect on its results, and even its existence.

A company's management may be superior, its balance sheet strong and its reputation enviable.

However, the company may not have diversified and the industry within which it operates may be in a depression.

This can result in a tremendous decline in revenues and even threaten the viability of the company.

Cycle

The first step in industry analysis is to determine the cycle it is in, or the stage of maturity of the industry.

The life cycle of an industry can be illustrated in an inverted 'S' curve.

he entrepreneurial or nascent stage

At the first stage, the industry is new and it can take some time for it to properly establish itself.

In these early days, it may actually make losses. At this time there may also not be many companies in the industry.

It must be noted that the first 5 to 10 years are the most critical period. At this time, companies have the greatest chance of failing. It takes time to establish companies and new products.

There may be losses and the need for large injections of capital. If a company or an industry is not nurtured or husbanded at this stage, it can collapse.

A good journalist I know began a business magazine. His intention was to start a magazine edited by journalists without interference from industrial magnates or politicians. It was an exceptionally readable magazine.

However, it did not have the finance needed in those critical initial years to keep it afloat and had to fold up. Had it, at that time, had the finance it needed it may have survived and thrived.

In short, at this stage investors take a high risk in the hope of great reward should the product succeed.

Debt MFs vs FDs: Who gives better returns?

2010-08-26T01:01:00.000-07:00

The question of debt mutual funds verses fixed deposits has been going on for a long time. Which one serves better for the conservative investor? InvestmentYogi takes a close look and breaks it down, giving you the details you need to make an informed choice.

For years now, a risk averse investor has considered fixed deposits as the safest bet. But with more mutual fund houses floating pure debt funds, which guarantee a fixed income and assure better returns, a conservative investor now has more choices to consider.

A fixed deposit is a secure investment option floated by banks and financial institutions. It offers a pre-determined rate of interest over a fixed time period. A debt mutual fund is a professionally managed fund, which invests money in government securities, bonds, money market instruments and corporate deposits.

They include a small percentage of equity investment of around 10 per cent in their portfolio to give investors capital appreciation. Hence, debt funds are associated with little or limited investor

While choosing between capital appreciations and guaranteed returns it pays to compare the following key features of the two products.

Return on investment

Fixed deposits: Banks offer an assured fixed rate of return on maturity. Currently the rate of return varies from 3.5 per cent to 8.5 per cent depending on the maturity period. Interest is compounded quarterly and the proceeds are paid on maturity.

Debt fund: The rate of return of a debt fund is not assured and is governed by movement in interest rates and money market conditions. Any fluctuations in prices or interest rate impact the NAV of the fund.

Fixed deposit: Most banks allow premature withdrawal of the amount invested, before the actual maturity date. The interest would be calculated on the basis of the number of days the amount stayed invested with the bank. For larger amounts, banks have surrender charges or penalties.

In such cases, money would not be made available without penalties or until the fixed deposit matures.

Debt funds: Liquidity is similar to individual stocks or equity mutual funds which allow investors to liquidate their units in the market as and when they require. On redemption, one can expect to receive the amount in a day or two from the fund house.

The amount received would be based on the NAV of the fund as on the date of redemption.

From the tax angle, in the long run, a debt fund seems more friendly than a fixed deposit.

Fixed deposits: The interest earned on fixed deposits is added to the total income, and then taxed at applicable slabs. Also, if the total interest earned on all fixed deposits in a bank is greater than Rs 10,000 in a financial year, a tax of 10.3 per cent will be deducted at source by the banks.

Debt mutual funds: The short term capital gain of a debt fund is added to the income and then taxed at applicable slabs. For long term capital gain tax, it is calculated as 10 per cent without indexation or 20 per cent with indexation.

Dividends received on a debt mutual fund are tax free in the hands of the investor. However, a dividend distribution tax of 14.16 per cent is to be paid by the asset management company (AMC). Though this tax is not paid by the investor, the burden of this is eventually passed on to the investor by the AMC, by declaring lower dividends.

13/11/2009 Tips

2009-11-12T22:18:00.000-08:00

Buy Bharti Airtel on dips with long-term target of Rs 410-440
Buy Infosys with target of Rs 2421 and stop loss of Rs 2270
Hold PNB with target of Rs 1050-1100 on crossing Rs 930 and stop loss below Rs 895
Hold Moser Baer with target of Rs 96 and stop loss of Rs 76
Buy FSL with target of Rs 48 and stop loss of Rs 35
Buy RCF with targets of Rs 117 and 153 and stop loss of Rs 66

FII inflow in Indian stock markets crosses Rs 60 cr

2009-10-05T21:05:00.000-07:00

Overseas fund inflows into the Indian stock markets have crossed the Rs 60,000-crore (about $12 billion) mark so far this year.
With investments by foreign investors expected to rise in the coming months, the total overseas fund flow this year could well surpass the highest ever figure recorded in 2007, when India attracted a whopping Rs 70,000 crore (Rs 700 billion).
Foreign institutional investors were gross buyer of shares worth Rs 4,58,371 crore (Rs 4,583.71 billion), whereas they sold equities valued at Rs 3,98,245 crore (Rs 3,982.45 billion), resulting in a net investment of Rs 60,125 crore (Rs 601.25 billion), as per data available with market regulator Securities and Exchange Board of India.
In September alone, foreign investors infused a hefty Rs 18,344 crore ($3.8 billion) in the local share markets.
"FIIs have stashed a lot of money and they don't want to miss the opportunity in a fast growing market like India," Delhi-based Unicon Financial Intermediaries chief executive Gajendra Nagpal said.
The country had witnessed the highest FII inflow in stock markets in the year 2007. That year, India attracted a whopping Rs 70,000 crore inflow in local markets, data since 1999 shows.
However, last year (2008) FIIs pulled out a net Rs 52,000 crore (Rs 520 billion) from stock markets and remained net seller till February this year. The global economic meltdown created a panic among foreign investors, forcing them to pull-out money for safety.
Overseas investors are significant players of the Indian stock markets.
Significantly, so far this year Bombay Stock Exchange's [ Images ] benchmark index Sensex has gained over 77 per cent. On Thursday, the Bombay Stock Exchange benchmark Sensex closed flat after a alternate bouts of buying and selling.
The 30-share barometer, which breached the 17,000 points mark on Thursday, added 7.71 points to close at 17,134.55 points.

Is the Indian market overvalued?

2009-10-05T21:04:00.000-07:00

A look at the Sensex value doesn't give you the correct picture since what matters is the earnings outlook for companies. It would be incorrect to assume that the markets are cheaper when the Sensex is at 15,000 or that they are more expensive when it is at 20,000.

That's because a market is valued according to the estimated future growth in profits of companies. The growth outlook for companies can be brighter when the market is at 20,000 and so the market can actually be cheaper at those levels.
Conversely, if the prospects for growth are muted going ahead, the market could be expensive even at 15,000.
So one useful metric with which to value the market is the price-earnings (P/E) ratio.
If you were bottom trawling, however, you could consider other metrics like the dividend yield. If the dividend yield is say 4-5 per cent, then it is worth buying these stocks because one is getting an assured return and over two years one can expect some capital appreciation.
What is the price-earnings (P/E) ratio?
If company A's share costs Rs 100 and it is expected to give shareholders an Earning Per Share (EPS) of Rs 10 in the current year ending March 2010, the current P/E is 10. If the EPS for the year ending March 2011 is expected to be say Rs 15, the forward P/E is 6.6.
The P/E for the market is typically the P/E for the benchmark index. One of the simple ways to arrive at the EPS for the 30-company Sensex: The EPS of each of the constituents is multiplied by its respective free-float market capitalisation.

Then these numbers are added and the total is divided by the sum of the individual free-float market capitalisations.
That gives weighted EPS of the Sensex. To arrive at the Sensex P/E, the Sensex is divided by the Sensex EPS. Consensus estimates (typically the average of estimates from about 20 brokerages) for the Sensex are Rs 900 for 2009-10.
Since the Sensex is at 17,100 right now, this means the current P/E is 19. For the year 2010-11, the consensus, right now is Rs 1,050, so the forward Sensex P/E is 16.2.
So, how does one judge whether the Sensex P/E is high or low?
The P/E ratio has to be benchmarked to the historical P/E of the country and also to the P/Es of peer group markets. India's historical long-term average P/E is close to 15. So, from a historical point, the Sensex is more expensive currently. India's peer group would include countries such as Taiwan, Korea, China, Brazil [ Images ], Russia [ Images ] and other emerging markets.
As of now, Taiwan is among the most expensive markets in the region, trading at a current P/E of over 30 times mainly because the market expects a huge spurt in earnings of over 75 per cent in calendar 2010, following the recovery in the US economy.
Korea is slightly cheaper - at around 14.5 times - than India, although the earnings outlook is slightly better than that for India. China is cheaper than India, justifiably because the earnings outlook for that market is less exciting than that for India.
What is the relation between P/E and interest rates?
Typically, there is an inverse relationship between interest rates and P/Es. P/Es are a function of risk appetite, the higher the risk appetite the higher the P/E. In a tight money scenario, when interest rates are high, people are risk averse so the P/E will be low.
In an easy money environment, when interest rates are low, people are willing to borrow to invest in the markets and so the prices move up, pushing up the P/E. Currently in India, interest rates are trending down in an easy money environment.

Day Trading Strategy

2009-07-24T04:46:00.000-07:00

Day trading is defined as the buying and selling of a security within a single trading day. Day trading is a strategy for playing the stock market, where "playing" means trying to make money. Day trading is designed to produce short-term profits. Day trading is clearly a phenomenon of our times. Day trading is not appropriate for all investors. The profit potential of day trading is perhaps one of the most debated and misunderstood topics on Wall Street. Due to short time lines that prevent any company research or other traditional stock analysis tools, day trading is often regarded to as more like gambling than investing.
Investors are caught in-between the unstable markets and their need to improve their profits. With the new trading robot available, the worry of finding great penny stocks has ended for thousands of investors. Now, you have to tap into the full-fledged accessibility of software that pulls top penny stocks to the forefront for your benefit. If you've never heard about the trading software, you are missing out on a market advantage never seen before. The day trading robot handles all of the analysis you need in order to move forward in your investing career.
Intro to Trading Robot
The trading robot was created in the early 2000s when an organization was in need of penny stock picks for profit. Day trading has existed for hundreds of years as people developed a strong sense of the markets. Today's untimely demands of checking, reading, and shorts keep the opportunities flowing. Knowledge of the trading robot started to arrive online as a way to make more money without risk. The robot compares the stock data and pricing from the last seven days in order to choose the best picks for you. You literally sit back, do nothing, and enjoy profitable benefits of this software.
How Does it Help Your Portfolio
The software ended the consistent confusion of finding good penny stocks. The industry has unleashed hundreds of penny stocks over the last two years while the market remains fragile. Investors have lost their interest and confidence in investing in new companies because of this economy. The trading robot removes this fear with advanced technology; investors with online trading accounts will have an answer waiting for them when they wake up in the morning. This is more than a benefit for today's day traders; it's an asset in building their portfolio safely.
True Benefits of the Software
The benefits are beyond a financial reward; investors have peace of mind, confidence, and security in the functioning of the trading robot. The fears of losing thousands on bad buys have ended for day traders using this software. If you remain uncertain about the effects of this software, it's easy to try then return if you're unsatisfied with the results. You not only learn the basics of great day trading with its information, you become a successful trader over time. The software has made it easy for day traders to work the markets to their advantage while creating strong portfolios worth close review.
Final Thoughts
The day trading robot is only one addition to a great learning experience. The day trading continues with or without the software, but the rewards are not as promising. New investors interested in taking an advantage of the markets will find the trading robot a perfect solution to their woes. If you've ever lost a great fortune in the market, you can ease your stress as well. The best thing about the trading robot is it is getting better every day. More people are making more money, investors are buying the software, and online trading has become an amazing work experience for investors. No longer are they concerned about picks because the software handles the analysis to save time.
Stock Assault 2.0:100% Automated Artificial Intelligence Stock Picking Software!It would be easy for anyone to make money investing in the stock market if only they knew which stocks were going to increase in value, and when to sell them before their value goes down. Well, that dream may now be a reality thanks to Stock Assault 2.0. This is an artificial intelligence software program that works on the user's computer to analyze what is going on with all the available stocks being traded and then picking those it "thinks" will be good investments.
The Stock Assault 2.0, The software scans automatically, analyzing thousands of stocks instantly through an analysis of stock charts and live data to generate a reliable prediction of future price changes.
Only when stock investment software produces picks that are suitable to your needs, you can invest, buying and selling. Within a week you can be gathering a profit between 5% and 15% of your investment.

All about health insurance for senior citizens

2009-06-24T05:15:00.000-07:00

Are you a senior citizen and have lost all hope of buying a regular health insurance policy? Well, if you are still under 65 years of age, you wouldn't be too old to get one some time from now.
The Insurance Regulatory and Development Authority (Irda) has asked general insurance companies to keep at least 65 years as the maximum entry age for a health insurance policy.
The present problem
Across the 16 insurers that offer health insurance policies in India, there are many choices. However, once you are over 50 years, your options get limited -- most insurers do not offer fresh covers beyond this threshold. (see Entry Age Limits).
Also, you will have to undergo some self-funded medical tests -- the older you are, the stricter the tests get. Even after this, you may not get a cover on the ground of you being medically unfit. If you are fit, there may not be a policy for your age group. In that case, you will have to opt for the especially designed senior citizens' policy (see Senior Citizens' Plans).
Senior citizens' plans
Here's a list of standalone senior citizens' health policies, the age band that they cover and the maximum sum insured they offer. To facilitate a comparison among these, we give indicative premiums assuming that the policy is for a 60-year-old with a sum insured of Rs 1 lakh (Rs 100,000).

IRDA's solution
The regulator aims at addressing all such problems. No insurer will be able to refuse an older persom a cover or load him with extra premium without giving a valid reason for doing so. "Such reasons should stand the scrutiny of reasonableness and fairness," Irda has said.
Important as it may be, the health insurance market is arbitrary at present. For example, while some insurers reimburse the cost of medical tests to be undergone by a customer above the age of 45 years, others don't, and some others reimburse only part of it.
Beginning July 1, all insurers will have to reimburse 50 per cent of the cost of tests if they agree to cover the customer after medical examination.
At the time of refiling their products with Irda or launching new ones, general insurers will have to include these clauses in their policies.
Says Sanjay Datta, head (health insurance), ICICI [Get Quote] Lombard General Insurance: "The sector is heading towards more transparency and consistency. With the entry age being extended to 65 years, customers would have greater flexibility in choosing a plan and also since now disclosures are explained upfront, an insured would know what's in stock for him."
The future problem
Cross-subsidisation: Some insurers feel that the move could lead to cross-subsidisation and a subsequent increase in the premium for younger people.
Says Sreeraj Deshpande, head (underwriting), Bajaj Allianz General Insurance: "We have a separate policy for senior citizens as they comprise a different risk pool. Cross-subsidisation may be a natural fallout of combining two risk pools -- that of senior citizens and younger people. To compensate the risk associated with senior citizens, younger people may have to shell out a little extra."
Senior citizens' policies were introduced keeping cross-subsidisation in mind. These policies have a lower sum insured and greater premium and are, therefore, self-sustainable. These policies also considered other needs of senior citizens.
For example, Star Health and Allied Insurance Senior Citizen Red Carpet policy offers to insure people in the age group of 60-69 years without a medical test. It also covers pre-existing diseases right from the first year.
National Insurance's Varistha Mediclaim, too, mandates no medical tests, gives no-claim benefits and includes pre-existing diseases after one claim-free year.
However, while Senior Citizen Red Carpet gives a sum insured of up to Rs 2 lakh, Varistha Mediclaim offers a maximum sum insured of only Rs 1 lakh.
Medical reimbursement: The fact that the insurer will now have to reimburse at least 50 per cent of costs of medical tests may also lead to a hike in premiums.
Entry age limits
The insurance regulator has mandated that the maximum entry age for a standard health insurance policy offered by general insurers should be at least 65 years. Here's what general insurers offer at present.

Mixed reforms
The reforms process seems to be rolling. Earlier this year, Irda had asked insurers to spell out renewal norms clearly to avoid any ambiguity. Says Antony Jacob, CEO, Apollo DKV Insurance: "The proposed changes will surely have a pricing implication. We will need to see it in conjunction with Irda's circular on renewals."
However, general insurers are complaining. They say that the new guidelines do not propose anything for life insurers, which have entered the health insurance business in a big way.
Says Jacob: "Life, non-life and pure health insurers should follow similar regulations when it comes to their health insurance portfolio since they operate in a similar market."
Sources say, life insurers are excused as, barring a few exceptions, they are long-term contracts and offer benefit policies like critical illness and hospital cash.
It is expected that Irda will take cognisance of such disparity soon. For you it is just a step up as the sector matures.

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8 amusing facts about your home loan

2009-06-12T04:13:00.001-07:00

A loan agreement is the document that lays out the terms and conditions of the lender. It also informs the lender of the borrower's consent. It is very important to read what you sign for that very reason. Be informed before you agree.
The agreement could be the last thing you want to read. The miniscule font size alone is a turn off. Add to that, too many asterisks, and more than ample number of sections. So, even if reading the document seems to be a mind-numbing task, you have to get it done. This document is legal and once you sign it, you are bound by its terms and conditions.
But you must read the document very carefully. Because not only will it inform you, it has immense potential for amusement. Are you ready for some fun then?
1. If you have a dispute with the bank during the loan tenure, as a borrower, you cannot issue a stop-payment instruction with respect to post-dated cheques for as long as the 'facility' (loan) or any part of the dues is outstanding. In case such an instruction is issued, the bank can initiate criminal proceedings against you under the Negotiable Instruments Act (1881).
2. If you, the loan borrower, do not understand English, a declaration in vernacular language needs to be executed and signed by you in the desired vernacular language. There is a special instruction in the agreement regarding the same.
3. There is a special 'Memorandum Regarding Signing' for those who understand a vernacular language, for an illiterate, and for a blind person.
4. According to the agreement, you cannot sell, exchange, partition, mortgage, charge, encumber, lease, or dispose the property till you have got 'discharge' from the bank in writing.
5. You cannot hold the bank responsible for any delay in construction, giving possession of, completion of property by developer, promoter or society even if the bank has approved or sanctioned any facilities to such a person or entity.
6. If you are a resident Indian, you cannot leave India for employment or business or stay long-term outside India without fully repaying the loan. You cannot stay out of India for any purpose for more than 60 days. There should not have been a change in the citizenship nor should you have made any earnings or income during this period from abroad.
7. If you have taken a 'home equity' or a 'top-up loan' you cannot let out your property for use/ occupation by another person without prior written permission from the bank.
8. Oh yes, and this one is a personal favourite, see if it's yours too. It is not clear whether banks are bound by law to notify you of changes in their policy. But, the agreement binds you to remain acquainted with a bank's rules/ terms and conditions affecting or relating to the loan taken.

Some basic facts about mutual funds

2009-05-21T20:34:00.001-07:00

To invest in mutual funds, you need to first understand what they are, and how they work.
Even more basic is your grasp of stocks and bonds. Very quickly, stocks stand for shares of ownership in a public company, and bonds are money lent to the government or company, on which you receive interest. These are the two most common forms of investment, owned and loaned (real estate and precious metals being examples of others), but we are presently concerned with these instruments, since most mutual funds invest in stocks and/or bonds.
Simply, mutual funds act as intermediaries and facilitate investments in various securities (stocks and bonds). The logical question here would be: why do I need a mutual fund? Why can't I just invest directly?
The mutual fund advantage
Investing in a mutual fund allows you to minimise risk and maximise returns, because it acts as a middle man for a group of investors with a shared and predefined investment objective. If your main objective is security in investment but you don't know how to begin, a mutual fund is one way to go.
Typically, a fund manager will maintain the fund, and since you are one shareholder in the fund, you have the added advantage of easy investment, and lower trading costs.
Who are these fund managers?
Asset management companies (AMCs) approved by the Securities and Exchange Board of India (Sebi) manage the funds by making investments in various types of securities. This means that all recognised AMCs are monitored by higher authorities and stringent regulations, and funds are managed by professionals who have the necessary expertise.
How is your risk minimised?
Typically, investing in a mutual fund means investing in more than one stock. Some fund managers will diversify and spread your investment further by buying a mosaic of stocks and bonds. Investing in a large number of assets, or diversification, means that a loss incurred on one investment is minimised by gains in others.
How are trading costs reduced?
Since the AMC buys and sells large amounts of securities at a time, transaction costs are reduced, and the benefit is extended to the investor, because the average cost of the unit is lowered.
There are three ways in which you will see returns on your investment in a mutual fund:
Through dividends on stocks and interest on bonds;
Through capital gains, if the fund sells securities that have increased in price and the fund distributes these gains; and
By selling your shares when the holdings increase in price.
Mutual funds can either be open-ended or close-ended in nature. With open-ended funds, you can either enter or exit the fund any time during the scheme period, by buying/ selling fund units -- this means a high degree of liquidity. Close-ended funds, as the term implies, means that an exit is possible only when the scheme period is over.
Mutual fund schemes in India are varied and cater to a wide range of requirements and profiles, based on financial position, tolerance to risk, and expectations of returns. Each mutual fund has a specific stated objective.
The fund's objective is laid out in the fund's prospectus, which is the legal document that contains information about the fund, its history, its officers and its performance.
High on risk and high on return are Equity funds. Also known as Growth Schemes, the aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.
They may be further classified into Diversified Equity Funds, Mid-Cap Funds, Sector Specific Funds and Tax Savings Funds (ELSS).
Debt funds, or Income Schemes, invest in debt instruments, typically issued by the government, private companies, banks and other financial institutions, and promise low risk and a stable income.
These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Further classification includes Gilt Funds, Income Funds, MIPs, Short Term Plans and Liquid Funds.
Balanced funds are a mix of both equity and debt funds. They invest in both equities and fixed income securities, providing both growth and stability.
Money Market Schemes promise high liquidity, preservation of capital and a moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
Tax-saving schemes offer tax rebates to the investors under tax laws. For example, under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index schemes track and emulate the performance of a particular index such as the BSE Sensex. The stocks in these portfolios will mirror those in the Index, as will the percentage of each stock retained. Returns will therefore mirror the movement of the Index.
Finally, a further benefit from investing mutual funds is the 100 per cent income tax exemption on all mutual fund dividends. For Equity Funds, short-term capital gains are taxed at 15 per cent. Long-term capital gains are not applicable.
For Debt Funds, short-term capital gains are taxed as per the slab rates applicable to you. Open-ended funds with equity exposure of more than 65 per cent are exempt from the payment of dividend tax for a period of three years from 1999-2000.

How investing in stocks can make you rich

2009-05-21T20:31:00.000-07:00

Stocks are volatile, which is another way of saying they're likely to experience wide swings in value. However, over long periods of time, there's good reason and evidence to believe stocks also will appreciate dramatically faster than any other type of asset. That makes it easier to attain your long-term wealth goals.
When you buy a share, or stock, you are buying a piece of the issuing company. Admittedly, it's probably a small piece, but that share you purchase gives you the right to participate in the company's wealth (or fiscal decline) and vote on matters of some importance - directors, company auditors, and some shifts in corporate policy.
In some cases, you are also entitled to dividends - payments of cash or stock to shareholders. Some companies also provide their shareholders with perquisites, such as tickets to the company's theme parks or discounts on its merchandise.
Why share prices go up
Because companies tend to grow and prosper over time - and because a share of stock allows you to participate in the prosperity - stock prices, in the aggregate, tend to appreciate over long periods of time. However, individually, some companies prosper; others fail.
If you buy a share in a loser, you could lose all, or a significant portion, of your initial investment. In other words, when you invest in stocks, you risk losing your initial investment, but because you are taking a bigger risk, you get the opportunity to earn far bigger rewards.
How big a reward? In the case of the US, for example, the Chicago-based research company Ibbotson Associates has tracked the performance of US stocks from 1926 onwards. The period till the turn of the century included the Great Depression, the New Deal, World War II, the Korean conflict, the Vietnam War, the Kennedy assassination, Reaganomics, and the Gulf War, not to mention the lunar landing, the break-up of Ma Bell, the Watergate scandal, and the dismantling of the Iron Curtain.
In other words, it is a fairly diverse period that has had its share of ups and downs, just like any period in history. During that time, the average annual return on small-company US stocks was about 12.4 per cent. The average annual return on big-company stocks was 11.2 per cent. Over the same period, inflation rose 3.1 per cent per year, and the return on U.S. Treasury bills was 3.77 per cent.
To put it another way: If you had a diversified portfolio of large-company stocks during that period, the value of your investment portfolio rose 8.1 percentage points faster than the rate of inflation. For every $100 you put in the market, you hiked your buying power by $8.10 each year. At the end of twenty years, your real (inflation-adjusted) buying power increased fivefold, to $503 from $100, without any additional payments from you.
Although investing is as much an art as a science, it's reasonable to expect that future investment returns will mirror historic returns over long periods. In other words, it's reasonable to assume that stocks will continue to appreciate faster than the rate of inflation and other types of traditional investments.
The downside: it is also reasonable to assume that stocks could repeat their short-term historic performance over shorter periods, too. And that's been far less illustrious than the long-term performance. To be specific: the market crash of 1929 so depressed stock prices that investors who put $100 in the market then saw the value of their securities fall to less than $20 at the market's nadir in 1932.
It took roughly eight years before securities prices rose back to ground zero, where $ 100 invested in 1929 was worth $100 again. And then the market took another sickening slide, from which it didn't recover until after World War II had ended. From start to finish, it was a full fifteen years of pain for stock market investors.
The market also took a sharp, decade-long dive in 1969. And it experienced short-term 'crashes' in 1987, 1989, and 1990. But its performance in 1995 was enough to make an investor beam. Stock values as measured by the Standard and Poor's 500 index were up more than 37 per cent.
The following years till 2000 were almost as impressive. Big-company stocks posted a 23 per cent gain in 1996, a 33 per cent gain in 1997, a 28 per cent gain in 1998, and a 21 percent gain in 1999.
Incidentally, although investors in small companies have done better than investors in large companies over the long haul (average annual returns of 12.4 per cent versus 11.2 per cent, respectively), at various points in time, small-company stocks do worse than big-company stocks. They fall farther and faster, and they stay depressed longer.
How to deal with price yo-yos
These heady climbs and sickening slumps are called volatility. When an investment is as volatile as the stock market, it is unwise to invest unless you have a fairly long time horizon that allows you to wait out the price swings and go for the long-term price appreciation.
How long is a 'fairly long' time horizon? That depends on you and why you are investing. Let's say you want to buy a house in five years, and you're trying to determine where to invest the down-payment money.
The stock market would be a good place for all or part of that money if you wouldn't be crushed if your home-buying plans had to be put off because of a market slump that depressed the value of your investment portfolio and thus reduced the amount you had saved for the down payment.
What if you would be crushed if you couldn't buy the home as planned? Then put the down payment money in bonds that mature (or pay back their principal) at the same time as your plans do.
Stocks are also ideal to have in your retirement portfolio. The younger and farther from retirement you are, the more stocks you can handle. And they're a good choice for college funds for young children.
However, if you are investing in individual stocks rather than mutual funds, you must diversify your portfolio by buying stocks in several different companies that do business in several different industries. That ensures that your net worth won't crash if one industry, whether it's oil, technology, or retailing, hits a slump.
Experts suggest you own shares in at least eight to ten different companies. Ideally, those companies should be operating in substantially different industries.
Do it the equity mutual fund way
Mutual funds are investment companies that pool the money of many investors and buy securities in bulk. The securities that a fund buys are determined by the fund's investment objectives. These investment objectives are spelled out in the prospectus and by the fund manager, who makes the investment decisions.
So-called equity funds - also known as growth or aggressive growth funds - buy stock in companies. When you buy a share in an equity fund, you're actually buying an interest in all of the different stocks held by that fund.
That gives you the benefit of broad diversification, which reduces the risk that your investment portfolio will be savaged by a single bad stock. In essence, if you buy the right mutual fund, you may not need to diversify the stock portion of your portfolio further. One fund could do it all.
There are lots of other benefits and tricks to buying mutual funds. However, let it suffice to say that investing in equity mutual funds is an alternative to investing in individual stocks. It is a particularly good alternative for those who don't want to spend a lot of time picking individual shares or for those who are starting out and don't have a lot of money.

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Stock Market Investment Guide

2009-05-20T22:26:00.000-07:00

From the level of 14,000 in Sept 2008 the Indian markets fell to a level of 8,000 in October 2008 because Lehman Brothers of USA went bust. Between October 2008 and February 2009, the Indian market bounced around 8,000 and 10,000 levels three times. By March 2009 the Indian market broke through the 10,000 levels and was 12,137 before the election results were announced. i think we are in a new range of 14,000 to 16,000 till budget day - sometime in July. If the budget is good the market will head towards 18,000... if the budget is not so exciting the market will head towards 14,000. I do not believe the market can head towards the 10,000 to 12,000 range till there are some MAJOR political and social shocks.
My concern over companies like DLF is they have huge land banks bought at prices which may not be publicly visible and the estimated selling price of the finished, constructed product may not be what they initially thought. Basically, the value of assets may not be as high as investors expect and the profitability from those assets may not be as great as investors expect. Not my preferred sector.

There are many ways to bring your hard earned money from all the corruption and deals that you have done. One easy way is to tell your Swiss bank to remit the money to your foreign bank account in India. Of course the problem with that is that you will attract all the smart smooth-talking private client wealth managers and they will reach your house before your money from your secret numbered Swiss bank acocunt gets to you. Which means that before you can even touch your money it will have vanished in fees and bad advice. The other way of bringing your money back to India is to tell your Swiss banker to buy you P-Notes and use your hard earned money to punt in the Indian stock markets. The risk there is that you will end up buying stocks of your friends who also have Swiss bank accounts and knowing how intelligent they are (just like you) they will fund ways to use your money to siphon it into their own Swiss bank accounts. By the way, pl do not invest in Quantum Long Term Equity Fund because you will fail our KYC norms. Best wishes.

ICICI is a fairly aggressive bank that has, in the past built a business based on maximizing market share. That scares me. Bankers are not supposed to go around the company boasting how many accounts and clients they have. A banker's job is to ensure that they have collected money which they had lent out. I am not sure whether ICICI Bank [Get Quote] is reformed now - like a teenage child that matures and gets more steady. I would prefer putting my money in a relatively more stable financial company like HDFC.

Nothing is safe. There is risk in everything one does in life. Buying equity shares - either individual stocks directly based on equitymaster research or investing in Quantum Long Term Equity Fund - is also risky. They key is to understand the risk and to "price" the risk correctly when trying to estimate your potential gain or potential loss from such an investment. But yes it is a good time to buy into the stock market.

The real estate market is in an excess built and over capacity mode across the country. Many people with great political connections used foreign money to buy raw land; used their connections to convert this useless land into valuable zoned land. They then sold this at a huge profit. They used these profits to buy more land at higher prices and hoped to play the same game. However, in most cities their there is too much construction and excess supply of apartments, homes and office space at available prices which people cannot afford to buy or rent. These real estate companies have used money from the public banks to bail them out of their problems. While the banks - under guidance from the government - can give more loans to the developers to keep them afloat, consumers still cannot afford the high priced product. Therefore real estate developers will have to sell their available square feet at lower prices (there is no shortage of buyers at lower prices) and this reduction in selling price will hurt their profit margin. This is the logic why I do not really like real estate stocks. However, the money power of real estate developers is very tempting to most politicians and this money power may bail out these stuck real estate developers and their battered share prices.

10 don'ts for smart stock market investing

2009-05-13T21:11:00.000-07:00

This is a great check list of 10 habits, impulses and tendencies you steer clear of in order to keep your investments healthy.
1. Don't be arrogant
The market teaches humility and that is how you must approach it. As soon as you believe you know why the market acts the way it does, you will be proven wrong. Arrogance can kill a portfolio. You must be able to admit defeat and preserve enough capital to fight again.
Following point and figure charts, which depict the battle between supply and demand, helps keep you out of the 'I know why' attitude of investing.
2. Don't wait until you feel comfortable to buy when a sector reverses up
Falling into the waiting trap is a great way to ensure that you buy the stock at a higher price. When sectors reverse up from oversold levels, it is often when the news is the most dire.
Conventional wisdom would suggest this is the last place in the world you would want to invest. Buying at this time is gut wrenching, but to be successful you must act with complete confidence.
As the sector moves higher, the comfort level increases. If you use comfort level as your guidance, however, you will for sure leave a lot of money on the table, or worse, buy as the sector peaks.
3. Don't be afraid to buy strong stocks
Don't avoid stocks just because they have gone up. Doing so will keep you out of the long-term winners. In the United States, for example, this mentality would have kept you out of General Electric, which was up 188 per cent between January 1995 and December 1997 only to see it rally another 96 per cent by the end of 2000. It also would have kept you out of Cisco, which was up 376 per cent between January 1995 and December 1997, and then it moved up another 312 per cent by the end of 2000. These are only two examples, but there are many others.
More important than how much the stock is up is its supply and demand relationship. By evaluating the point and figure chart, you can gain insight into this relationship and whether or not the stock is likely to move higher. Stocks that double can easily double again. Don't miss out on these great opportunities.
4. Don't sell a stock simply because it has gone up
Doing this cuts profits short. Buying a stock right is only half the battle. You have to be able to sell it right to win the war. Just because a stock has rallied 30 per cent or 50 per cent, don't be tempted to take your trade off for that reason alone.
Consider trimming the position and leave part on the table to continue in the uptrend. Let profits run.
5. Don't buy stocks in extended sectors because 'it's different this time'
On the surface, the stock market appears different all the time. The leadership changes: in come new stocks into the Nifty 50, and then out they go. Small-cap stocks outperform for a while, then it's back to the large caps.
However, the underlying forces that drive the stock market are always the same. They are true and time-tested and do not change. They are supply and demand. That's why buying sectors that are extended (overbought) will not be different this time.
6. Don't try to bottom fish a stock in a downtrend
'The trend is your friend' is a true statement. So don't go against it without some inkling that the trend has changed.
Bottom fishing a stock in a downtrend is the opposite of being afraid to buy strong stocks. Do not buy a stock just because it fell sharply. You want to buy a stock that is likely to move higher, not one that is not likely to fall further.
At a minimum, wait for the stock to show a sign that demand is back in control and suggesting higher prices. That may be a simple buy signal on the chart or a reversal back to the upside after holding an area of support. Also remember why you initiated the position. Be careful not to let a trade turn into something else.
7. Don't buy a stock simply because it is a 'good value'
These days, value is in the eyes of the holder, and therefore it is a subjective term at best. If a stock has become a good value, ask why. This is important, because a stock can stay a good value by not moving for the next decade, or worse, become a better value by dropping another 20 per cent.
The true value of a stock is determined by its capital appreciation potential, not numbers on a balance sheet. The basis for capital appreciation lies in the supply and demand relationship of the stock. Appreciation can occur only if demand grows stronger for the stock and buyers are willing to pay a higher price. Watch the point and figure charts to determine if a stock is likely to move higher in price and become a good value.
8. Don't hold on to losing stocks and hope they come back
Hope is eternal, but your portfolio is not. Holding on to a losing stock is the best way to let your losses run. Combine this mistake with selling a stock that has gone up and you can create a portfolio of dogs.
When buying stocks, there will always be some losers: Count on it. However, how you manage that loss often determines the success or failure of the overall portfolio. Keep losses small so that you have the capital to play again. Hanging on to losing positions, hoping that they will come back, can be deadly.
A $50 stock that is stopped out at $40 is a 20 per cent loss. It's a bad trade, but it is manageable. In order to recoup that loss you would have to make 25 per cent on a $40 stock. What if you held on to that $50 stock, hoping that strong earnings would come in and turn it around, but instead it continued lower to $25?
Finally, you decide to exit, but now it takes a 100 per cent return from a $25 stock just to get back to even. Those results are hard to find, and if you are able to find one, you don't want to waste it on getting back to even
Learn to recognize your losing positions for what they are. If a stock cannot trade above its support line or is not outperforming the averages, find one that is and swap it.
9. Don't pursue perfection
There are two types of mistakes to discuss here. The first is the constant belief that there is a better system out there, and you need to find it.
Using a new system to invest each week will not get you to your goal. You will become good at nothing and moderate to bad at everything. To be good requires that you stay focused, disciplined, and skilled at whatever methodology you choose.
You need to have the strength of conviction in your chosen discipline to learn from mistakes rather than to run away from them and find another methodology. There is no Holy Grail in investing.
The second mistake is to wait for the perfect trade. There is no such thing. If you only buy stocks that have all positive attributes you will maintain a portfolio of cash. Rarely, if ever, do you find a stock that has all the pluses on its side.
Look for the big ones like relative strength, trend, and signal. Also remember that 80 per cent of the cause of price movement in a stock is based on the market and sector. You are better off being approximately right than precisely wrong.
10. Don't do anything based on a magazine cover
Following the hot news that appears on magazine covers is a shortcut to the poor-house. Why should you follow the advice of someone who has just moved from the society pages to the business section?

Fixed deposits: Are they for you?

2009-05-12T04:39:00.001-07:00

With the stock markets in a downward spiral, it comes as no surprise that few want to invest in equity markets. This crash in the share prices, however, has proved to be a boon for banks, whose fixed deposits were ignored by the investors in favour of equities for higher returns.
These banks came out with various FDs, offering attractive rates. This has tempted many investors to opt for FDs. However, every investor in a fixed deposit must remember that FDs are also an investment option and as with any investment option, they too have their own pros and cons.
So be prepared to get the complete overview of this investment option before opting for it.
What is an FD?
An FD, or fixed deposit, is also a term deposit. It is similar to a savings account, except that your money is locked in for a certain period, also called 'term'. Hence the name term deposits.

However, while you cannot access your money, the bank rewards you by giving you a higher interest rate than it gives you on your savings account.
Is it the best investment option?
Remember, diversification is the name of the game when it comes to investment. Just putting your money in FD will not help you get the best overall returns.
You also need exposure to equities to get the growth in capital and beating inflation in the long run. Hence, it is advisable to invest into both equities and debt.
It will help you get higher returns from equities, while enjoying the capital safety offered by FD.
What are the advantages of an FD?
An FD has various benefits that make it an ideal investment option for those looking for capital safety.
Low risk: An FD is comparatively lot safer than equities, as your deposit up to Rs 1 lakh (Rs 100,000) is insured by Deposit Insurance Credit Guarantee Corporation. So, in case the bank fails, your money is still secured. This makes FD an ideal investment option for senior citizens.
Regular income: Unlike dividends given by the companies, the interest earned on an FD is fixed, as the rate of interest for the particular term is constant. Even if the rates increase or decrease subsequent to your opening an FD, your rate of interest will not be affected.
So you are guaranteed a regular income, making it an ideal investment option for those looking for regular income.
Availability of loan: Are you looking for a secured loan? Then you can avail of a loan by offering your FD as collateral. While your FD continues to earn interest, the rate of interest for the loan will be a few notches higher than that of the FD.
Hence this type of loan works out cheaper than any other type of loan, since the bank has the assurance of claiming your deposit if you fail to repay the loan.
Saves taxes: For those looking for an efficient tax saving investment option, FD is a good option. While ELSS (Equity-Linked Savings Scheme) has the shortest lock-in period of three years, your capital is not secured.
On the other hand, PPF (Public Provident Fund) offers capital security, it has a lock-in period of 15 years.
The tax-saving FD offers the best of both the world, as your money is locked for just five years, while your capital is safe.
Are there any drawbacks?
While an FD does have a lot of pros, it does have its share of cons. Here are some of them:
Erosion of worth of capital due to inflation: Inflation means a loss in the purchasing power of the money. When inflation goes up, the purchasing power of money goes down. As the interest rates on FDs are lower than the rate of inflation, the purchasing power of your deposited money does go down. As a result, you end up eroding the worth of your capital.
Tax liability: Except for the tax-saving FDs, the interest earned is taxed. So you end up incurring tax liability. You are particularly affected if you are a high income earner.
What should I do?
The best option for you is to invest as per your goals. If you have any short-term goals -- i.e. goals that have to be met within three years, like buying a car, or going on a holiday -- then the FD is your best bet.
On the other hand, for long-term goals like retirement planning or your child's education, go for equities.

Market Trendz Today - 05-05-2009

2009-05-04T21:14:00.000-07:00

The market is in an uptrend now but investors should wait for the election results before investing, says Ambareesh Baliga of Karvy Stock Broking on CNBC Awaaz.

The market is in a strong uptrend now, says Sudarshan Sukhani, technical analyst, on CNBC TV18. Buy on dips during the day, he adds. He advises waiting for a 30-40 point decline before buying.

All about the New Pension Scheme

2009-05-04T21:13:00.000-07:00

From May 1, Indians have access to another investment avenue to plan for retirement in the New Pension Scheme (NPS).
The scheme has been in the pipeline for at least five years but it finally took shape in 2007-08. Although the government was pushing for the scheme after a law providing statutory backing to the regulator was enacted, the Left parties, which were supporting the United Progressive Alliance government, did not allow the passage of the Bill.
So, last year, the government decided to go ahead by allowing the NPS Trust to enter management agreements with fund managers. What benefits does the NPS offer? Who is eligible? Business Standard provides a ready-reckoner.

US-64 windfall: Be age wise before investing

2008-12-01T19:02:00.000-08:00

Thirteen lakh investors, Rs 8,000 crore (Rs 80 billion) . . . tomorrow will be a big day for US-64 bond holders.

These tax-free bonds were issued in 2003 to bail out Unit Trust of India's flagship scheme US-64, which got into trouble because of lack of transparency in its portfolio composition and investment strategy.

Now these investors will finally get their due. And if you are among those, who have still not decided on what should be done with this windfall, financial advisors say the money should be channelled in instruments depending upon your age and risk profile.

"Responsibilities and risk appetite change according to the age of a person. This, in turn, should decide the investments made in different asset classes," said Kartik Jhaveri, director, Transcend India.

For instance, if you have retired or are on the verge of retirement, take a safety-first approach. This implies investing in instruments that would increase the size of the retirement corpus. To meet the monthly expenses requirement, invest in debt.

"If the investor wants safe returns on his investments, he can invest in RBI bonds. These are tax-free bonds and yield about 6.5 per cent returns," said financial planner Sajag Sanghavi.

There are other taxable debt investments as well such as floater schemes of mutual funds that return around 7 per cent on an average, but only if the money is deployed for three years or more. Floater schemes invest in corporate and government bonds and treasury instruments. They offer returns that are equivalent to the prevailing interest rates.

The senior citizens' savings scheme is another option that gives 9 per cent return annually. However, the income is taxed, based on the income bracket.

Another option is to look at monthly income plans, where 10 per cent of the corpus is invested in equities for returns that are slightly above the other debt-based funds. If you are above 40 years and have already accomplished financial goals, such as buying a house or owning a car, use the money to pre-pay any loans.

And if you have not invested enough for life after retirement, a part of the money should be deployed in diversified equity mutual funds because over a period of five to 10 years, they would give returns of 15 per cent and more.

If you are averse to risk, look at deep discount bonds that give returns of 12 per cent. For instance, Bhavishya Nirman Bonds, issued by Nabard, offer 12.15 per cent returns. However, remember that the accumulated sum would only come to you at the end of the tenure.

If you want, you can splurge a bit. As Hitungshu Debnath, executive director, wealth management services, AngelBroking, put it, "If your financial planning is running sound, you should give a treat yourself with a good vacation at this stage in life."

For youngsters, who have inherited the money by being a nominee or by invested in US-64 units in the early years of their careers, the best route now is pure equity funds or blue-chip stocks. With stock markets volatile, it is the right time to create a portfolio that will give good returns in the long run.

Thirteen lakh investors, Rs 8,000 crore (Rs 80 billion) . . . tomorrow will be a big day for US-64 bond holders.

These tax-free bonds were issued in 2003 to bail out Unit Trust of India's flagship scheme US-64, which got into trouble because of lack of transparency in its portfolio composition and investment strategy.

Now these investors will finally get their due. And if you are among those, who have still not decided on what should be done with this windfall, financial advisors say the money should be channelled in instruments depending upon your age and risk profile.

"Responsibilities and risk appetite change according to the age of a person. This, in turn, should decide the investments made in different asset classes," said Kartik Jhaveri, director, Transcend India.

For instance, if you have retired or are on the verge of retirement, take a safety-first approach. This implies investing in instruments that would increase the size of the retirement corpus. To meet the monthly expenses requirement, invest in debt.

"If the investor wants safe returns on his investments, he can invest in RBI bonds. These are tax-free bonds and yield about 6.5 per cent returns," said financial planner Sajag Sanghavi.

There are other taxable debt investments as well such as floater schemes of mutual funds that return around 7 per cent on an average, but only if the money is deployed for three years or more. Floater schemes invest in corporate and government bonds and treasury instruments. They offer returns that are equivalent to the prevailing interest rates.

The senior citizens' savings scheme is another option that gives 9 per cent return annually. However, the income is taxed, based on the income bracket.

Another option is to look at monthly income plans, where 10 per cent of the corpus is invested in equities for returns that are slightly above the other debt-based funds. If you are above 40 years and have already accomplished financial goals, such as buying a house or owning a car, use the money to pre-pay any loans.

And if you have not invested enough for life after retirement, a part of the money should be deployed in diversified equity mutual funds because over a period of five to 10 years, they would give returns of 15 per cent and more.

If you are averse to risk, look at deep discount bonds that give returns of 12 per cent. For instance, Bhavishya Nirman Bonds, issued by Nabard, offer 12.15 per cent returns. However, remember that the accumulated sum would only come to you at the end of the tenure.

If you want, you can splurge a bit. As Hitungshu Debnath, executive director, wealth management services, AngelBroking, put it, "If your financial planning is running sound, you should give a treat yourself with a good vacation at this stage in life."

For youngsters, who have inherited the money by being a nominee or by invested in US-64 units in the early years of their careers, the best route now is pure equity funds or blue-chip stocks. With stock markets volatile, it is the right time to create a portfolio that will give good returns in the long run.

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Credit card addict? Switch over to cash

2008-12-01T19:00:00.000-08:00

Puneet Lakhotia signed up for an ICICI Bank [Get Quote] credit card to book tickets online. His problem: None of the ticketing websites accepted his regular bank's net-banking facility.

But instead of only booking tickets online, the 27-year-old bank employee started splurging. Within a year, he was in a debt trap. "Due to the convenience it offered, I used the credit card to pay bills and shop online for books, movies, music CDs and even bought a cell phone," says Lakhotia. Having learnt the hard way, he has surrendered his credit card and keeps ItzCash, a pre-paid card for online transactions.

Top five expenses

Travel and related activity, including tickets and hotel bookings
Fuel refilling
Consumer durables
Apparel and garments
Jewellery
Credit card for convenience is a very common excuse. Many pay their restaurant and hotel bills because using a debit card involves punching the four-digit identification number. There are other advantages like cash-back benefits or points that attract more expenses.

According to the data compiled by ICICI Bank, the country's largest private sector bank, the top five expenses that consumers make through credit cards include travel and related activity (including tickets and hotel bookings), fuel refilling, consumer durables, apparel and garments and jewellery. Payment of utility bills is another area that is fast catching up.

"Around 8-12 per cent of business comes from the top five areas. At least, 10 per cent of card-holders pay at least one of their utility bills every month through cards," said a banker from a private sector bank.

However, just to make a few expenses, consumers always start over-spending. For those, who cannot control the urge to splurge, using an alternative-payment mechanism is a better idea.

For instance, for buying tickets online, it is better to use pre-paid cards. Three - such cards are currently available in the market - Itzcash, OxiCash and Done Cards.

These cards can be used for a host of other purchases as well. These include online shopping, insurance purchases, mobile recharge and many others.

Like credit cards, these cash cards come at a cost as well, but only for a few transactions like railway bookings and bill payments for public sector utilities. This is because government-owned companies do not give any commission to cash card companies. "The charges are either a maximum of Rs 15 or 1.5 per cent of the value of these transactions, whichever is higher," said Naveen Surya, managing director, Itzcash.

When it comes to petrol bill payments, credit card companies give bonus points and a waiver of fuel surcharge of 2.5 per cent.

Substituting them with pre-paid cards from oil companies would mean the same thing. All the three major oil companies have their own branded cards. For instance, Bharat Petroleum has a Petro Card and Hindustan Petroleum has HP-Smart 1. None of these cards attracts a surcharge and offers similar loyalty bonuses.

For apparel and consumer durables enthusiasts, most retailers on Thursday have loyalty programmes that give discounts for cash purchases. For persons, who cannot handle credit cards, it is best that they go for options that require the use of more cash. It saves them the trouble as well as a high interest payout.

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Exports dip 12%, imports up 10% in Oct

2008-12-01T18:59:00.000-08:00

Reeling under the impact of global slowdown, India's exports declined by 12.1 per cent in October this fiscal causing concerns of job losses in export-oriented manufacturing units.

Exports dropped to $12.82 billion in October from $14.58 billion a year ago.

However, imports grew by 10.6 per cent to $23.36 billion in October compared to $21.12 billion in the same month last year.

Concerns have been raised over large scale job losses in several export-oriented industries like textile, handicraft and gems and jewellery.

How to make tax gains on stock market losses

2008-11-03T03:37:00.001-08:00

Stock markets have tanked big time, spreading widespread, contagious panic, pain and gloom the world over.

For equity investors, the pain is, of course, real though not unusual given that share prices routinely go through bullish and bearish cycles.

An array of preferential tax treatment on equity investment offers some balm to investors bloodied by capital losses.

Tax gains on capital losses

Your investments may not always result in capital gains. A loss from the sale of a long-term capital asset (such as investment in equity or equity mutual funds held for more than 12 months) can only be set-off against long-term capital gains.

On the other hand, a loss from short term capital asset is allowed to be set-off against both short term and long-term capital gains.

How to become a millionaire?

2008-11-03T03:36:00.001-08:00

Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable.

Read on for some tips on how to increase your savings and work toward this goal....

Stop senseless spending
Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.

That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere - this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses.

This doesn't mean that you shouldn't go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits.

Fund retirement plans ASAP
When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.

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Unfortunately, retirement planning is an afterthought for many young people. Here's why it shouldn't be: funding a 401(k) and/or a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later.

How much difference will funding a vehicle such as a Roth IRA early on in life make?

If you're 23 years old and deposit $3,000 per year (that's only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it's clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest - your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you've lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That's still a sizeable fund, but you had to contribute $160,000 just to get there - and it's no where near the $985,749 you could've had for paying much less.

Improve tax awareness
Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.

Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.

However, if you're not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return.

Renting versus buying
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren't sure where we want to live for the longer term. And that's fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.

Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)

Buying expensive cars
There's nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice - especially since this asset depreciates in value so rapidly.

How rapidly does a car depreciate?

Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.

In short, especially when you are young, consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you'll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.

Don't sell yourself short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.

Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Bottom line
You don't have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don't have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

The art of wealth management

2008-11-03T03:34:00.000-08:00

In times of unnatural exuberance there are irrational forces that pull on an investor's portfolio. These may either be in the form of structured or unstructured advice or the psychosis of being left behind or the tug to outperform given the overtly optimistic situation. These forces create imbalance in a portfolio and lead to problems of concentration or of over leverage.

If unnatural exuberance is true, the opposite is also true. Irrational pessimism can also lead to feelings of over caution and being overtly defensive. The portfolio can be influenced by an apocalyptic fear. It clings to any sign of stability even at the cost of growth. These fears too create imbalances in a portfolio, and disable the portfolio to benefit from an imminent turnaround.

While both the above examples are of extreme situations investors are known to also swing moods during extreme volatility or even flat markets; which probably leaves us with a market that neither goes up or down for sanity to return.

Blaming the market for such behaviour is probably mistaking the wood for the tree. There are no easy or readymade answers that could solve all or even most of our queries. What is needed is a robust process that enables an investor to plan, execute and monitor her / his asset allocation depending on his unique requirement.

But planning for creating substantial wealth requires an understanding of the asset allocation practice.

Consider that no asset class (be it gold, stocks, commodities, real estate) has singularly outperformed over the long run, whether it was the bond funds that did their best in 2000 and 2001 or if we consider the mid-caps in 2002-2004 or the Sensex in 2005 and 2006.

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Asset allocation is the process of deciding how to distribute wealth amongst various asset classes and sectors. Although often regarded as a minor investment decision, asset allocation is the cornerstone on which the entire investment process is built. About 90 per cent of change in returns over time can be explained by asset allocation decisions. About 40 per cent of the differences in returns can be explained by differences in asset allocation. Asset allocation is thus the major factor that drives portfolio risk and return.

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There are many ways of achieving a correct portfolio strategy with diversification acting as the guiding principle. However, diversification as a concept has existed for long in the minds of investors. Many of us would know about the perils of putting all the eggs in one basket. Therefore, more than the idea of diversification, it is important to arrive at an objective method of scientifically diversifying in order to obtain the most efficient risk-return combination. The science is to select the portfolio which either holds the least amount of risk, given the return or to take the best possible return, given a level of risk.

An asset allocation recommendation requires an in depth understanding of the client and his family. The rigour of the process starts with a meeting between the advisor and the client.

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The advisor tries to assess the tolerance to risk and appetite towards risk that the client possesses. Since risk tolerance and appetite form the cornerstone of building the asset allocation, the questionnaire is of utmost significance. A structured interview approach is required for profiling the investor's broad details about existing investments, approach towards liquidity, leverage etc. along with specific constraints. These help the advisor assess parts of the investment psychology that may have been implicit and not obvious otherwise.

Armed with this deep understanding the advisor is able to map the investor and is therefore able to add value while determining the yield (net return after tax) preference. S / he is then able to look at the various portfolio combinations and together with the investor arrive at the right mix. As a prerequisite for this, the advisor needs to have an in-depth understanding of the various asset classes as well have the wherewithal to offer these to the investor.

The portfolio construct must also allow for tactical allocations. The objective of tactical asset allocation is to move among various asset classes within a risk-controlled framework and to seek to create an additional source of return.

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The investor might well be advised to insist on the structured process being followed and resist deviation from the plan. S / he must also insist on the various options available for her/his investments. This also puts the onus on the investor to allow the advisor to have a holistic picture of the portfolio.

Agreeing to a plan that combines various asset classes, ruthlessly executing it, and diligent follow up might not be as glamorous as talking about your latest leveraged small cap bet. It is a bit dour instead. But it's a bet that has the best odds of success in good times and times not so benign. With your money I wouldn't settle for anything less.

Indian Stock market for 17/10/2008

2008-10-16T20:25:00.000-07:00

AT the point Market is getting set for bounceback.

Nifty Pivot 3234
Supports 3369>3468>3603

Resistance 3135>3000>2901

Sensex Pivot 10462
Supports 10907>11232>11676

Resistance 10907>11232>11676

Nifty may try to open Flat.

ADVISE TO TRADERS AND INTRADAY -positive in 1st half and cooling off in later part.

ADVISE TO INVESTOR COMMUNITY - keep hunting for frontline blue chips at lower panic levels, buy is not advised again today.

13/10/2008 Stock To watch

2008-10-12T20:07:00.000-07:00

Here are the stock list for which you should lookout today

Powergrid
NTPC
Reliance capital
larsen and Toubro

further fall is expected in Realty sector.

Hold Dish TV for Long term.

Tuesday, 7 October 2008 Market

2008-10-06T21:33:00.000-07:00

The market has been falling for the last 2-3 trading sessions, so some kind of a technical bounce can be expected now.

The market looks weak, but the Nifty should hold 3600

The market has opened higher on Tuesday and is getting stronger

One can look at buying IT for trading purposes today

Inflation is expected to remain in double-digits till year-end

General Market Advice:

2008-10-05T20:15:00.000-07:00

1. Never chase a stock.

2. Buy when markets are in the grip of panic.

3. Only buy fundamentally strong stocks, which are undervalued.

4. Buy stocks grown in top line and bottom line over the past years.

5. Invest in companies with proven management.

6. Avoid loss-making companies.

7. PE Ratio and Growth in earnings per share are the key.

8. Look for the dividend paying record.

9. Invest in stocks for sure returns.

10. Stocks have been the high yielding asset class over the past.

11. Stocks are an asset class.

12. The basic property of any asset class is to grow.

13. Buy when everyone is selling and sell when everyone buys.

14. Invest a fixed amount each month.

3rd October Market

2008-10-02T19:32:00.000-07:00

it is possible to see Gap up opening today.

Real estate sector is oversold now so one can expect bounce back today.

Power secotor is going to zoom today. So good buy expected there. I would advice you to keep booking profit at regular interval.

HDIl, Reliance Capital, Larsen & Toubro is my pick for today.

Reliance power and NTPC is expected to boucnce back today.

Keep close watch on ICICI bank today.

01-10-2008 Market Update

2008-10-01T04:06:00.000-07:00

Since there is no clarity or direction in this market, it is best to wait and stay out, The market began on a weak note but stabilized to see a decent close today

Buy Hero Honda with a target of Rs 950-1000

Buy ONGC on declines with a stop loss of Rs 975 and target of Rs 1120,

Hold Nifty long with a stop loss of 3910 and target of 3980

Top Gainers A group
--------------------

+ Videocon Industries 222.85 +13.87
+ Satyam Computer 318.75 +7.47
+ Patni Computer Sys 190.85 +7.43
+ Gammon India 148.00 +7.13
+ JaiprakashAssociates 118.90 +7.02

Top Losers
-----------

+ KSK Energy Ventures 222.00 -6.74
+ Hind.ConstructionCo. 71.90 -6.68
+ Sintex Industrie 268.15 -5.36
+ JSW Steel 454.65 -5.32

inflation and home loans

2008-07-29T20:40:00.000-07:00

The finance minister's tax giveaways are what have saved tax-payers from the impact of inflation and higher home loan rates.

When Finance Minister Palaniappan Chidambaram completed his Budget speech on February 29, most tax payers were a happier lot because of the raising of income tax slabs, and the resulting reduction of the overall tax burden for everyone.

But in the four months since then, inflation has climbed into the double digits, reflecting an increase in the cost of both food items and fuel. Most banks have raised interest rates on loans by up to 0.75 percentage points.

"Though the FM had expected a rise in the inflation rate, even he would not have imagined the real numbers," says Madan Sabnavis, chief economist at NCDEX, the commodity exchange.

The tax benefits were quite significant. For a male taxpayer with an annual gross income of Rs 500,000 a year, after the eligible deductions of Section 80C (Rs 100,000) and 80 D (Rs 15,000), and after taking advantage of the higher tax exemption floor as well as the adjustment of tax slabs, the annual income tax liability would have fallen from Rs 74,160 to Rs 32,960, or by 55 per cent, yielding an extra cash in pocket of Rs 3,500 per month.

On the other hand, the inflation rate has risen by 5 percentage points in the last three months.

On top of which, home loan rates have risen by up to 0.75 percentage points. Someone with a home loan of Rs 12 lakh therefore finds that the equated monthly installment has risen by about Rs 500 per month.

The balance of these different elements still leaves our Rs 500,000 earner with a net benefit of perhaps Rs 2,000 per month or a little more (see table), though it would also be true that the value of his assets (house, mutual fund units, etc) would have fallen and left him poorer.

However, for people lower down the income ladder, the benefit-cost matrix works out quite differently - chiefly because the tax benefit they would have got would be less than Rs 3,500 per month, while the living cost increases would be broadly comparable.

If the home loan is for a smaller amount, it would mean a smaller increase in the EMI. For people with lower income levels, therefore, the net impact of the Budget and subsequent events may be broadly neutral, or in some cases even marginally negative.

The real losers therefore are those who have got no tax benefit (because they are below the tax-paying threshold) and who at the same time have had to cope with all the cost increases.