SHARE TIPS MINI 2 MAX .............Deepak

INDIAN FOREX TRADING

2010-03-01T07:45:00.000-08:00

Forex (short for Foreign Exchange) is trading where the commodity is currency.

The return for the investor is rather the relative exchange value of one currency against another currency. Therefore forex trading is always expressed in currency pairs such as us dollars and uk sterling or us dollars and euros.

A Beginners Guide to the Forex Markets and the Euro

We all have heard of the European Union's adoption of the euro currency. This radical change has had tremendous impacts on the various financial markets. For instance, the different countries that have begun using the euro have seen substantial increases in their currency profile strength. They each had exhibited weaker economies than they do now.

Simple Tips To Target Bigger Gains Instantly

Enclosed we are going to give you a simple tip that many forex traders ignore in their pursuit of profits but if you learn it, you will increase your profit potential and enjoy greater currency trading success.

If you want bigger forex profits now then read on.

If you have a forex trading strategy it should have one aim and one aim only -

Making bottom line profits

To do this you need to get catch and hold the big currency trends that offer you the big profits and have the odds heavily in your favour when you enter them - and they don't come around often.

These trades only come around a few times a year in each currency, so the rule is:

Cut down your trading and bet big on the trades that offer you the most favourable odds.

Where Most Traders Go Wrong!

How To Make Money In Forex

As you might already know, forex is an acronym for foreign exchange -- is the international currency market where money is being sold and bought. Forex certainly is a new and exciting way to make money in the huge global currency market.

Making money in forex is very similar to stocks, options, or futures. You will be provided with a list of currency pairs each is coming along with graphs which you can select and trade. You can sell (or short) if you expect the graph to go down and you can buy (long) if you expect the graph to go up.

How Can I Make Money in Forex Trading?

When you buy a currency in the forex market, you are actually doing two trades. You are selling one currency and buying the other. You have known what currency you are betting for/against, as opposed to the stock market where you only need to know one stock.

Unlike stock trading, most online forex firms don't charge commission. They make money by giving you a worse spread then they get and by charging you interest on margin. This spread is usually two or three pips (explained below).

Margins are huge in currency trading; you can easily be accepted for 200 to margin on-line. Some forex firms will give you up to 400:1 margin. To be honest, there is very little regulation in this industry, which means you can move $2,000,000 worth of currency with only $10,000 in your account. You can even open an account with as little as $300.

Profits in forex are measured in "pips" or "points." A pip is 1/1000 of dollar. For example if you buy the dollar (USD) against the euro (EUR), and it went in your direction from $1.300 to $1.299, you have made a 1 pip profit. On a $10k order at full margin (200:1), this is equivalent to $50 in profit.
How To Make Money In Forex

As you might already know, forex is an acronym for foreign exchange -- is the international currency market where money is being sold and bought. Forex certainly is a new and exciting way to make money in the huge global currency market.

Making money in forex is very similar to stocks, options, or futures. You will be provided with a list of currency pairs each is coming along with graphs which you can select and trade. You can sell (or short) if you expect the graph to go down and you can buy (long) if you expect the graph to go up.

How Can I Make Money in Forex Trading?

When you buy a currency in the forex market, you are actually doing two trades. You are selling one currency and buying the other. You have known what currency you are betting for/against, as opposed to the stock market where you only need to know one stock.

Unlike stock trading, most online forex firms don't charge commission. They make money by giving you a worse spread then they get and by charging you interest on margin. This spread is usually two or three pips (explained below).

Margins are huge in currency trading; you can easily be accepted for 200 to margin on-line. Some forex firms will give you up to 400:1 margin. To be honest, there is very little regulation in this industry, which means you can move $2,000,000 worth of currency with only $10,000 in your account. You can even open an account with as little as $300.

Profits in forex are measured in "pips" or "points." A pip is 1/1000 of dollar. For example if you buy the dollar (USD) against the euro (EUR), and it went in your direction from $1.300 to $1.299, you have made a 1 pip profit. On a $10k order at full margin (200:1), this is equivalent to $50 in profit.

How Much I Can Earn?

Virtually, the limit is the sky. As much as how long you trade and keep earning. Trading will be within 24 hours 5 days a week. How fast you can earn is depending on the volatility of the market. If it is very volatile (moving ups and down quickly), you probably can earn a lot of pips if you are lucky.

However, average earning for professional trader is 100 to 200 pips a day that is equal to 100% to 200% return on investment. George Soros, the heart of inspiration for every forex trader, made a history in September 22, 1992 when he bagged US$1 Billion and ruined the Bank of England. This called The Black Wednesday.

What Do I Need to Trade?

The first thing you need to trade is a broker. Register with any of them and they will provide you a software platform that equip with a list of currency pairs, graph, technical indicators free to use. The broker usually provides you free practices by providing virtual money for you to practice enhance your skills.

There are two schools of thought like in stocks about how to make money in forex trading. On one side you have the technical, which are basically charts and other statistical methods that used to try and guess the market. On the other side you have the fundamentals, which study things like countries domestic product, interest rates, economic output, etc. to try and forecast currency movements based on these criteria.

Of course the best answer is always in the middle, using a combination of graphs and charts along with real world knowledge of political events and economic statistics to make the market more predictable for you.

If you want to learn more about mainstream technical analysis tools, in my experience, the most honest person who teaches mainstream technical analysis in the best way is Peter Bain (Forex Mentor). Whether Peter trades himself, and whether Peter ever made money in forex is definitely questionable. But if you want to get good education and overview of many different mainstream technical analysis tools, I think Peter is good for that.

Is It a Risky Business?

Is there any risk involved? Yes. Everything has risk whether it is involve time, life, money, etc. Risk unfortunately can not be avoided. No absolutely not, that's impossible for everything. But as any other thing else you can minimize risk and increase profit, that's how to make money.

I feel so grateful and lucky to be able to trade forex full time. Not only is it fun, and I feel passionate about it, but it's also monetarily rewarding, and it gives me freedom to do it from almost anywhere in the world. I hope to be able to share some of this luck and gratefulness with you. And truly from the bottom of my heart and my being, I am wishing you tremendous success and abundance in forex or any other business you do.
READ MORE........
TOMMOROW

"Subscribe to Large Cap Recommendation Service

2010-02-12T22:51:00.000-08:00

You can sign up for StockSelect for juSo why are we doing this?

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This stock actually rallied after we put out a Sell recommendation!

We would like to point out that it is impossible to time the market, let alone the fact that someone can be perfect at it! We instead focus all our efforts on identifying stocks that offer an attractive investment opportunity as determined by our time-tested investment process.

When we do come across such a stock, we will tell you about it.

And when the same process tells us that the stock is over-valued, we will not hesitate to put out a Sell report, even though the market momentum is not in our favour!

From our experience we know that a disciplined investment process is far more likely to yield the kind of returns you and us are looking for than any other approach to investing.

Markets are correcting. What to do?

2010-02-12T00:20:00.000-08:00

So what should you do in an uncertain market like this?

The best thing will be to avoid selling the highest quality stocks in your portfolio for a fear of correction in their prices. Over time, good quality stocks bought at low valuations always go up in price. The only way to participate in their growth is by being invested at a level that does not cause you to lose sleep.

The worst seems to be over for the Indian IT sector. That is what we can infer from the performance of the top four IT companies during the quarter ended December 2009. These witnessed a sequential growth of 2% in their combined topline. And their profits grew by 6% QoQ.

As we have heard from these companies' managements, improving volumes coupled with stable pricing has infused a new confidence. Better customer sentiment emanating from previously plagued industries and geographies is also fueling new hopes.

However, when it comes to the stocks of most of the IT companies, valuations do not paint a rosy picture. With a sharp rise in stock prices over the last 9-10 months, most of the stocks from the sector are already factoring this recovery. Additionally, there is a looming concern of currency volatility impacting IT companies' margins going forward. Thereby it would be wise for investors to tone down their expectations from these stocks over the short to medium term.

Anyways, in a sharp turnaround of sorts, Indian markets were trading with gains at the time of writing. From being down around 265 points at one time, the BSE-Sensex recovered smartly. At the time of writing this, the Sensex was trading higher by around 100 points (0.7%). IT and realty stocks led this sharp upward move of the markets today. Other key Asian markets closed in the red, with losses seen in Hong Kong (down 0.6%) and Japan (down 1%).

As for the Indian markets, we at Equitymaster believe that after the sharp rise in stock prices in 2009, some uncertainty (correction) this year should be expected and not feared. Investors will do themselves a world of good by treating corrections as just a normal part of stock markets that will not do much in altering the long-term bull market that is India.

What would an economy be left with if the government encourages land prices to go up 10 times in 10 years? A property bubble would be the simplest answer. But for the Chinese economy, the problem is much deeper.

As per economist Andy Xie, more than 50% of the fiscal revenues of the Chinese state governments depend on the sale of land for new construction. Little wonder then that the banks have been induced to lend for purchases of the third and fourth houses by Chinese households. This has made new properties in China almost 100% overvalued, says Xie. Although the Chinese central bank has now resolved to tighten its monetary policy, the impact would be in terms of bringing down loans from 20 trillion yen last year to 17 trillion yen this year. Although significant in absolute terms, Xie believes that the tightening needs to get more aggressive. Otherwise, the Chinese property bubble could well go out of control.

Marc Faber is at it again. One of the most vocal critics of the US Fed's expansionary policies has once again argued that the US could default on its debt obligations or monetize debt and reduce it through massive inflation. "I'm convinced the US government will go bankrupt, but not tomorrow. And before they go bankrupt, they'll print money, and then you get high inflation rates, you have a depression and eventually they'll go to war," Faber is believed to have said in his most recent report.

And as a natural corollary to this scenario, Faber backs precious metals like gold as amongst his most favored investments. As he advices, "The risk is really not to own any precious metals at all."

Thus, while gold could be going through a bit of a lean patch currently, it might just be a temporary phenomenon and it is only a matter of time before it returns to its trend of being in a long-term bull market!

An interesting article in a leading business daily points out to the fact that it is not true that oil price deregulation will stoke inflation. If anything, it will lead to efficiency in consumption and a greater search for alternatives. In fact, there was a time in India when steel was controlled and oil was not. When steel was subsequently decontrolled, the market adjusted. Sooner or later, crude oil prices will start their march towards the US$ 200 per barrel mark. On the supply side, hardly any major oil reserves have been discovered in the last several years.

In our view, no matter which way you look at the future of crude oil prices, it is clear that prices of the commodity are headed upwards. The recent Kirit Parikh Committee recommendations will help us deal with that scenario. The question is - will politicians bite the bullet. After all, this is the third such committee. At some point, they will have too. Imagine the amount of subsidy burden if crude prices touched the US$ 200 per barrel mark. It would be wise for us to make systemic changes much ahead of that eventuality.

Today's investing mantra
"If you have trouble imaging a 20% loss in the stock market, you shouldn't be in stocks." - John Bogle

The lesson investors cannot afford to ignore

2010-02-08T03:38:00.000-08:00

Economists and authors have their ways of contradicting popular notions. And during times of a heated economic debate their contradicting views make a very interesting read. In yesterday's issue of 5 minute Wrapup we had quoted Nassim Taleb's view on US Treasuries. He says that if there is one trade that every human should have, it should be shorting US Treasuries.

Interestingly, Nobel Prize winning economist Paul Krugman has a pretty conflicting view on this. He believes that the US Treasuries would continue to find buyers. And that the federal budget deficit is not a looming disaster for the US economy. In an op-ed in The New York Times, Krugman writes that "contrary to what you often hear, the large deficit the federal government is running right now isn't the result of runaway spending growth." Rather, Krugman contends, more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, federal bailouts of financial institutions. We believe that whether or not the US Treasuries find takers, the US economy is certainly digging its grave by not paying sufficient heed to its burgeoning deficit.

Legendary hedge fund manager George Soros was quite emphatic in his endorsement of the US dollar recently. He's known to have said that the US dollar is not about to lose its status as the world's primary reserve currency anytime soon. This is because there is no attractive alternative to the US dollar currently. With the debt woes of European nations such as Spain, Greece, Portugal and Italy that have come to light recently, even the Euro's image, which was seen as the number-two choice, will now take a beating. And so, it seems like 'flight to safety' will continue to mean 'flight to the US dollar' for some time to come.

After the battering that US banks received due to the subprime crisis, one bank has decided to adopt a conservative stance. Even if that means foregoing US$ 1 bn in returns. We are talking about Wells Fargo, which bet US$ 1 bn on rise in US interest rates. The bank chose to cut down its bond holdings last year betting that the interest rates will rise. This is in stark contrast to what the other 3 biggies did, notably add on to their holdings. While Wells cut its bond portfolio by US$ 34 bn in the second half of last year, JPMorgan Chase, Bank of America and Citigroup increased their holdings by an average of US$ 35.5 bn.

The strategy is clear. Wells Fargo is in no hurry to make immediate profits and is waiting for the right time for the returns to accrue to them. On the other hand, the others are looking to make profits before the rate hike occurs. Therefore, will the rate hike happen anytime soon? Given that the US economy has displayed some signs of recovering, raising interest rates does seem like the right thing to do. After all, it is the prolonged expansionary monetary policy followed by the US Fed which sowed the seeds of the crisis in the first place. But with the US unemployment showing no signs of abating as of yet, raising rates does not seem a priority to the government. Therefore will Wells' long term strategy bear fruit? Only time will tell.

Lately, the primary market has been buzzing with a slew of IPOs and follow-on public offers. However, most of them, including NTPC's follow on offer, turned out to be a flop show. Almost none of the issues this week managed to garner significant interest from retail investors. As institutional investors saved their day, they managed to get fully subscribed. Most experts attribute the poor performance of IPOs to very high valuations. There are others who consider negative cues from global markets responsible for the fiasco. All said and done, given the volatility in the secondary markets, government's disinvestment plans could certainly run into rough waters. It would be most prudent for the government to price the issues at reasonable valuations rather than get carried away by the prospects of milking its stake in the PSUs.

With the European crisis taking its toll on global markets, benchmark indices across major markets saw declines this week. Asian and most European stocks were amongst the worst hit. There was no escaping the selling, even for India. Concerns that some European nations may be on the verge of defaulting on their debt payments was on top of investors' minds. India's benchmark index, the BSE-Sensex ended lower by about 3.5%, making it amongst the top losers.

investing mantra
"If you can find a company that can get away with raising prices year after year without losing customers (an addictive product such as cigarettes fills the bill), you've got a terrific investment." - Peter Lynch

Markets are correcting. What to do?

2010-02-08T03:34:00.000-08:00

Anyways, in a sharp turnaround of sorts, Indian markets were trading with gains at the time of writing. From being down around 265 points at one time, the BSE-Sensex recovered smartly. At the time of writing this, the Sensex was trading higher by around 100 points (0.7%). IT and realty stocks led this sharp upward move of the markets today. Other key Asian markets closed in the red, with losses seen in Hong Kong (down 0.6%) and Japan (down 1%).

As for the Indian markets, we at Equitymaster believe that after the sharp rise in stock prices in 2009, some uncertainty (correction) this year should be expected and not feared. Investors will do themselves a world of good by treating corrections as just a normal part of stock markets that will not do much in altering the long-term bull market that is India.

What would an economy be left with if the government encourages land prices to go up 10 times in 10 years? A property bubble would be the simplest answer. But for the Chinese economy, the problem is much deeper.

As per economist Andy Xie, more than 50% of the fiscal revenues of the Chinese state governments depend on the sale of land for new construction. Little wonder then that the banks have been induced to lend for purchases of the third and fourth houses by Chinese households. This has made new properties in China almost 100% overvalued, says Xie. Although the Chinese central bank has now resolved to tighten its monetary policy, the impact would be in terms of bringing down loans from 20 trillion yen last year to 17 trillion yen this year. Although significant in absolute terms, Xie believes that the tightening needs to get more aggressive. Otherwise, the Chinese property bubble could well go out of control.

Marc Faber is at it again. One of the most vocal critics of the US Fed's expansionary policies has once again argued that the US could default on its debt obligations or monetize debt and reduce it through massive inflation. "I'm convinced the US government will go bankrupt, but not tomorrow. And before they go bankrupt, they'll print money, and then you get high inflation rates, you have a depression and eventually they'll go to war," Faber is believed to have said in his most recent report.

And as a natural corollary to this scenario, Faber backs precious metals like gold as amongst his most favored investments. As he advices, "The risk is really not to own any precious metals at all."

Thus, while gold could be going through a bit of a lean patch currently, it might just be a temporary phenomenon and it is only a matter of time before it returns to its trend of being in a long-term bull market!

An interesting article in a leading business daily points out to the fact that it is not true that oil price deregulation will stoke inflation. If anything, it will lead to efficiency in consumption and a greater search for alternatives. In fact, there was a time in India when steel was controlled and oil was not. When steel was subsequently decontrolled, the market adjusted. Sooner or later, crude oil prices will start their march towards the US$ 200 per barrel mark. On the supply side, hardly any major oil reserves have been discovered in the last several years.

In our view, no matter which way you look at the future of crude oil prices, it is clear that prices of the commodity are headed upwards. The recent Kirit Parikh Committee recommendations will help us deal with that scenario. The question is - will politicians bite the bullet. After all, this is the third such committee. At some point, they will have too. Imagine the amount of subsidy burden if crude prices touched the US$ 200 per barrel mark. It would be wise for us to make systemic changes much ahead of that eventuality.

Today's investing mantra
"If you have trouble imaging a 20% loss in the stock market, you shouldn't be in stocks." - John Bogle

What to buy when the markets correct?

2010-01-18T06:01:00.000-08:00

» What can lower Indian markets' dependence on FIIs
» Why is Jim Rogers hot on commodities?
» IEA expects oil demand to recover in 2010
» PSU divestment to get clarity by March
» ...and more!!

So if you are also one of those, and are expecting stocks to correct, what are you doing now? What about preparing a watch list of stocks you'd buy once the correction really happens?

Indian markets have made a huge recovery from their March 2009 lows. While we don't think they're anywhere near bubble territory, good values have become harder to find. Does that mean you should stop researching for new stock ideas? Not really!

What you rather need to do is make a list of good quality stocks - ones with good operating margins and return on equity, manageable debt levels, strong growth prospects, and selling expensive. In other words, you must prepare a list of strong companies worth buying if the markets crack.

One of the fundamental rules of investing is that great companies, even if bought at high valuations, don't always make great investments. Take Infosys' case. The company has multiplied profits 20 times over the past ten years. But the stock has gained just around 2.5 times during this period. That's because investors were paying too much for the company's prospects during the dot-com bubble.

It's very important to buy great companies only at the right prices. The next correction can give you that opportunity. Are you preparing yourself with a good watch list?

Data Source: RBI

Even after so many years into existence, Indian stock markets are still largely driven by FII sentiment. And this tends to hurt sometimes, and hurt big. Take the case of the recent financial crisis. India's fundamentals were far better than the developed world. And still its stock markets came in the firing line. Needless to say, FIIs did not figure out India's fundamentals properly. And it was mostly the smaller investors who paid the price for it. This may not be an isolated case though. Similar situations would play themselves out again and again as long as FIIs remain kingmakers.

An article in Financial Times has perhaps a solution to this problem. It correctly argues that the time has come for India to kick-start a process whereby equity mutual funds could overtake bank deposits in a few years time. Since India has a very high savings rate, the gush of liquidity that would flow into the equities as a result of this transition would certainly make the Indian middle class and not FIIs the primary drivers of the market.

Plus, we also have the benefit of learning from the experience of countries like US as to what the best and worst practices could be and hence, make the entire exercise even more beneficial to investors. As the article rightly concludes, there are indeed risks, but even the prize, if we could avoid western mistakes, would be great. And only then, the Indian stock markets could be called as wealth creators in the true sense of the word.

Anyways, Indian markets had a strong start to this week. The BSE-Sensex was trading 75 points (0.3%) up at the time of writing. Mid and small-caps also had their day in the sun. Indian markets were in fact the best performers across Asia. Other gainers included China (up 0.4%) and Singapore (up 0.3%). European markets have started on a mixed note.

After last week's fall, gold prices have started this week on a positive note. An ounce of the yellow metal is currently trading at US$ 1,134 an ounce, up by US$ 4 over last Friday's close.

One of the biggest economic worries going forward is inflation. Simply put, the huge amount of cash that has been pumped into the economic system will chase all asset classes. And this includes commodities. Add to that, the economic recovery has meant the demand for basic commodities is recovering rapidly.

As per the International Energy Agency (IEA), global oil demand this year will reach the highest level since 2007. After falling for the last two years, consumption will be expected to rise to 86.3 m barrels per day. We are not surprised about predictions of higher crude oil demand. The lifestyle of the developed world is dependent on crude oil. And emerging nations are also on their way towards that lifestyle!

Data Source: BP; Note: 2010 demand forecast is from IEA

Investors are keen to know where various economies are headed. The quality and substance of the economic recovery in major countries around the world is a much debated topic. And justifiably so! After all, the performance of one's investments depends on the same in a big way over the short term.

But there is one discerning investor who has carefully chosen an asset class that will perform well in either scenario. This class of assets, according to him, will perform well if economies recover, and will also perform well if they don't!

The asset class is commodities and the investor is none other than Jim Rogers. According to him, stock markets are up a lot in all emerging markets including India. Thus he is not investing in them currently, but is in fact just sitting and watching how things are panning out.

But Rogers' attitude towards commodities tells a different story. In his words, "The way I am playing is mainly with commodities because if the world gets better they will get better and if the world economy doesn't get better then most stock markets are going to suffer. It's not necessarily true of commodities, if the world economy does not get better. In fact if the world economy does not get better they are probably going to print even more money. Hence, commodities will be the place to be."

Pretty convincing argument, isn't it?

India's PSU divestment picture will get clearer by March. This is if one were to go by the words of Sunil Mitra, the disinvestment secretary. In an interview with a business channel earlier today, Mr. Mitra clarified that the government will first focus on listing unlisted profit-making companies.

Anyways, one of his statements that was intriguing was - "Availability of good-quality stock in the market will mop up some of the surplus liquidity, which is presently available and which will therefore help in stabilization of markets."

Well, while some PSUs that are on the block might be good companies. But whether they'll be good stocks (valuation wise) is what investors need to decide. Not the government!

Today's investing mantra
"There's no reason we should become fearful if a stock goes down. If a stock goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month." - Warren Buffett, 2008 Berkshire Hathaway shareholders meeting

Can this asset of the decade go higher still?

2010-01-03T06:30:00.000-08:00

Wish You A Very Happy & Prosperous New Year! >Will gold turn out to be the asset class of choice in the next decade as well?
» S&P 500 could jump 200%, says Faber
» Value investing has given killer returns in India
» Corporate India on improvement path after Satyam
» ...and more!!

One of corporate India's worst scams seems to have taught managements a wise lesson. Or so it seems. Internal controls have improved in corporate India since Satyam fiasco came to light. This is if one were to go by DNA Money's interview with Porus Doctor. Mr. Doctor is a partner with Deloitte India, one of the auditors of the government-appointed board of Satyam. He also believes that independent directors need to invest more time in companies they direct. As he says, "Two hours in a quarter in a meeting in a board does not necessarily give them the right equipment to direct company affairs."

We at Equitymaster believe that independent directors are not the only ones to blame for the Satyam fiasco. Look at the evaluation systems that boards, auditors, credit rating agencies and bankers apply to judge companies. You will find glaring loopholes! The role of companies must be to find creative and productive ways to help build societies. Frauds like Satyam and its chairman is definitely not what we want.

Value investing works and works big time! Numerous studies have proved how value investing - a method of creating a portfolio of stocks that are trading at the cheapest valuations when measured on conventional valuation parameters like price to book value and price to earnings - have given market beating returns over a long-term period. And what's more, the same approach has given Indian investors stellar returns in the current Bull Run.

As per DNA Money, companies from the BSE 500, which had single-digit P/Es during March 2009, when the market was trading at its lows of the most recent bear market, have on an average, tripled investor wealth since then. This is way better than the Sensex, which managed to gain a little over 100%. Infact, some companies have risen as much as nine times over March lows, adds the article. Clearly, if one follows the simple strategy of being fearful when others are greedy and greedy when others are fearful and invests in companies with sustainable business models, he may not learn any other investing lesson in his entire lifetime and still achieve better returns than most financial experts.

The S&P 500, the US stock market index, could jump 200% in the next decade, says the maverick investor Marc Faber, in his most recent Gloom, Boom and Doom report. "I suppose this will happen over the next 10 years or so. Eventually, the U.S. government will have no other option but to print massively to finance the growing fiscal deficit", observes Faber. Certainly. If the US Federal Reserve keeps providing the economy with truckloads of cash, the economic activity is likely to pick up, thus giving a boost to the stock markets as well. But please bear in mind that there is no such thing as free lunch in economics. The US dollar could also depreciate appreciably in the coming years, making most of the gains that could come from the S&P 500 nearly worthless. Hence, for an US investor, gold and other hard commodities could still prove to be a better investment.

Fresh into 2010, many experts are positive on global economic recovery and rise in asset prices. And then many aren't. One amongst them is Paul Krugman, the Nobel Prize winning economist and a noted writer on economic matters. In his latest post in the New York Times, Krugman sees China as posing a major risk to world (mainly the US) economy in the current year.

With the dragon nation keeping an almost fixed currency, it puts other exporting nations on a negative footing. This is because if China were to free its currency, the same would appreciate on the back of huge foreign capital inflows that the country absorbs and its huge trade surplus. This would be detrimental to its exporters who otherwise benefit from a pegged currency. And with its currency pegged, manufacturers in other nations (including the US) will never be able to compete against it. This would continue to impact their economies that are showing initial signs of improvement after last two year's crisis. Krugman's solution? China will have to appreciate its currency otherwise it faces the prospect of increasing protectionism.

Stockmarkets across the world continued to be in a celebration mood as majority of them ended the week on a positive note. While the Indian stock markets were not amongst the top gainers this week, they did manage to end the week on a positive note. India's benchmark index, the BSE-Sensex ended with weekly gains of 0.6%. Last week, the Indian markets were amongst the top gainers with the BSE-Sensex ending higher by about 3.8%. The US stock market was amongst the few major markets to end the week on a negative note, as it edged lower by around 1%. Amongst commodities, while gold continued to be in a price correction mode, crude oil advanced nearly 2%.

Source: Yahoo Finance, Kitco, CNN Money

Weekend investing mantra
"The most common cause of low prices is pessimism. We want to do business in such an environment, not because we like pessimism, but because we like the prices it produces." - Warren Buffett

What will you buy in 2010?

2009-12-31T22:38:00.000-08:00

Today We discus
» Two market gurus' views coincide once again
» World credit market shrinks for the first time in 15 years
» India's largest bank says it will not hike interest rates
» SEBI moots punishment for IPO scamsters
» ...and more!!
Asset alocation works. Ask those who were 100% invested in equities in 2008. Their portfolios were shattered as the year ended. However, those with a proper allocation between stocks, bonds, gold, real estate, and cash (for emergency needs) were a better lot.

Now those who talk about asset allocation generally end the discussion at these various asset classes. However, equity investors would do well to go a step even further. They can further allocate their equity portion between large caps, mid caps and small caps. While large caps are the safest of the lot, mid and small caps while being risky can generate the best returns over a long run. So a proper blend of these different categories of stocks can help you generate good yet stable returns over a 5 to 10 year period.

Now as we move into 2010, investors in small cap stocks must be the happiest lot. This is on the back of about 125% returns of BSE-Smallcap during 2009. This is higher than the returns recorded by the BSE-Midcap (106%)
So, where will you be investing in 2010?

Large caps? Mid caps? Or small caps?

Well, the answer is - it depends on your long-term needs and risk appetite. But purely as a matter of prudence, one looking to build a portfolio from a 10 to 15 years perspective can have a 60-70% allocation to large caps and 10-15% each to mid and small caps... and quality stocks in each of these categories.

Treat this allocation as just a guide and, we repeat, allocate your equity portion using your understanding of different kinds of companies across different levels of market cap. Bloomberg reports that both Marc Faber and Barton Biggs are bullish on the US dollar and US equities in the New Year. Interestingly, their views are coinciding once again. Last time they agreed upon something, the stock market witnessed one of its best rallies in decades.

"History would suggest that after such a severe economic shock like we've just had that the odds are that we're going to have a pretty good burst of growth in 2010, 2011", Biggs is believed to have said. The US Fed will have to inject more liquidity into the system, spurring inflation that prompts investors to shift assets to equities from treasuries and cash, added Faber.

The arguments that both these gentlemen have put forth indeed sound logical. But even they would be willing to agree that their predictions are based on shaky grounds. The US economy is extremely vulnerable right now and it won't take a pretty big fire to raze down the recovery process. A tiny-winy spark would do just fine. Hence, any investment based on the thesis that the US would recover may have to be undertaken with caution.

Are you one of those who had applied in 21 IPOs that opened between 2003 and 2005 and were not allotted even a single share? If so, you may be in for a windfall gain. That is because if you haven't been allotted any shares in the IPOs during that period, you may have been a victim of a devious scam. Between 2003 and 2005, a group of investors opened thousands of demat accounts, some even in fictitious names, and cornered shares reserved for retail investors. In some cases, they even used photos of random people, procured from photo studios for the purpose. The IPO scam related to 21 IPOs, including for offers like NTPC, TCS, Jet Airways, IDFC, YES Bank, Suzlon Energy and Shoppers' Stop.

However, a SEBI committee that was set up to suggest ways to compensate those investors who were affected by the IPO scam has said that money recovered from the scamsters should be distributed among the affected IPO applicants. The committee has now also suggested ways to recover the gains from the scamsters and distribute the same among those affected by the scam. Further, the amount which is the difference of closing price of shares on the first day of listing/trading on the NSE and the IPO price may be considered for distribution. However, the best part of this is not even the money that the investors will receive. It is the clear signal that will go out to market manipulators who may have such schemes up their sleeves to not mess around with retail investors anymore.

Here's a shocking statistic! A firm called Mizuho Securities has reported that the world credit market has shrunk for the first time in 15 years. This means that for the first time in 15 years there have been more firms who've either repaid debt or stayed away from it as compared to the ones seeking debt. This seems shocking because it has happened at a time when the US Fed has perhaps had the biggest expansion in its balance sheet.

What explains the anomaly? Simply put, the money that has been lent to the US banks is not travelling further and is stuck in the system. And this is hurting economic growth. People have become so risk averse that even though there is plenty of liquidity in the system, neither the firm nor the US consumer wants to spend as freely as before. And this is the biggest challenge that Team Ben Bernanke is likely to face in its effort towards reviving the US economy. The confidence of an average American has been badly scarred and unless that is restored, no matter how much money comes their way, they are not likely to return to their old ways in hurry. On second thoughts, they might not return at all!

Looks like there is a revival in demand for luxury homes and villas. And real estate players are quickly looking to capitalise on this trend. Last year, the scenario was very different. Due to the slowdown, demand for villas and bungalows plunged severely, affecting property developers. The focus then shifted to affordable housing in order to bolster sagging volumes as premium projects were put on hold. Now, many real estate players are set to launch new projects in the premium segment. Large developers such as Unitech, Parsvnath and Jaypee Greens have all launched villa projects in the last two months to tap demand for such properties.

Even in Mumbai, where property prices are very expensive by any yardstick, developers are looking to build such luxury homes on the periphery of the city where the land prices are low and thus the potential of healthy margins high. Having said that, it cannot be said with certainty that the trend has entirely shifted towards such homes and one will have to wait for a few more months before any real picture emerges. At the end of the day, we believe that property prices will remain a contentious issue not just for premium properties but also for affordable houses.

SBI Chairman, Mr. OP Bhatt has good news to cheer you up for the New Year. The largest public sector bank in India has no plans of increasing the interest rate on loans at least for next six months. The prime banker believes that the existing surplus liquidity and the increasing number of bank deposits allow the banks to defer any plans of an interest rate hike. The bank's supply and demand situation favors continuance of existing rates.

The banker also expects the government to continue with the stimulus package for some time till the desired growth in credit and overall economic activity improves. We expect the other banks to resonate his views. After all, it was SBI which pegged its home loan rates at 8% early this year. The entire banking system followed suit. The result? Builders and buyers came back on the scene and demand revived for steel, cement and construction businesses. This gave a big boost to the economy.

Meanwhile, the markets are trading lackluster currently with the Sensex down a marginal 30 points at the time of writing. The Mid cap and Small Cap indices however, are witnessing a positive bias. While Asian markets closed mixed today, weakness is being seen among European indices currently.

Today's investing mantra
"We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely." - Warren Buffett

You can definitely expect these in 2010

2009-12-31T22:32:00.000-08:00

In this issue:
» 2010 to witness 18 public sector IPOs
» Sensex post the highest annual gain in 18 years
» Emerging markets still have a upside says Mobius
» A country on the verge of default
» ...and more!!
Predictions are tricky business. But this is a prediction that is almost sure to come true. We are going to see a rush of public sector initial public offerings (IPOs) next year. As many as 18 public sector companies are expected to debut on the bourses in 2010. In fact, the government does not want a gap of more than three weeks between any two IPOs. 2010 will kick off with IPOs and follow-on offerings of NTPC, NMDC, Satluj Jal Vidyut Nigam and Rural Electrification Corporation.

The reason for the rush to the primary market is not hard to understand. The government needs money. For its social sector programmes and to bring down the burgeoning fiscal deficit. Given the liquidity in the system and the RBI not showing any signs of tightening it, we believe the stage is set for the government to access it through the stock markets.

Another interesting set of IPOs will emerge from the life insurance sector. At least a few of the 23 players in the industry are likely to access the markets after the regulator has halved the pre condition of 10 years of business to 5.

Interestingly, a key challenge for both the PSU and Insurance IPOs will be disclosure of information and governance issues. As and when they come, we will be looking at them on a case by case basis, especially with regard to valuations. We do believe a greater variety of listed companies provides greater depth to the markets and more choice to investors. As such, we look forward to the issues.
In the decade gone by, many asset classes hogged the headlines - be it power, real estate or commodities. But in terms of sheer impact, few could match the rally that crude oil prices went through on their way up to US$ 147 per barrel in July, 2008. Predictions were made of even higher prices, which were proven incorrect. When prices crashed many said, they won't recover. Wrong again. As the chart of the day shows, on the whole crude oil prices have marched upwards through the decade. The key reason being the incremental demand from China and India. Over the long term, and the next decade qualifies as long term, we believe that crude prices will trend upwards. The average Chinese and Indian is only beginning to ramp up his energy usage. And we have not had a giant oilfield discovery globally in several years. The short term blips apart, oil prices will head in only one direction - upwards.

Emerging markets continue to have potential for upside. But not without substantial corrections along the way. These corrections could be even as much as 20%. As we look towards a new year, this is how Mark Mobius, chairman of Franklin Templeton Investments, chose to summarise his views about emerging market stocks. That said, the overall global optimism for the Indian market is quite evident. In a survey by The Association of Investment Companies, 35% of money managers chose emerging markets as the region that will perform best next year, making them the No. 1 choice. But if you plan to be a net buyer of stocks in the coming year, this might not be such a good thing for you after all. As a wise man once said, it is optimism that is the enemy of the rational buyer.

What is the biggest risk that the global economy faces in 2010? Nine out of ten experts would say a sovereign default. And rightly so. After all, with countries piling on so much public debt, the risk that one of them would default is indeed on the higher side. Because of the structural imbalances that exist in the region, one of the EU countries would certainly be amongst the top contenders. Already, a huge shadow of doubt has been cast on Greece's interest servicing abilities. The country was downgraded by ratings agencies recently.

Other laggards in the EU are not in the best of health either. And time seems to be fast running out. EU heavyweights like Germany, France and other Northern European countries are showing signs of economic improvement. Thus, if the trend persists, the European Central Bank (ECB) may even think of raising interest rates. However, this may work to the enormous disadvantage of the fringe players like Greece who may want to continue with the stimulus a little longer. Thus, what happens once ECB starts raising rates would be one of the key events to look out for in the New Year. Needless to say, if any of these economies come under strain, the global financial system might also come under strain. Especially given how integrated it has become in recent years.

Troubles for financial institutions in the US do not seem to be over yet. While talks of a recovery abound, the US government is injecting another US$ 3.8 bn into GMAC Financial Services to help cover mortgage losses. This bailout makes the US government the majority owner of this auto and home finance company which is one of the largest in the US. GMAC has been saddled with mortgage assets which account for about a third of the company's US$ 178 bn balance sheet and this is expected to be a major deterrent to its profitability. This development is a grim reminder of the fact that the effects of the subprime crisis are far from over. Many of the biggies had been bailed out last year while some of them chose to repay this government money as their performance improved slightly. But the GMAC development could still mean that there are some skeletons in the closet.

According to China's foreign exchange regulator, while the dollar will continue to remain the country's main reserve currency, the country is looking to diversify its reserve currency holdings to spread out risk. It is obvious that China which holds the world's largest currency reserves is worried. The cause is the eroding worth of the greenback due the country's ballooning debt. This is the reason why the country which holds the largest amount of dollars outside the US is cautiously moving to other currencies. Another thumbs down to the confidence in the US economy.

Indian markets traded today, the last day of 2009, on a strong note. The BSE-Sensex was trading with gains of around 180 points (1%) at the time of writing. Mid and small-cap stocks were also trading in the positive. With today's performance, the Sensex will be closing 2009 with its biggest annual gain in 18 years. If you are wondering how long that is, most of the young investors and analysts of today were just into primary school then! Now that's a pretty long time!

All in all, 2009 has been a truly exciting for Indian investors . From the depths of fear in March, sentiment moved to the heights of optimism. Now as we move into a new year, caution (though with a tinge of hope) is the buzzword.

As you assess your portfolio's performance during the past year and also some lessons that the year must have taught you, we hope 2010 brings you a lot of good times to buy quality stocks to help build the portfolio of a lifetime.

Today's investing mantra
"In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockroach in the kitchen." - Warren Buffett

Rs 6 trillion stimulus may never be withdrawn

2009-12-28T03:25:00.000-08:00

In this issue: Indian companies favour QIPs over foreign debt India may soon lose its dominance in voice based BPO CEOs of bailed out firms are still earning billions Navratnas set to become "Maharatna' ...and more!!
That India has one of the best demographic advantages heading into the next couple of decades is now perhaps well known and extensively documented as well. And when you talk about this advantage, one tends to think about higher productivity nine times out of ten. What escapes one's attention is the fact that this advantage coupled with an age old Indian tradition is also capable of injecting some pretty big dosages of economic stimulus for a long, long time to come. And this is no ordinary stimulus.

As per a leading daily, even a conservative estimate of this stimulus could make it the fourth largest contributor to India's GDP. The stimulus that we are referring to is nothing but a collective muscle of the big, fat Indian weddings. With nearly half of the country's population below the marriage worthy age of 29, the wedding scene in India is likely to be a huge beehive of activity for many years into the future. And since a good part of an average Indian's wealth is spent towards wedding, this could easily translate into an economic stimulus to the tune of Rs 2 trillion to Rs 6 trillion. Thus, while experts may play a guessing game over whether India's Finance Minister may roll back its economic stimulus or not, this is one stimulus that they can happily count upon year after year.
Funds raised by Indian corporates through depositary receipts have jumped from US$ 100 m in 2008 to about US$ 3.4 bn this year. Thanks to relaxed regulations and cheap liquidity abroad, money raised through external commercial borrowings was to the tune of US$ 9.4 bn until November 2009. But do not delude yourself into thinking that this route has been the most favoured among Indian corporates. Infact, the mode of fund raising that has caught the fancy of India Inc. are QIPs. There are many reasons for the same but the one that tops the list is the volatility in the rupee dollar exchange rate. A shift towards rupee-denominated funds and easing of QIP issuance are some of the other factors that have tilted the balance in favour of QIPs. Not just that, by opting for QIPs, companies can get larger amounts sanctioned by the board and raise the money in parts. Fathom this. The private sector raised Rs 325 bn through QIPs this year. This resulted in mark-to-market returns of about 15.8%, amounting to Rs 377 bn. Volatility has persisted in the currency markets for some time now. Therefore, it is hardly surprising that stability in raising funds seems to be the buzzword now.
World's back office, that's what India has been proud to be called for years now. A multitude of Indian youth all sitting in fancy offices, talking to clients around the world. This has been a typical scene of the India's sunshine BPO industry. But India's dominance in the world's voice based BPO market is slowly phasing out. Philippines, one of the largest English-speaking countries in the world, is quickly gaining prominence, challenging India's leadership position in voice-BPO. The country is finding favor because of better English accent as well as a time-zone which is more suitable for the US which accounts for 50% of the world's BPO. Not to forget the age old Indian problem of inadequate infrastructure. Arrangement of transport and security for employees, power backup in offices to take care of frequent power cuts etc are everyday problems for the BPO setups. Given the Indian English skills, the clients ignored these issues. But no longer!

Philippines, which is better placed with all this infrastructure, is offering better voice services at the same price. No wonder then companies are setting up shops there and India is losing thousands of BPO jobs. An attrition rate of over 25% is also of not much help. We believe that this complacency with respect to the quality of services as well as infrastructure will not do any good to the Indian BPO sector. It is high time efforts are made to contain the exodus of clients to other destinations.
Freddie Mac and Fannie Mae received a drubbing last year when the global financial crisis escalated. What is more, the companies' performance this year too has not been much to talk about. And yet, the CEOs of both these companies are likely to pocket a salary of around US$ 6 m for 2009.

The credit crisis had resulted in both Freddie and Fannie needing a gargantuan US$ 111 bn in taxpayer money to keep their heads above water. Not just them, the top honchos of some well known financial institutions had pocketed big pay packets despite the fact that they were bailed out by the government. Following intense criticism, the Obama administration had to put a cap on the salaries that top executives receive. Since then, many of these companies have opted to pay back the bailout money so as to escape the salary constraints placed on them.

As per the board of Freddie Mac and Fannie Mae, it would be difficult to attract people to head these two troubled companies. And in that sense the high pay packages are justified. But both the CEOs then would have to reverse the fortunes of their respective companies to justify the salaries accorded to them.

Indian government owned enterprises are not particularly known for good business decisions. That is because they hardly have any independence in decision making. Most of their corporate decisions are the outcome of the government's social welfare and political inclinations. Be it PSU oil marketing companies or PSU banks, most of their books are riddled with subsidies and the resultant losses thanks to the government's generous streak. However, few PSUs have managed to overcome this limitation and are set to reap the benefits of the same.

As per a leading daily, 3 ‘Navaratna’ PSUs, already the cynosure of the government's eyes thanks to their competitiveness to private counterparts, are set to become ‘Maharatna’. What this means for them is that they get greater financial and operational autonomy. The entities to be bestowed this honour are - ONGC, SAIL and NTPC. Of the 18 Navaratnas, these 3 met the stiff criteria set by the government. This included a three-year track record of annual net profit of over Rs 50 bn, net worth of Rs 150 bn and turnover of Rs 250 bn, besides being listed entities on the bourses. The coveted status empowers these entities to take investment decisions up to Rs 50 bn as against the present Rs 10 bn limit without seeking government approval.

The Indian benchmark index - the BSE-Sensex ended the week higher by 3.8%. This was after a dismal performance last week when the index saw a decline to the tune of 2.3%. As far as global markets are concerned, the general optimism that the global economic recovery is strengthening seems to have spilled over to markets across the world. The UK markets led the gains this week, with its index ending higher by about 4%. After India, next in line were Japan and France, which ended higher by about 3.5% and 3.1% respectively. Most markets were propped up by technology and commodity stocks, which rose on the perception of a better outlook for a recovery. After last week's dismal performance, the Chinese and Brazilian markets once again found themselves at the bottom of the heap, rising only 0.9% and 1.2% each.

Weekend investing mantra
"People calculate too much and think too little." - Charlie Munger

One big lesson for investors from 2009

2009-12-28T03:19:00.000-08:00

» Don't buy gold for profits, but for protection
» Lessons from Buffett's buyout of BNSF
» Taxpayers to pay for India's legal reforms
» Prospects are good for emerging markets. But so are the risks!
» ...and more!!
2009 was an extremely strange and trying year for stock market investors. It started with 'fear' as the buzzword. Stock prices across the world were on their way down. Investor dumped their holdings as if the world was approaching the death of equities. Now as we close in on 2009, fear seems to have vanished. Instead, greed of more returns in 2010 has emerged as the key underlying theme.

So, what according to you has been the biggest lesson one can learn from 2009?

We believe it is that the investors would be doing themselves a great disservice if they continued to believe in the Efficient Market Theory at all times! Simply put, an 'efficient market' is nothing more than the statement that stock prices fully reflect all available information. But the experience of 2009 clearly suggests that markets could well be highly inefficient.

After all, if markets were efficient, everyone would have known of the rally that was about to begin in March 2009. But everyone didn't! If markets were efficient, we wouldn't have seen extreme despair and then extreme optimism in a space of just a few months. But we saw that!

As we stand now, the world seems a much optimistic place, especially as far as stock market investing is concerned. The markets are on their way up and business channel experts predict even better times. (remember that these very people were predicting doom at the start of this year!).

So, are the markets right this time around? We don't know. But going by history, it's always better to be cautious when your neighbour and even his aunt are all greedy about 'more returns from stocks in the next few months'!
There were many who weren't convinced that Warren Buffett made a smart deal when he acquired BNSF, one of US' biggest railroads last month. After all, railroads are dull, regulated businesses and have a history of poor return on shareholders' funds. Hence, why would someone as astute an investor as Buffett waste his money on such firms? However, Buffett is not one of the most astute investor of our times for nothing. In an exhaustive discussion with BNSF's CEO, he has offered a point by point rebuttal of all the arguments that were stacked up against the deal.

Buffett reasoned that unlike a lot of other businesses that came and went, US railroads are not likely to go anywhere and they are going to remain right there in the US. Furthermore, he argued over a very long term period, the US is going to grow and is going to have more people, more goods moving etc and hence, rail is the logical way for many of those goods to travel. Buffett was also aware that railroads cannot be something like Coca Cola or Google because they are public businesses and hence, have to be regulated and price controlled but he appeared pretty confident that railroads have transferred themselves into highly efficient businesses and over the long-term, his investment in BNSF should do just well.

Any lessons for aspiring investors here? Indeed. Think long-term, study closely the dynamics of industries that are low return and not very popular currently but still have huge competitive advantages and bet big when the turnaround happens. Budding investors would do a huge favor to their returns if they keep these lessons very close to their heart.

When a person writes a book that becomes the biggest-selling financial book in history and is the editor of a newsletter that serves more subscribers than any other financial-advisory newsletter in the world, his views indeed need to be taken seriously. We are referring to Howard Ruff, the legendary author of the bestseller, 'How to prosper during the coming bad years'.

In a recent newsletter, Ruff has argued that the US dollar is in its death bed and hence, when you buy gold and silver, you are not just looking for a profit but you are looking for protection against the decline of the dollar. He further reasons that Fed and the administration are determined to drive down the dollar, so why on earth would someone want to invest in US dollar and not the precious metals. So, here's another financial guru, trying to drive home the importance of staying invested in precious metals such as gold and silver.

Stock markets around the world have witnessed a spectacular rally in 2009. What is more, the buoyancy in BRIC markets in particular stands out the most. As reported in Barrons, EPFR Global has highlighted that inflows into emerging-markets equity funds are at all-time highs of US$ 75 bn so far this year. This is up from US$ 54 bn in 2007.

The reason for the same is not hard to find. Developed countries have been mired in recession for some time now. Hence the focus has shifted to emerging economies where growth is expected to far exceed that in the rich nations.

However, the real question is whether emerging economies have witnessed any meaningful growth in corporate earnings. The answer is - no! For all the profit potential of these emerging nations, some two-thirds of their equity outperformance in recent years has come not from earnings growth but from expansion in price-to-earnings multiple and a weaker dollar. Nobody doubts the long-term growth potential of the emerging markets. But we believe that this growth has a certain price attached to it. And at present, this price seems to be running ahead of fundamentals.

The government of India is planning some great reforms for the country's legal system. It aims to expedite the resolution of 30 m cases that are pending in different courts of the country. A great step indeed, right?

However, before getting excited, you must note that you might have to pay for such an initiative. The law ministry is planning to setup an independent body having wide range of powers, fully funded by the centre. It might happen that later, it might be funded by an additional tax applicable to all the citizens of India.

So, just like the educational cess we pay as part of our income tax now, we might have to pay the 'legal reform cess' in the future!

Anyways, Indian markets missed out on Asia's strong performance as the former remained closed today for Moharram. China and Japan led Asia's gains as their benchmark indices closed up by 1.5% and 1.3% respectively.
Today's investing mantra
"When proper circumstances present themselves, act with decisiveness and conviction." - Charlie Munger

Interested in penny stocks? Here's a warning!

2009-12-25T05:29:00.000-08:00

» Dr. Doom favours Indian banks, real estate
» BRICs seeing big money flows
» Indians leaving their mark on corporate US
» Wall St. bankers got it all wrong, and so did their teachers
» ...and more!!

Have you ever heard of Avance Technologies, Kaleidoscope Films, or G-Tech Info? We didn't, that is until today. As we were looking at some of the best performing stocks of 2009 across all categories, we came across these and were amazed to see their 12-month returns that ranged between 500% and 2,500%!

All these stocks are part of the category we know as 'penny stocks. Penny stocks are those having share price in single digits or low double digits. And seeing their returns, we can say for sure that these stocks are back in the limelight!

Investors' interest in penny stocks is not difficult to understand. Most large, mid and small cap stocks are back to trading at high valuations. As such, the 'cheap' valuations of penny stocks are acting like bait for investors in search for new stock ideas.

And if you are amongst those lured by the dirt-cheap valuations of such stocks, here's a word of warning. Penny stocks can become even cheaper as there are little or no earnings or track record to back whatever valuations they enjoy. While these stocks might record big gains within a short period (as seen above), these gains are largely owing to extremely low liquidity rather than any fundamental reasons.

So the next time someone tips you to buy those 'hot' penny stocks, remember that he might be looking for a bigger fool to buy his holdings in such stocks - many of which are just worthless pieces of paper!

Investment guru Marc Faber has always been known for his independent and bold thinking. No wonder then that it is always interesting to know his take on investments. Especially when the crowd is so often turning out to be wrong. Thus when in a recent interview he listed his top contrarian picks from across the world for 2010, we were all ears.

Among other things, Faber is very bullish on the banking and real estate sector in India. He believes that banks in India did not play in the CDO (collateralized debt obligations) market and mortgage backed securities market. So for the banks that are well run, there is a huge opportunity. As for real estate, he sees urbanization accelerating at a fast clip in India. There will be entirely new cities coming up. So there too he sniffs big opportunity in Indian real estate over the long run.

While we must say that India's scope for development does hold a lot of potential for these sectors, making sure that one invests in fundamentally strong companies at the right valuations is of utmost importance.

BRIC nations - Brazil, Russia, India, and China - are seeing a higher share of global investments coming their way. This is if one is to believe a report on a leading business paper today. The report cites EPFR Global a tracking agency for global fund flows. Its stats show that BRIC-focused equity funds have already seen inflows of US$ 20 bn during the first nine-months of this year. Importantly, this is almost 40% of funds of all emerging market stock funds.

Such large fund flows into BRICs are not without reason. Stockmarkets in these countries have risen sharply over the past 12 months. The MSCI BRIC index is up almost 90% in 2009 as compared to 70% gains recorded by the MSCI EM (emerging markets) index.

Apart from the promise of better returns, and as compared to developed markets, the BRIC economies also promise a better economic future for the coming few years. India is one clear case in point here. And if one has this conviction that the coming decades are going to be extremely bright for India and stays invested in the right kind of stocks, he will be glad that he pulled the trigger.

Anyways, Indian markets traded strong today. The BSE-Sensex was trading with gains of around 480 points (2.9%) at the time of writing. The BSE-Midcap and BSE-Smallcap indices also followed suit, trading with gains of 1.4% and 1.5% respectively. Energy and IT stocks led today's gains in India, which closed as the best performer among all Asian markets.

Gold is trading marginally lower. The metal has now touched its 7-week low of around US$ 1,086 an ounce owing to a rising US dollar.

When it comes to criticizing Wall Street investment bankers, there may be few adjectives that have been spared in the last twelve months. However, it seems that the bankers are not the only ones to be blamed. Their alma mater has also got it all wrong when it came to judging risks. 'How to invest profitably' is not a lesson that only the bankers need to learn. The school that produces most of the Wall Street honchos has been one of the biggest victim of poor risk management.

We are referring to one of the most renowned business schools in the world - Harvard Business School. To fund its expansion plans, the school invested in interest swaps. In December 2004, the institution bought swaps on construction bonds worth US$ 2.3 bn. The Fed rates were then 2.25%. With the Fed slashing interest rates to near zero, Harvard University has had to bear losses of a staggering US$ 1 bn.

The crisis has taught some very important lessons. To the bankers and to their teachers!

It appears that Indians are leaving their mark on corporate US in more ways than one. Forbes has come up with a list of what it calls 'Eight Indian Flavoured CEOs'. It highlights how US immigrants of Indian origin have managed to get into the boardrooms of capitalist US. It shows how they are at the helm of affairs of corporations that rule the world.

Some names from the list that make India proud are Indra Nooyi (PepsiCo), Vikram Pandit (Citi), Francisco D'Souza (Cognizant) and Shantanu Narayen (Adobe) among others. However this number is still negligible in context of the huge immigrant population of Indians out there. Nevertheless, it is much better than zero a decade back. In short, Indians are making great headways towards ruling global corporations. Also they are fairing much better than the other immigrants in the US!

Food inflation may be giving consumers, government and the central bank sleepless nights. But the deputy head of planning commission, Dr. Montek Singh Ahluwalia is very sanguine about bringing it under control. Rise in food prices that has been to the extent of 20% YoY in recent days has played havoc with the average consumer's budget. The same has been particularly worrisome given the draught like situation this year. However, Dr. Ahluwalia believes that most of the price rise is speculative in nature.

He expects food supply to catch up in the coming months thereby bringing the inflation under control. However, we believe that lower crop yield, shift to cash crops and higher income in rural areas is unlikely to bring the prices lower anytime soon.

Today's investing mantra
"All investment evaluations should begin by measuring risk, especially reputational." - Charlie Munger

We may have fewer Enrons and Satyams.

2009-12-25T05:24:00.000-08:00

TODAY'S ISSUSE
» Where to invest if the world economy does not recover?
» Is this a bull run for dollar?
» Some more hot IPOs in the pipeline
» Pension funds queue up in emerging markets
» ...and more!!

What could be the biggest risk to your investment in a stock? Management's poor execution abilities? Unstable economy? High inflation? Wrong business decisions? Or lack of ethics and corporate governance? While each of them have the potential to wreck your expected returns, the last one can take the stock price to near zero. The unfortunate shareholders of Satyam may want to vouch for that.

Competitive business scenario, greed for bigger bonuses and desire to impress investors with supernormal profits has often thrown ethics out of the window. But things could change soon. And for good.

Mr. Deepak Parekh, the chairman of HDFC group and member of the team leading Satyam's saviour has some important suggestions in this regard. In an interview to a business daily, Mr Parekh suggested that corporate governance must be voluntary. It should come from the top management, and it should percolate down to the entire organization. Given that the organization he has built is best known for its ethical practices without compromising on growth and profits, one cannot take his comments lightly. Mr. Parekh suggested that companies flouting laws should be delisted. Also, SEBI must force the promoters of those companies to pay back the money to the shareholders. This could set a precedent for action against unethical managements.

It requires only a walk down the streets of any major city in India to see the poor level of sanitation and waste management in the country. It is thus difficult to believe that more than one third of the Rs 336 bn funds allocated towards urban infrastructure are going towards these. To overcome the resource constraint and introduce urban reforms, the government had launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in FY06. It aimed at improving urban facilities in 63 identified cities. However, the pace of execution has been dismal to say the least. Out the 351 projects sanctioned under JNNURM till November 2008, only 22 projects have been completed till date!

If readers wish to know where they should be investing in different economic scenarios, the following lines could be a beacon of light. "If the world economy improves, commodities will lead the way due to demand and shortages. If the world economy does not get better, commodities are still a great place to be because governments are printing so much money. And, if the world economy doesn't get better, they will print even more money!" These words of renowned investor Jim Rogers are clearly reflective of his opinion on commodities, particularly precious metals like gold and silver.

Rogers opines that since no new large gold mines have been opened in decades and the 100-year old ones are depleting soon, the supply of gold is restricted. At the same time, central banks that have huge gold reserves above ground are less interested in selling than in the past.

Sometime in 1984, Suzuki Motor Corporation of Japan started a revolution of sorts in the Indian passenger car market. However, little did the company know that nearly 25 years later, the revolution would snowball into something so big that it would strip its own country of origin, Japan of an honour. The honour of being the world's largest seller of super compact or the small cars. Yes, that's right. As per Moneynews, nearly 0.9 m cars will be sold in India this year, surpassing the 0.7 m cars forecast for Japan. Little wonder, the who's who of the global automotive industry wants to make India as its manufacturing hub of small cars. However, India can get complacent at its own peril. As highlighted in the article, the auto industry in India still faces headwinds in the form of bureaucratic red tape, labor unrest, inefficient ports, poor infrastructure and competition from Thailand and South Korea.

The Bretton Woods system collapsed in 1971. Since then, a somewhat inverse relationship has developed between the US$ and gold. During times when one advances, the other falls and vice versa. The gold has been in rip roaring form these past few months whereas the dollar has been rather subdued. However, of late, signs of reversal have emerged. Gold is taking a bit of a breather these days while the dollar has gained some lost ground. Hence, what better time than now to once again bring the age old question out in the open. Is the rise of the dollar about to spell doom for gold prices?

Certainly not if few experts are to be believed. The current rise in gold prices could be in part because of a fall in dollar but it has to also do with a lot of other reasons. The most prominent among these is a general disbelief in paper currencies and the current vulnerable global economic climate. Thus, even if the dollar were to rise from here, one can rest assured that gold prices may not move in the other direction. The case for gold being a very important part of one's portfolio is stronger now than ever before. And mind you, it is just not based on the weakening of the US dollar. Gold bugs can thus breathe easy.

Coming up are some more red hot IPOs that are going to hit the market sometime soon. Jubilant Foodworks - operator of Domino's Pizza stores, animator DQ Entertainment, Talwalkar's Better Value Fitness and India's largest cable television operator Hathway Cable & Datacom are amongst them. As per reports on Bloomberg, 48 companies are already planning IPOs in 2010. Most of these are attracted to Indian domestic consumption boom. The steadily increasing discretionary spending power has left them greedy for bigger franchises and larger reach. There is no denying that some of these companies might earn big bucks in the future as their businesses gather steam. But whether this would mean big bucks for investors is highly doubtful!

How times change. Just a few years back, 'developing countries' like China, India, Brazil and Russia were considered to be 'risky'. Now the term 'developing countries' has been replaced by the more enthusiastic 'emerging markets'. The risk is still there. But now in the opposite context. Overseas asset managers are now seeing a big risk of not being invested in these countries, rather than the risk of investing in them. As per reports, a large US based fund manager has been recently quoted as saying, "Most pension funds have maybe five to ten percent in emerging markets, I bet in 10 years that number is closer to thirty per cent."

The growth that these economies witnessed even during the years afflicted by the credit crisis have left most of the developed world spellbound. Stocks markets too have reflected that. In the year 2009 so far, the MSCI Emerging Markets index has soared 68%, stacking up quite well with the 24% advance for the Standard & Poor's 500 index. The pace and volume of FII flows into India this year says it all. However, there is also a negative side to this newfound fascination of global money managers with emerging markets. For Indian investors, this means higher valuations. And higher valuations mean lesser opportunities to buy good stocks at good prices.

Meanwhile, Indian markets witnessed a volatile trading session today after a positive start. The BSE Sensex was up nearly 66 points at the time of writing. Stocks from the auto and commodity sectors were amongst the lead gainers. Amongst global indices, while the Asian markets ended in the positive, Europe has also opened in the positive.

Today's investing mantra
"If you want to have a better performance than the crowd, you must do things differently from the crowd." - Sir John Templeton

Bull market for gold has a lot further to run

2009-12-21T04:59:00.000-08:00

In this issue:
» Where are small-caps headed in 2010?
» Worst performing sector in 2009
» Outlook for crude oil in 2010
» Raise interest rates, says Bimal Jalan
» ...and more!!

While stock markets have had a brilliant run in 2009, there's another asset class that we believe has grabbed the headlines. Gold! And that's just with a 23% returns since January (in rupee terms). Compare this with the 75% gains that the stock market indicator - BSE-Sensex - has seen during this period.

One key reason for gold's bigger mind share than stocks during 2009 we believe is - the future.

With the printing presses of central banks (led by the US Fed) working overtime, many noted experts are now predicting a return to the Gold Standard! One amongst them is Porter Stansberry, chief of the leading US-based private publishing company, Stansberry & Associates Investment Research.

Porter has been a gold bull for quite a number of years now. And his current view is that gold is ‘nowhere near the top'. This he believes is because central bankers, the key players in the gold price - have begun to buy gold only since the last six months. "So this bull market for gold has a lot, lot further to run," he put its straightforward!

Like he keeps all his savings in gold, Porter also advices people to hold their savings in the yellow metal. And to own as much as they can reasonably afford.

As for Equitymaster's view, we believe that while gold can still perform very well in 2010 and beyond, one should have not more than 10% of his/her investments in the yellow metal. Stocks in good Indian companies must form the biggest portion of this portfolio, especially if it has time on its side.
Just like the stock market, the crude oil market is currently in the wait and watch mode. It is watching the progress of the economic recovery in the developed world. The long term factors for higher crude oil though remain intact. There will be more people in the world in the future. Many of them will consume oil with greater intensity. No large discoveries have been made in the past several years. Over the near term, i.e., in 2010, crude prices will be determined by the pace of economic recovery, OPEC's decision on supplies, geopolitical disturbances, and also by the liquidity chasing crude oil derivatives.

Anyways, Indian markets had another weak day today. The BSE-Sensex was trading down by around 80 points (0.5%) at the time of writing. Midcaps and smallcaps however bucked the trend with the BSE-Midcap and BSE-Smallcap indices raking in gains of around 0.2% and 0.5% respectively.

Most other Asian markets also traded weak today. Stocks across Europe have however opened on a positive note. Gold is trading US$ 2 higher as compared to last week's close.

Bimal Jalan, the former Governor of the RBI, has now joined in on the debate over rising food prices. And he favours monetary policy tightening. "Reduction in availability of money may help in reducing the speculative pressure on retail prices," Jalan is believed to have said recently.

He rightly argues that a stark action is not needed as the inflation is confined mainly to food prices. He also points out that in addition to drought, the fact that India didn't make arrangements for import of rice is also hurting matters right now. This anomaly though may be about to get corrected. With political pressure mounting, imports will have to be resorted to. But even this could come with a steep cost. Importing food grains would mean putting further pressure on the government finances, which is already delicately poised currently.

Improving farm productivity and curbing inefficiencies in the distribution system seem to be the only viable long term solution. And these measures need to be undertaken on a war footing.

Today's investing mantra

"Like most trends, at the beginning it's driven by fundamentals, at some point speculation takes over. What the wise man does in the beginning, the fool does in the end." - Warren Buffett, at the 2006 Berkshire Hathaway annual meeting

Buffett's 'mirror-image' is most bearish on...

2009-12-20T01:01:00.000-08:00

In this issue:
» World's foremost short seller is bearish on
» Equity funds too jump in on the gold bandwagon
» Freshly minted Indian MBAs' industry of choice
» Food prices may continue to soar
» ...and more!!

We all know that Warren Buffett's investment style is buying rock solid companies and staying invested in them for the long term. Now, what would be mirror image of this strategy? Shorting companies that look extremely weak fundamentally and holding the position for long periods. And the foremost practitioner of this art is a man called Jim Chanos. Called a short selling guru, Chanos is perhaps the most successful pure equities short seller in the world right now. Thus, when he is bearish on something, his words cannot be dismissed lightly. Ironically, he seems most bearish on a country that other investors feel is the most attractive growth story of the next decade or two. Indeed, we are referring to China.

Chanos believes that China is forging its GDP numbers on a massive scale by not providing adequate depreciation for a very, very shaky capital base and further adds that there is no bigger credit excess than China right now. In fact, he has called the China credit excess problem "Dubai times 1,000 or worse".

There could well be a lot of merit in his argument. It is a well known fact that China's export driven growth model has crumbled in the wake of the credit crisis and if it were to keep its economy on a higher growth path, the current model will have to be altered dramatically. We are not saying that it may not be able to do it. However, the transition may not be easy and there could be a lot of turbulence ahead. Perhaps, Chanos is pointing out to one such turbulence, which he believes could happen any time soon.

Here's another good news for gold bugs. The Wall Street Journal has reported that the dash to get into gold has caught so much popularity that not only are commodity mutual funds digging into the precious metal but even stock funds are stocking up on it. So much so that funds specializing in large cap growth stocks have made gold a good 3% of their portfolio as compared to 0.9% not a very long ago. And given that the US government is thinking of going ahead with another spending binge via a second round of stimulus, gold is only going to gain in popularity from here on.

Agreed that the yellow metal has hit a bit of a road bump recently, but such corrections are only expected after a brilliant run that it has seen the whole of 2009. In other words, there is still a lot of steam left to be exploited in gold prices. But as we have always maintained, do not make it too large a part of your portfolio.

One class of investments where a top down works rather well is commodities. By top down, we mean-ask the broader questions first and then look at merits of the specific investment vehicle or security. For example, take crude oil. The most important questions are - is the average Chinese and Indian likely to consume more oil in the future? Where are the new crude oil supplies that have been found in the last several years? The answers will indicate that crude prices will only tend to move upwards over the long term.

Or take agricultural commodities. First, the demand side. The world is getting more populated. It is also getting more urbanized. The average Chinese and Indian is likely to consume more. On the supply side, it is difficult to bring more land under cultivation. Weather patterns are getting erratic with frequent droughts and floods. That makes it reasonable to expect increasing food prices over the long term.

Little wonder then, experts are pointing at higher food prices next year. That includes investment banks like JPMorgan Chase, Deutsche Bank and Barclays Capital as per Bloomberg. Goldman Sachs's recent outlook for commodities is also bullish. The immediate reasons are the ongoing economic recovery and low inventory levels currently.

It is official now. The recession that started in 2008 was less dangerous than many feared. But here's a warning. It's after effects are likely to be more dangerous than many expect.

This is what a recent report in The Economist suggests. It states that a recovery built entirely on government support is dangerous for the world economy. Another big danger is that central banks are using cheap money to cure problems that were a result of cheap money in the first place. This is sowing the seeds of another bubble, especially across the emerging markets. Or what would justify doubling of stocks across these markets over the past year despite no meaningful improvement in economic fundamentals?

The Economist also mentions that property prices are still falling in more places than they are rising, and the global banking industry is still under too much stress. As for the Indian economy, we are facing a problem of a different kind, fast rising inflation.

While the RBI was proactive enough to ward off the recession's impact on India, we need to wait and watch as to how it acts to save the 'aam aadmi' from the spectre of high inflation!

Marc Faber, one of the most successful investors of our times has a very interesting take on the industries that investors should avoid investing in. He believes that the sector which is very popular among freshly minted MBAs is very likely to have a very bleak future over the next few years. Indeed, just before the sub-prime crisis broke out in the US, every MBA dreamt of working on Wall Street. And now, see what has happened of it. Wall Street companies and the financial sector have come crushing down. If we were to extend a similar logic to the Indian economy, the sector that is very likely to face a bleak future is the FMCG sector. This is because if a leading business daily is to be believed, the FMCG sector has emerged as the industry of choice for this year's management graduates. The daily further adds that the security that the sector provides forms a major attraction for the students.

So, is the Indian FMCG sector as well as the sector stocks likely to come down in a heap? We do not think so. Unlike the Wall Street firms, Indian FMCG companies have little or no leverage to speak of and have excellent returns on capital and a severely underpenetrated market to cater to. Thus, while the sector stocks may certainly look expensive from a medium term perspective, over a long-term basis, they could actually turn out to be very profitable career option for young MBA graduates in India.

Barring a few, most major indices across the world saw declines this week. India too, unfortunately found itself amongst the losers. The BSE-Sensex ended the week lower by 2.3%. This came after a subdued performance last week when the index saw an almost flattish performance. The recent dull performance of the markets here in India comes at a time when concerns about high valuations are taking centre stage. As for the key commodities, crude oil and gold were at opposite ends of the spectrum. While the former saw a gain of 5%, the latter saw a decline of 1.6%.

Weekend investing mantra
"Any unleveraged business that requires some net tangible assets to operate (and almost all do) is hurt by inflation. Businesses needing little in the way of tangible assets simply are hurt the least." - Warren Buffett
source: online research

Did you sell this stock after it tripled?

2009-12-19T01:32:00.000-08:00

In this issue:
» Who will benefit from extended trading hours?
» Marc Faber on investing in 2010
» Is the Fed sowing seeds of another bubble?
» How you can guard against corporate frauds?
» ...and more!!
Sintex is a household name in India today. From selling water tanks to becoming the biggest plastics manufacturer in India, the company has taken off in a big way. Its sales have multiplied almost 14 times over the past ten years. Profits have done even better in multiplying around 28 times. And someone who had invested in the stock in December 1999 has already multiplied his money 36 times!

Now whether Sintex is a worthy investment now is not a matter of discussion here. What we are trying to point is that the right kind of small companies can help you generate tremendous wealth.

But only if you have patience! And stick with good quality stocks across market cycles.

You can learn this from an investor in Sintex in December 1999, who sold the stock after it tripled in December 2003. Since then, the stock has multiplied another 12 times!

So you may ask - should I never sell a stock, always expecting it to multiply several times?

Well, if the company continues to do well, the idea of selling it should not even enter you mind. As the legendary Warren Buffett says - "If the homework is done right while purchasing a stock, the time to sell it is never."

But then, one must also never be greedy. With a stock whose valuations move way above its true business value, it is always good to book profits.
So, who will benefit from this increase? Brokers won't - as their costs would increase as they would probably require two shifts to match Asian markets' trading hours. Fund managers won't - as they would get less time on research and analysis of companies and spend more time looking at the ticker tapes.

What about you?

Will you benefit from these extended trading hours? Share your views

"I don't think the S&P or any market would go up significantly after rising 50-100% in the last 8 months." If you wanted one investment advice for the year 2010, there possibly can't be one better than this. And it comes from none other than Marc Faber, one of the most successful investors of our times. Speaking to a leading business daily, Faber has opined that he would be happy to preserve whatever he earned in 2009 as risks have increased and valuations are not as compelling as they were a year ago.

This is exactly the line of argument that we at Equitymaster have been holding for quite some time now. Unlike end 2008 or early 2009 where there were a lot of compelling buys available, the risk reward ratio from a medium term perspective does not look all that favorable. Hence, caution while investing should be the need of the hour right now.

Anyways, Indian markets traded volatile today. The BSE-Sensex was trading up by around 30 points at the time of writing. Realty and oil & gas stocks were the worst performers today while IT stocks led the gainers' pack. Most other Asian markets traded weak today. Gold was trading US$ 10 an ounce lower.

Marc Faber has also outlined his views on gold in the above quoted interview. He has maintained his bullishness on the yellow metal despite the huge run up in its price. "If I look at the growth in quantity of money worldwide, then gold around this level is not overpriced. Well, it's not as much as a bargain as it was in 1999 to 2001, but I would believe that it's not very expensive still now," Faber notes.

As he did earlier with Jim Rogers, New York University professor and noted economist Nouriel Roubini disagrees with Marc Faber's positive views on gold. In fact, Roubini believes that the recent price surge in gold 'looks suspiciously like a bubble, with the increase only partly justified by economic fundamentals'.

He adds that there are several reasons (like easy liquidity, falling dollar, and potentially high inflation) why gold prices are rising, but they suggest a gradual rise with significant risks of a downward correction, rather than a rapid rise towards $2,000, as today's gold bugs claim.

As much as the US Federal reserve would want to appease everyone, it seems to be finding few takers for its logic. Yesterday the Fed confirmed its resolve to keep interest rates near zero for an 'extended period'. The same backed by hopes of economic recovery. Ignoring the fact that trillions of dollars of stimuli have had little impact so far.

However, its critics are not taking the central bank's inertia in good taste. According to Morgan Stanley Asia Chairman Stephen Roach, the Fed has not learnt from its past mistakes. And after having fueled the subprime mortgage crisis, it is on the verge of causing another one. He attributes the Fed's attitude to lack of political will to exit the loose monetary policy in a timely manner. Roach also believes that the Fed's attitude is very worrisome in assessing the prospects of a next bubble.

In what might burn a deeper hole in your pocket, India's food price inflation is now nearing 20%! This is as per data compiled by the commerce ministry, which shows that food prices on an average increased by 19.95% during the week ended December 5. This is higher than the 19.05% food price inflation that was recorded in the previous week.

All eyes are now on the RBI as the central bank may raise interest rates to curb the rising prices. But we see any rate hike from the RBI having a minimal impact. This is given that food prices are rising owing to supply-side issue, and this has a lot to do with this year's weak monsoons than anything else.

Given human frailties, frauds have been around us almost as long as there has been money. But their form changes with time. As per a leading business daily, most frauds in companies today happen in the human resources department. Especially in the IT industry, where hiring volumes are large. Some HR people float their own consultancy firms and route CVs/resumes through them. The procurement division is also fertile ground for frauds. A single company bids for a tender under different names. Another susceptible area is 'private equity'. It is hard to track where the money is going. Ironically, one of the reasons is the investor pressure on companies to show earnings performance.

In our view, much of this can be prevented. That is if managements and auditors do their job earnestly. Investors on their part must also learn to set reasonable expectations from businesses.

Today's investing mantra
"If you took our (Berkshire Hathaway's) top fifteen decisions out, we'd have a pretty average record. It wasn't hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor." - Charlie Munger

India's property market to go the Dubai way?

2009-12-18T04:51:00.000-08:00

» The best times to be buying Indian stocks
» World's largest bond fund going into cash
» Jim Rogers scorns the US Fed's actions
» The kind of innovation you should keep away from
» ...and more!!
If you are looking at multiplying your money, there's no better place to invest than midcap stocks.
Since we are able to identify stocks that return 358%, 143%, 151% and 132% how could our view be any different!
But how do you identify these potential multi-bagger midcaps? Well, it's a lot easier than you think!

India isn't another Dubai, and thus our property market will escape the kind of collapse that has impacted the Gulf nation. This is what Mr. Keki Mistry believes. Coming straight from the chief of HDFC, India's largest housing finance company, these words carry a lot of weight.

As Mr. Mistry says, "Dubai was very different from India. In India, the property market is largely end-user based; in Dubai, the property market is largely investor based." While we are in agreement with Mr. Mistry about his views on the nature of the Indian realty market, we believe certain pockets in the country like Mumbai and Pune do give a sense of a building bubble. And they seem like strong contenders for being the 'next Dubai'!

We believe homes are still out of reach of average buyers in these cities. And if greedy real estate companies, instead of getting punished for their misdemeanors, continue to get rescued by banks, they will not change their stripes in a hurry and will continue to bid up home prices.

So, while the Indian realty market might not crash like the one in Dubai, realty buyers' dreams of owning their own homes will continue to crash if property prices continue to surge.

The word 'innovation' usually has only positive connotations. But add to that the word 'financial' and it brings to mind unpleasant images of the credit crisis. The offsprings of this financial innovation have played havoc with the world during the last two years. They are widely considered to be the genesis of the credit crisis.

Paul Volcker, former chairman of the US Federal Reserve, came out rather strongly at these financial instruments in a recent conference. In his view, there is not a shred of evidence that this particular innovation provided any kind of benefit. In fact, the credit default swaps and collateralized debt obligations (CDOs) took the US right to the brink of disaster.

Reminiscing the time when he held office, he said that the US economy was doing just fine in the 1980s without credit-default swaps, securitization and CDOs. Important lessons for India too! As India moves towards more developed financial markets, there will always be a tendency towards more and more complex products that will be hawked to unsuspecting investors. It would be wise to take a leaf out of this bad experience of the developed countries – if you can't understand something (an investment option), it's probably not for you.

At standard pressure, water boils at 100 degrees Celsius. This is an irrefutable law of nature. It does not matter to the boiling point if different people are conducting the experiment. It will still exhibit the same characteristic. But what about an experiment where the result is dependent on the how the participants think? Let us take the example of the most recent credit crisis. Here, the politicians, the most influential participants thought that financial markets should be completely de-regulated and left to themselves. And what is the result of the experiment that we got? Risk taking increased at a phenomenal rate and the global economy came to the brink of a collapse.

Thus, if an experiment leads to disastrous consequences, it only makes sense to abandon it and use some new rules. And this is exactly what Nobel Laureate Paul Krugman also seems to be thinking. In an article in The New York Times, Krugman has argued that the reason the US economy got into the current mess was because politicians got under the influence of free market ideology and gave bankers whatever they wanted.

Holding former US President Ronald Reagan responsible for the situation the US economy currently is in, he hoped that better sense would prevail and a major overhaul of the financial system takes place. As he so rightly said, "If politicians refuse to learn from the history of the recent financial crisis, they will condemn all of us to repeat it."

What do you do when you find markets to be expensive? You don't put in new money. And you start selling the existing investments. As a result, your cash holding goes up. That's exactly what the manager at the world's largest bond fund is doing.

As per Bloomberg, Bill Gross of Pacific Investment Management Co. (PIMCO) has boosted cash to the highest level since Lehman Brothers collapsed in September 2008. It may be noted that as a bond fund manager, one of Mr. Gross's main concerns is interest rates. 'Expected' interest rates to be more precise.

Higher interest rates imply investors will demand higher yields. That in turn means bond prices must fall. With the US economy expected to post some growth in 2010, its central bank is expected to increase interest rates from close to zero. That would make bonds less attractive. We'd like to add that a higher interest rate not only affect bonds but also stocks. In fact, it is like gravity that exerts a pull on the entire financial universe. To take a cue from PIMCO, it is perhaps time for equity investors to also moderate their expectations for 2010.

In a recent interview, Jim Rogers expressed concerned regarding the US economy. He felt the solution that is being given by the Federal Reserve for getting out of the recession is absurd. He pointed out that spending more money to get out of this crisis may not be the right thing to do specially since too much debt and too much consumption is what has led to it in the first place.

On a humorous note, it is like asking Tiger Woods to get 5 more girlfriends to solve his marital problems. Moreover, the government has tripled its balance sheet size with debt. The very same people who are expected to spend more are also expected to pay more taxes to bring down the deficit. He also believes that the government has stretched itself to thin in this crisis. In case of another slowdown the government may not have enough resource left to tackle it. In a lighter vein he added that there may soon not even be enough trees left to print money with.

Meanwhile The Indian markets traded in a narrow range today and the BSE Sensex was trading lower by 40 points at the time of writing. While stocks from healthcare, auto and consumer durable managed to garner investors' interest, stocks from realty, oil & gas and FMCG traded weak. As for global markets, Asia was trading in the red, while Europe began the day on a positive note.

Today's investing mantra
"We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable

Did you sell this stock after it tripled?

2009-12-17T02:39:00.000-08:00

In this issue:
» Who will benefit from extended trading hours?
» Marc Faber on investing in 2010
» Is the Fed sowing seeds of another bubble?
» How you can guard against corporate frauds?
» ...and more!!

------- Multi-bagger MidCaps -------
If you are looking at multiplying your money, there's no better place to invest than midcap stocks.
Since we are able to identify stocks that return 358%, 143%, 151% and 132% how could our view be any different!
But how do you identify these potential multi-bagger midcaps? Well, it's a lot easier than you think!
To know more, just click here...
-----------------------------------------------

Sintex is a household name in India today. From selling water tanks to becoming the biggest plastics manufacturer in India, the company has taken off in a big way. Its sales have multiplied almost 14 times over the past ten years. Profits have done even better in multiplying around 28 times. And someone who had invested in the stock in December 1999 has already multiplied his money 36 times!

Now whether Sintex is a worthy investment now is not a matter of discussion here. What we are trying to point is that the right kind of small companies can help you generate tremendous wealth.

But only if you have patience! And stick with good quality stocks across market cycles.

You can learn this from an investor in Sintex in December 1999, who sold the stock after it tripled in December 2003. Since then, the stock has multiplied another 12 times!

So you may ask - should I never sell a stock, always expecting it to multiply several times?

Well, if the company continues to do well, the idea of selling it should not even enter you mind. As the legendary Warren Buffett says - "If the homework is done right while purchasing a stock, the time to sell it is never."

But then, one must also never be greedy. With a stock whose valuations move way above its true business value, it is always good to book profits.

"I don't think the S&P or any market would go up significantly after rising 50-100% in the last 8 months." If you wanted one investment advice for the year 2010, there possibly can't be one better than this. And it comes from none other than Marc Faber, one of the most successful investors of our times. Speaking to a leading business daily, Faber has opined that he would be happy to preserve whatever he earned in 2009 as risks have increased and valuations are not as compelling as they were a year ago.

This is exactly the line of argument that we at Equitymaster have been holding for quite some time now. Unlike end 2008 or early 2009 where there were a lot of compelling buys available, the risk reward ratio from a medium term perspective does not look all that favorable. Hence, caution while investing should be the need of the hour right now.

Anyways, Indian markets traded volatile today. The BSE-Sensex was trading up by around 30 points at the time of writing. Realty and oil & gas stocks were the worst performers today while IT stocks led the gainers' pack. Most other Asian markets traded weak today. Gold was trading US$ 10 an ounce lower.

Marc Faber has also outlined his views on gold in the above quoted interview. He has maintained his bullishness on the yellow metal despite the huge run up in its price. "If I look at the growth in quantity of money worldwide, then gold around this level is not overpriced. Well, it's not as much as a bargain as it was in 1999 to 2001, but I would believe that it's not very expensive still now," Faber notes.

As he did earlier with Jim Rogers, New York University professor and noted economist Nouriel Roubini disagrees with Marc Faber's positive views on gold. In fact, Roubini believes that the recent price surge in gold 'looks suspiciously like a bubble, with the increase only partly justified by economic fundamentals'.

He adds that there are several reasons (like easy liquidity, falling dollar, and potentially high inflation) why gold prices are rising, but they suggest a gradual rise with significant risks of a downward correction, rather than a rapid rise towards $2,000, as today's gold bugs claim.

As much as the US Federal reserve would want to appease everyone, it seems to be finding few takers for its logic. Yesterday the Fed confirmed its resolve to keep interest rates near zero for an 'extended period'. The same backed by hopes of economic recovery. Ignoring the fact that trillions of dollars of stimuli have had little impact so far.

However, its critics are not taking the central bank's inertia in good taste. According to Morgan Stanley Asia Chairman Stephen Roach, the Fed has not learnt from its past mistakes. And after having fueled the subprime mortgage crisis, it is on the verge of causing another one. He attributes the Fed's attitude to lack of political will to exit the loose monetary policy in a timely manner. Roach also believes that the Fed's attitude is very worrisome in assessing the prospects of a next bubble.

In what might burn a deeper hole in your pocket, India's food price inflation is now nearing 20%! This is as per data compiled by the commerce ministry, which shows that food prices on an average increased by 19.95% during the week ended December 5. This is higher than the 19.05% food price inflation that was recorded in the previous week.

All eyes are now on the RBI as the central bank may raise interest rates to curb the rising prices. But we see any rate hike from the RBI having a minimal impact. This is given that food prices are rising owing to supply-side issue, and this has a lot to do with this year's weak monsoons than anything else.

Given human frailties, frauds have been around us almost as long as there has been money. But their form changes with time. As per a leading business daily, most frauds in companies today happen in the human resources department. Especially in the IT industry, where hiring volumes are large. Some HR people float their own consultancy firms and route CVs/resumes through them. The procurement division is also fertile ground for frauds. A single company bids for a tender under different names. Another susceptible area is 'private equity'. It is hard to track where the money is going. Ironically, one of the reasons is the investor pressure on companies to show earnings performance.

In our view, much of this can be prevented. That is if managements and auditors do their job earnestly. Investors on their part must also learn to set reasonable expectations from businesses.

Today's investing mantra
"If you took our (Berkshire Hathaway's) top fifteen decisions out, we'd have a pretty average record. It wasn't hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor." - Charlie Munger

When you borrow, borrow big time

2009-12-15T02:31:00.000-08:00

In this issue:
» Its Too Big To Fail playing out all over again
» The long commute to work
» The loan waiver that brought the UPA back
» Mark Mobius still likes Indian equities
» ...and more!!

Many years ago, during the height of the cold war, there was a popular theory - mutually assured destruction. If you sink, so will everyone. Others had no choice but to keep you alive. Years later, the theory has mutated to a financial version - Too Big To Fail. We saw it being played out when governments had no choice but to bail out financial institutions during the meltdown. We are seeing that again with the Dubai bailout.

Abu Dhabi, the richest member of the UAE has agreed to bail out neighbouring Dubai. At the last minute. After all, it couldn't let Dubai default without harming its economic interests. Abu Dhabi has provided the Dubai government with US$ 10 bn. That's enough to pay the US$ 4.1 bn due immediately but less than the total debt. As per the New York Times, Dubai World (real estate arm) still owes about US$ 18 bn, Dubai Holding (investment arm) owes US$ 8 bn, the Investment Corporation of Dubai owes US$ 26 bn and the Dubai government itself owes US$ 16.3 bn. What about these remaining creditors? We believe they will also have to show some flexibility while dealing with a sovereign state. Too Big To Fail, you see.

The lesson in all of this - if you decide to borrow, borrow big time. The smaller fry is taken to task, borrowers who are Too Big To Fail are bailed out. Not that it is the right thing to do. We certainly don't believe in it. But it appears that this logic is working. Let's see for how long.

Rs. 60,000 crores is no small number by any stretch of imagination. But it also cannot get bigger than this for the ruling UPA government at the center. It was always being felt that this sum, which was sanctioned by the government in its previous regime for the farm loan waiver scheme, dealt a killer blow to its rivals. And now, even numbers seem to be telling the same story. A newly arrived report shows that states which topped the list in terms of total amount of loans waived off are also the states where the Congress performed admirably in the polls. And the reverse also seems to be true. Congress performed poorly in states where the amount waived off was comparatively lower.

Indeed, some lessons here for the parties trying to topple the Congress. But unfortunately, all the wrong ones. For it is not waiver that will solve the ills facing the Indian farmer. It will only be solved through things like higher productivity, better rural infrastructure and greater financial inclusion. We hope these facts are not lost to the Indian polity who, one feels, has always had the tendency of sacrificing long term solutions for short term gains.

Templeton Asset Management's chairman Mark Mobius is very clear about how he feels about India and Indian stocks. About India, he feels that India is still a good emerging market and investors should stay the course. He believes that the country will maintain its rate of growth going forward. But he also added that many Indian stocks currently do appear to be rather expensive. However, he continues to make strategic investments in some Indian companies as there are lots of good companies in India. That said, one thing that an investor should always keep in mind is that a good company does not necessarily make a good investment. It is only the combination of a good company along with a good price that makes for a good investment. One of the simplest but most overlooked rules of stock market investing.

Wholesale Price Index based inflation has climbed to 4.8% for November. That's a ten-month high. The main culprit is the price of food. Cereals, pulses and vegetables - especially the humble potato and onion are witnessing runaway inflation. Of course, much of it is due to the poor monsoons this year. The leaky public distribution system also doesn't help. The policymakers are pinning their hopes on a better winter harvest. In our view, they will have to act sooner rather than later. Not because monetary policy necessarily has much impact on food prices. Instead it is because high food prices have a political fallout. That always gets governments to act.

Whether they liked it or not, the US taxpayers rescued many of the very financial firms that got the country into the mess of the credit crisis in the first place. Through government bailouts that is. Now that many of them are back on their feet, expectations are running high. In fact, US President Barack Obama has told top US bankers that they owed it to the country to help lift the economy out of crisis. And that they should do this by lending more money to small businesses in need and embracing financial reforms. An important part of that means finding ways to help credit-worthy small to medium-sized businesses by giving the loans they need. What has got Obama worried is that, off late, he has been receiving letters from small firms saying they could not get loans. With the all so important 'trust' factor that has taken a huge beating in the US, the wheels of credit and lending that the US economy moves on seem to have gotten rather rusty.

It is not just the investors who seem to be happy with the Indian GDP growth in the quarter gone by. Even our FM, Mr Pranab Mukherjee seems to be all smiles. And why not? After all, India's not so comfortable public debt position may not deteriorate any further in the current fiscal. Strong economic performance has given the FM the hope that government revenues are likely to come in more buoyant than expected and hence, India's fiscal deficit, a measure of how much more it spends than earns, is likely to remain within the targeted 6.8% as a percentage of GDP. However, no further deterioration in the deficit situation does not mean that the 6.8% is a good number. Agreed that these were extraordinary times where the government had to come to the rescue but if India has to put itself on a higher growth path and has to lower the cost of borrowing for its companies and citizens, its deficit will have to be reined in substantially.

Meanwhile, the benchmark indices fell in to the negative territory thereby wiping out the opening gains. The BSE-Sensex was trading lower by 51 points at the time of writing. Selling activity was witnessed in stocks from the banking, PSU, auto and capital goods sectors. Most other Asian markets were also trading in the red at the time of writing.

Today's investing mantra
"Almost by definition, a really good business generates far more money (at least after its early years) than it can use internally." - Warren Buffett

India Inc. can get this straight to bottomline...

2009-12-14T04:02:00.000-08:00

In this issue:
» Another cockroach out of Goldman's cupboard
» US' transition into a fallen empire
» Gold could go up to a couple of thousand dollars an ounce
» Wind energy breeding corruption
» ...and more!!
There's one more cockroach that has spilled out of the cupboard of Goldman Sachs. The former US investment bank has been blamed as one of the major hands in last year's financial crisis. Now it is being accused of playing a big role in the near bankruptcy of AIG.

As per The Wall Street Journal, Goldman originated or bought protection from AIG on about US$ 33 bn of the US$ 80 bn of US mortgage assets that AIG insured during the housing boom. This was huge! And when the crash came, Goldman avoided losses on its trades, with AIG covering a total of US$ 22 bn in assets, as the US government bailed out the latter. And who, you might ask, in the US government did that? None other than Treasury Secretary Henry Paulson, the former Goldman boss!

The honeymoon period for Indian FMCG companies may soon be nearing its end. The government is considering ending the tax holiday for manufacturing units located in Himachal Pradesh and Uttaranchal this fiscal. The move to pre-pone the earlier deadline of FY13 is to have a uniform goods and services tax (GST) regime.

Many FMCG companies had set up manufacturing unit in these areas to take advantage of the tax sops. According to estimates, the higher effective taxes will scale up costs for these companies by upto 30% from current levels. An increase of this magnitude would put pressure on these companies to increase their prices. The cascading effect of this will be a slowdown in sales and an impact on margins.

Did you know that Spain defaulted on all or a part of its debt a record 14 times in the 16th and 17th centuries? Also, that pre-revolution France was spending a gigantic 52% of revenues as interest on debt in the 18th century? Or the fact that interest payments consumed 44% of the budget of the British Empire, thus making it difficult for Britain to incur defense expenditure to protect itself against the Nazis?

All the above mentioned countries were extremely wealthy and powerful in their own times but finally succumbed to a phenomenon. The phenomenon was nothing but the debt that these empires had built up steadily over time. And if there is one country in present times that is the most likely addition to this list, it is the US.

If Prof. Niall Ferguson, a Harvard University Professor and author of a well-received recent book, The Ascent of Money is to be believed, the US empire is being threatened and very seriously at that, by a strong surge in its public debt. He believes there will not be a balanced budget in another 30 years in the US, thus implying that every year, the US will have to keep borrowing to meet its expenses. This will further add to the economy's gargantuan debt burden!

Amongst all the doom and gloom that many of headlines these days convey, gold is one of the few investments that offer the most promising returns if the global economy were to go in a tailspin.

Consider commodities guru Jim Rogers' comments. In a recent interview with CNBC, he shared his detailed perspective on gold. Even though he owns gold, he's not buying the precious metal currently. That's because gold has shot up in price and according to him, whenever something shoots up it probably will go down for a while. But if gold goes to US$ 1,000 per ounce again, he will surely be smart enough to buy more. Infact, he has gone as far as to say that gold will certainly go to a couple of thousand dollars an ounce over the next decade. So he remains a firm believer of the theory that am gold will be a great investment over the next decade or so. With the kind of problems that the western economies are facing, we must say that that does not seem such a far off possibility after all.

An impending recovery in the IT sector has brought with itself its share of pains. There has been a hiatus in overall hiring for around a year. With the demand scenario improving now, companies particularly the IT biggies are revamping their hiring plans. Small start-ups are particularly feeling the pinch of this flight of talent towards better paying large IT brands. This is a big concern as it might take some time to fill in the gaps created by sudden exits. However, money is not always the sole reason for employee attrition. They need to ensure competitive levels of job security, challenging work profile as well as compensation so as to retain their resources.

Subsidies are fertile ground of corruption. No Indian needs to be told about that. But the phenomenon is universal. The New York Times reports how the wind energy sector is rampant with corruption with operators hiding under the good press that renewable energy receives.

The European Union grants billions of Euros in subsidy for clean sources of energy such as wind farms. Then there is also the matter of public land being misappropriated in the name of wind farms.

In our view, the solution is better regulation and creating standard procedure. For landowners, municipal bodies, local entrepreneurs, large companies and utilities. Whenever there is easy money to be made, the scamsters can't be far away. Whether it was the gold rush, the rush for crude oil or now the rush for clean energy.

Meanwhile, Indian markets witnessed a volatile trading session today after a weak start. The BSE Sensex was up nearly 28 points at the time of writing. Stocks from the telecom and banking sectors were amongst the lead contributors to the overall weakness. Amongst global indices, while the Asian markets are trading a mixed bag, Europe has opened in the positive.

Today's investing mantra
"The price of a stock can be influenced by a 'herd' on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person. " - Warren Buffett

Should we welcome this investor?

2009-12-11T05:04:00.000-08:00

In this issue:
» Foreign institutional investors love emerging markets
» Food price inflation touches 20%
» Goldman Sachs stops cash bonuses, opts for long term stock
» Chinese stimulus could endanger the world economy
» ...and more!!

Everyone loves attention. So we can't blame the emerging economies if they are flattered by all the attention they have been receiving of late from institutional investors from the developed world. They are attracted by the growing middle class in the emerging nations. This middle class has the habit of saving and taking on very little debt. That's in sharp contrast to their counterparts in the developed nations. Small wonder then that the institutional investors believe they should park their funds in emerging markets. Despite the steep recovery from their lows earlier this year. In fact, as per Reuters, emerging market equity funds have attracted a net inflow of US$ 60 bn in 2009, much higher than earlier record of US$ 54.3 bn in 2007.

But not all attention is good. Foreign institutional investors are notoriously fickle. They were the same set of investors who dumped assets in the emerging markets in 2008 to move into US Treasuries. Some emerging economies realise this fact. Brazil has recently slapped a 2% tax on foreign equity and fixed-income purchases. The question is - does India realise the same? Seems not. The RBI believes the recent inflows cannot be compared to those of 2006 to 2008. They are not creating any asset bubble.

We are not so sure. Net foreign institutional investment is estimated at US$ 18 bn this year. When we look around for the great businesses in India, we find they are now trading at rich valuations. Many of them are at their all time highs. We tend to not get very happy with steep valuations. Especially when we know the large but fickle foreign investor has the power to pull the carpet under our feet. When that happens, those with the stomach to look for a bargain have a field day. But the vast majority of retail investors get severely burnt.

Today Indians are admired for their technological prowess. Academicians believe we have the potential to create trend setting products. But we have not lived up to the expectation. To use the cliché, India has not really moved up the value chain. Today's chart of the day shows how Indian citizens and firms have fallen way behind their Chinese counterparts in the recent years when it comes to obtaining patents for inventions in the US. The reason is the lack of funding for ideas. Government and corporate research & development expenditure lags behind other nations. Venture capital finance is also hard to come by. It also has to do with a culture that promotes rote learning and frowns on unconventional career choices. While there are historical reasons - colonial rule and central planning thereafter - for this culture, we believe it is high time we moved on.

Did you ever imagine that the price of the humble potato would have an effect on the monetary policy of the country? Very soon it could. Food price index has risen by nearly 20% YoY this week. But the Reserve Bank of India (RBI) is finding it hard to implement measures to control it. This is because the RBI is seeking to strike a balance between supporting a nascent economic recovery and controlling inflation. RBI governor, Mr. Subbarao has indicated that tightening the monetary policy may not be very effective in controlling food inflation. However, it may be used for preventing a spillover from high food prices. For this purpose, Mr. Subbarao started withdrawing the economic stimulus in October. He did this by directing the lenders to deposit more money in government bonds while maintaining the reverse repurchase rate. We believe that RBI will soon have to raise interest rates to control inflation. However, it will have to be cautious so as not to disturb the fledging economic recovery.

'How can you mend a broken heart' is a song that was released by the Bee Gees in early 70s and went on to become an instant hit. But guess who's taking it very seriously these days? It is the investment bankers. Goldman Sachs to be more specific. The world's most powerful investment bank seems to have had a sudden change of heart as it has announced that its most senior executives would forgo cash bonuses this year and would instead be paid in the form of long-term stock, which are shares that cannot be sold for five years and can be retracted if the executive does something that hurts the firm.

Although it looks like better sense has finally prevailed this time around, we don't know for sure how much of a help the current measure is going to be. Goldman's tendency in recent times to make some outrageous, arrogant remarks and then to retract it is already well known. All this makes one wonder are these people really apologetic of their mistakes. If the answer is in the negative as we believe, then the game of excessive risk taking may continue to play on in the future as well and the financial system will continue to remain vulnerable.

We had recently warned you that the 'Next Dubai' could be closer than you think. Ironically there are a few others who share this opinion. The European Union Chamber of Commerce in China is one of them. It believes that the country's overcapacity situation could finally lead the dragon nation to its doom. Besides, many are willing to bet on the possibility of China throwing up a Dubai-like shock. Of course, of a much bigger proportion. Much of China's 'overcapacity' has been driven by excessive capital spending and the artificial peg of the Chinese currency to the US dollar. These measures protect China's export-led manufacturing industry.

But that is not the end of the story. China's famous saving and investment history also has many critics. It seems China's investment to GDP ratio of 50% has broken all records. That of Germany's 27% in 1964, Japan's 36% in 1973, and South Korea's 39% in 1991. Also, the longest any country has sustained an investment to GDP ratio of over 33% was nine years. They were Thailand and Singapore. China is well into its 12th year of heavy investments. In fact a business daily has cited an interesting quote of a Chinese economist. "China's mega-stimulus programme is like drinking poison to quench a thirst'." Do we need to say more?

If there is one asset class that holds the potential to earn really strong returns in the future then that is commodities. That is what legendary investor Jim Rogers firmly believes. In fact, Rogers is of the opinion that agricultural commodities are the place to be in because the prices are still depressed. This is despite the fact that prices have risen at a fast pace of late. His rationale is that there is an imminent prospect of food shortage. Be it rice, sugar or wheat, inventories of food as a whole are the lowest in decades and he expects a food crisis to loom large in the next 5 to 6 years. And while the speculators will be blamed for prices soaring, the fact is that no farmer will be ready to cultivate crops unless he gets a higher price for it. So all in all, while Rogers is bullish on commodities as a whole, agricultural commodities is that one class on which he seems to be the most positive.

Meanwhile, Indian markets witnessed a relatively choppy trading session today after a positive start and the BSE Sensex was down nearly 26 points at the time of writing. Stocks from the banking and telecom sectors were among the ones that failed to garner investors' interest. Asian markets are trading a mixed bag, while Europe is in the green currently.

Today's investing mantra
"Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return." - Warren Buffett

Are you feeling financially secure?

2009-12-10T03:19:00.000-08:00

The stock markets have doubled over the past nine months. And you must have recovered all of your portfolio losses of the last year. The economy is showing signs of recovery. And you must have felt that relief in seeing lesser number of people around you losing their jobs.

So, things seem to be getting back to normal again you might think.

But is all this making you feel financially safe?

We believe it is not the amount of money you have that makes you feel financially safe. Rather, financial security is about knowing and feeling safe that whatever and whenever disaster arrives, you know you will not have financial trouble.

And to know this, you need to ask yourself if you are prepared for the next recession, or the next financial downturn? You need to ask yourself what will happen to your finances if you lose your job today? And most importantly, you need to ask yourself what will happen to your family if you passed away suddenly?

Of course, these are serious thoughts. But answers to these will define how financially safe you are. You will then also be clear about how much of your surplus money should you risk on speculation and how much on serious, long-term investments.

Your speculative instincts (if you have any) might earn you good returns in the short term. But if this backfires, you will be putting your and your family's financial security to a big risk. On the other hand, sensible long term investing will go a long way in helping you reach you financial goals safely.

01:07 Chart of the day
A blame game is currently on between the developed and developing countries on who is responsible for the global warming spectre that the world faces. Now while the western world (led by the US) maintains a high rate of carbon dioxide (CO2) emission that is the biggest cause of this warming, developing countries led by China are now closing in the gap. China in fact recently became the biggest polluter in the world, contributing to around 22% of global CO2 emissions. While India's share in global emissions has doubled in the last four decades, it still stands at a miniscule 4%, though still higher than Brazil's 1%.

Data Source: BP Statistical Review 2009

The financial meltdown was caused by several factors. Bankers had the wrong reward structure. Banks were too interdependent. Risk was underestimated. Regulators did not do their job properly. Nobel laureate Joseph Stiglitz believes that enough hasn't been done to prevent another crisis. His solution - make banks smaller. Wherever the banks remain large, increase the regulation. Impose special taxes and greater capital adequacy requirements.

In our view, banks are meant to serve the real economy. But given the money and prestige this business involves, bankers innovate to a point where the dangers exceed the intended benefits. The subprime crisis isn't the first time this has happened. As long as the incentives remain, it won't be the last time either.

In what UK bankers are calling a 'poison pill', the British policymakers have levied a 50% tax on bonuses that banks pay to their employees until April 5, 2010. This seems a good move in curbing the predatory tendencies of banking employees who have survived the financial crisis on taxpayers' money.

However, how relevant will the tax be is doubtful. This is considering that many of the large banks have already announced their bonuses that will not be covered under the new tax norm. But then, as per an October report by the Centre for Economics & Business Research Ltd., a London-based research firm, UK financial firms were preparing to set aside as much as 6 bn pounds in bonuses for 2009, 50% more than 2008. The new tax will certainly act as a demoralizer for them!

Are the huge bonus payouts by banks and institutions like Goldman Sachs justified? Share your views

When the crisis started one stark fact that was brought to the fore was the extent to which companies were leveraged. Many companies were saddled with huge amounts of debt and the weak economic environment meant that servicing and paying off this debt was becoming a problem. Now this problem has shifted to a much bigger arena.

This is because various countries themselves are beginning to look over-leveraged as a result of which their sovereign rating are seeing downgrades. Dubai was the first to see its skeletons come out of the closet. The latest to have this dubious distinction is Spain. Ratings agency Standard & Poor's has revised its outlook on Spain to negative and has warned that the country faces a risk of a debt downgrade in two years if the government did not take tough action.

In a bid to bail out battered financial institutions, governments across the world have injected massive doses of liquidity into their respective economies all of which is beginning to take its toll on finances. Cleaning up this massive mess is going to require some herculean effort indeed!

An era in personal mobility will come to an end by the time the next fiscal dawns. Bajaj Auto, the company responsible for putting scooters at virtually every nook and corner of the country has decided to come fully 'in sync' with the latest fashion in the geared two-wheeler industry - motorcycles.

In other words, the company will exit the scooter segment by the end of the fiscal to focus exclusively on motorcycles. It is interesting to note that Bajaj was a little late in recognising motorcycles as the future of the Indian two-wheeler industry. Consequently, it went through some rough patch at the turn of the century when it tried to make the transition. However, now that it has made amends, it does not want to miss out on the enormous opportunity that is staring it in the face in the motorcycles space.

In fact, it has made it amply clear that it wants to be the largest bike player in the world. It may not be easy though. A company called Hero Honda has been dominating the Indian motorcycles scene for quite some time now and may not give up its pedestal so easily.

Despite all the bearishness about the US dollar, someone has been busy stocking up on the greenback over the last two months. And that someone is none other than commodity guru Jim Rogers. Let it be clear though that he himself is extremely bearish on the dollar over the longer term. However, there are too many bears on the dollar right now and that's the reason Rogers feels that the dollar may be set for a near term rebound from its beaten down levels.

However, what's most scary is that the renowned investor expects the longer maturity US government bond yields to reach double digits just like they had in early the 1980s. In 1981, 10 year treasury notes' yield had hit a high of 15.8%. It currently stands at about 3.42%. If yields were to indeed move to double digits, the prices of bonds will take a severe beating. With the US dollar making up such a large part of the forex reserves of so many countries around the world, a large decline in bond prices is sure to have a lot of ugly ramifications.

Indian markets traded amidst high volatility today. While the BSE-Sensex opened the day ion the negative, it was trading higher by around 50 points (0.3%) at the time of writing. Other gainers among the Asian markets included China (up 0.5%) and Korea (up 1.1%). European markets have opened the day on a weak note.

Today's investing mantra "The individual investor should act consistently as an investor and not as a speculator. This means... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase." - Benjamin Graham

This can push India into darkness...

2009-12-07T08:50:00.000-08:00

It is not uncommon for households and industries in India to keep backups for energy supply. After all, load shedding has been a regular menace even in metro and urban areas. As per World Bank, in 2008, India faced a 16.6% shortfall of electricity during hours of peak consumption. This was on the back of a 9.9% gap in energy generation. Coal is seen as the key solution to India's power shortage, a daunting barrier to the country's development. Primarily because people in semi urban and rural areas cannot afford costly electricity produced from renewable sources.

India has 10% of the world's coal reserves. India's reserves are the biggest after the US, Russia and China. However, it had to import about 70 m tonnes of high grade coal in FY09, mostly for making steel. The country plans to add 78.7 gigawatts of power generation during the five years ending March 2012. Most of it will be from coal, which now accounts for about 60% of India's energy mix. Even if India is on track with its renewable energy plans, coal will still account for about 55% of its power supply by 2030.

The emerging economies have often insisted that rich nations have caused global warming. The developed ones that are done with their industrial growth are happy to comply with emission norms. Renewable energy is steadily gaining ground in the West. However, looking at the high cost of solar and wind energy, the questions that arises is - can India afford them? India, the world's fourth largest greenhouse gas emitter is still very low on per-capita emission. The country's industrial electricity tariffs are amongst the highest in the world, a measure aimed at deterring wastage. Nevertheless, it is under pressure to cut pollution to battle climate change. This is at a time when the nation's demand for power is rising with more Indian middle class buying houses and electronic items.

India has committed to contributing towards reducing "carbon intensity". It has set a goal to rein the amount of carbon dioxide (CO2) emitted per unit of economic output by 20 - 25% until 2020. However, what is the price that the nation will have to pay? Does this mean that India's future will once again be pushed into 'darkness'?

01:14 Chart of the day

Source: Mint

China and India are today the toast of the emerging world due to their high GDP growth rates. However, they have also been at the core of green house gas emissions over the past two decades. As today's chart of the day shows, China and India have nearly doubled their carbon emissions since 1990. The World Wide Fund For Nature (WWF) estimates need for emission cuts based on per capita emission. Thankfully, India is very low on this count, even when compared to China. The WWF model projects that the average per capita emission in 2020 needs to be around 4.6 tonnes and between 0.6 and 0.7 tonnes by 2050. India's per capita emission is currently 1.3 tonnes as compared to 5.3 tonnes in China, 15 tonnes in the UK and 20 tonnes in the US.

01:50

Amidst talks of recovery of the Indian IT sector, business dailies have reported a different trend. Many US-based companies are shifting their call center operations back to the US from India. It seems that restrictive government policies and a drive to create jobs back home are triggering these movements. With its low-cost and high-quality talent pool, the US Mideast is being considered as an alternative. Moreover, downturn has taught the US firms to take customers a lot more seriously. They want to ensure full and flawless customer satisfaction. Nevertheless, we do not see a sizeable impact of this trend on Indian BPO industry. India's low cost talent pool and value advantage coupled with expertise in off-shoring services will keep its leadership position intact.

02:40

The man who saved us from the global financial crisis is now warning us against the 'new normal'. This 'new normal' he believes will be a lot different from what the world saw two years back. We are talking about Dr. Y.V. Reddy, the former governor of the Reserve Bank of India. He has said in a recent interview that the exit from the easy money policy is going to be difficult for central banks worldwide.

However, he is of the view that the problems could be managed with a certain amount of coordination. But then he is worried as he says, "...the problem is thereafter, what is the normalcy to which you are going when you exit and that should be the new normalcy and that new normalcy should learn lessons from the past and avoid the same mistakes." We are in complete agreement to these words.

03:35

There have been allegations galore that the US authorities have learnt nothing from the credit crisis. And that they are in fact repeating the same mistakes. Well, thankfully, at least when it comes to credit rating agencies, they have decided to make a clean break with the past. The US Fed has taken a lead on this front. As per Moneynews, the US central bank has decided to widen the field of credit rating agencies. It will allow rating agencies that are registered with the SEC and that have experience in the securities being rated to participate in an 'asset backed securities' purchase program that was initiated by the US Fed. This change is expected to break the oligopoly of the three dominant ratings agencies viz. Standard and Poor's, Moody's Investors service and Fitch Ratings, which together account for 95% of the securities ratings market. Many have held the callousness of these three ratings agencies largely responsible for the sub-prime crisis, the one which nearly brought the US financial system on the brink of a collapse. Thus, by expanding the field, the US Fed seems to have sent a message to investors and public that it is indeed serious about righting some of its earlier wrongs.

04:09

Buyers of any commodity would want a low price. On the other hand, sellers would prefer a higher price. What neither wants is volatility. It ruins the planning process of both the buyers and sellers. It is in this context, we must view the recent statement of Saudi Arabia's oil minister that current global oil prices are 'perfect'. The Organization of the Petroleum Exporting Countries (OPEC), which accounts for roughly 35% of the world's crude supply, has not changed its output level since last year's production cut of 4.2 m barrels per day. And given their preference for oil prices in the range of US$ 70 to US$ 80 per barrel, they are unlikely to change output levels. In our view, crude prices will witness a long term upward rise unless alternate sources of energy reach mass scale and commercial viability.

04:30

The Sensex continues its flirting with the 17,000 level. Probably, with the hope of better times to come. But renowned economist Paul Krugman certainly has a different view for the US economy atleast. The chances of a relapse into recession seem to be steadily rising according to him. That the US is going to have a 'double dip' recession is quite a serious possibility opines Krugman. The reason? First, stimulus driven growth will hit its maximum impact on the level of GDP in the middle of next year. Second, the rise in manufacturing production is to a large extent an 'inventory bounce' (companies restocking their severely cut down inventories), and this, too, will fade out in the quarters ahead. And if the US were to slip into another recession, the consequences for India's optimistic stock markets could also be dire.

04:45

Meanwhile, Indian markets witnessed a volatile trading session today after a weak start and the BSE Sensex was down nearly 118 points at the time of writing. Stocks from the commodity and power sectors were amongst the lead contributors to the overall weakness. Amongst global indices, while the Asian markets are trading a mixed bag, Europe has opened in the red.

04:55 Today's investing mantra
"Any fool can make things bigger, more complex, and more violent. It takes a touch of genius - and a lot of courage - to move in the opposite direction." - Albert Einstein

Here's how you can be like Buffett

2009-12-05T23:48:00.000-08:00

So, want to be like Warren Buffett? It is very simple. Do it like the Omaha's Oracle did it. Easier said than done isn't it, especially in the current environment. The asset class that seems to be the talk of the town is gold and other hard commodities. And to avoid the temptation of investing in them is akin to missing your favorite Tendulkar innings. But if your returns are to come anywhere close to those of Buffett's you may have to curb the instinct. For Buffett has never been a heavy investor in commodities. His disregard for gold is well known and he has never been an admirer of other commodities as well.

Instead, he has poured his entire faith in people and organizations that have turned these so called commodities into something that is perceived to be extremely valuable for mankind and then earned a fat margin in the bargain. In other words, the bluest of the blue chips. Companies that have, year after year, taken in the commodities and done something so valuable with them that their customers have had no hesitation in paying a little more for the same product every year. To sum up, if you want to handily beat inflation, commodities might prove to be a good hedge. We at Equitymaster have traditionally advocated upto 5% investment in gold. But to actually crush inflation, you've got to invest in companies with strong competitive advantages and available at reasonable valuations. And if you take these lessons to heart, ten years from now, you could well be ahead of the pack by a fat margin.

The steep rise in foodgrain prices have almost rendered them unaffordable for an average Indian middleclass household. Drought like conditions in few pockets and floods in some other areas made it all the more easy for the government to reason the steep prices. However, statistics tell a different story.

No doubt the shoddy state of affairs in India's public distribution system is to be blamed. But one wonders if there are other causes for the severe malnutrition and food shortage in remote areas of the country. Particularly in a state like Orissa that is one of India's most mineral-rich states.

As seen in today's chart, data from the Statistical Outline of India shows that the country has consistently increased its food production. Infact, even the per capita production has increased over the past six decades. There are 230 kgs of foodgrains produced a year to feed every Indian today as against a paltry 141 kgs in 1951. Despite this, much of it gets hoarded, wasted or lost in transit much before it reaches the needy. And this could also be a huge factor towards spiraling food price inflation. The government has a tough and imperative job at hand.

"The outside world's image of India now is of cutting-edge competitive companies that are going to take jobs away from the developed world." Few global experts have given such a reference to India in the past. However India's strong fundamentals and well guided crisis-management seems to have cemented its role in leading the global economic recovery. A business daily has quoted none other than the chief of the World Bank, Mr. Robert Zoellick citing his belief that the Indian economy is now a force to reckon with. Infact, the top banker sees both India and China scaling back their GDPs to account for a quarter of the world GDP, as was the case a few centuries ago. However, in the same breath he has added that the US retains a huge amount of dynamism, which is not going away anywhere.

The World Bank is keen to support India's infrastructural growth, including building rural roads. The bank has already lent around US$ 5.3 bn to India so far in FY10 for improving the power, roads, banking, rural development and water sectors. It only remains to be seen if India can make the best use of the funds and the opportunity.

This mega-investor is long on Indian bluechips

2009-12-05T00:19:00.000-08:00

Long term investing is a lesson preached by everybody but practiced by a select few. One of the few that seem to practice it is the big daddy of local institutional investors - the life insurance corporation of India (LIC). In 2009, the insurance giant has raised its holding in several blue chips, ranging from public sector banks to industrial heavyweights in the private sector. As can be seen in the table below, LIC has invested right through out the year. Its investments in the early part of the year have certainly paid off well for the insurer.

Buying on the way up: LIC's acquisition in 2009
Company Stake During
Indian Overseas Bank 2.86 Feb - Mar
Bharati Shipyard 2.62 June
Cummins 2.18 Jan - Mar
Bharat Electronics 2.10 September
Tata Tea 2.09 October
Andhra Bank 2.09 October
PTC India 2.06 July - Sep
Chennai Petro 2.02 Jan - Oct
Ultra Tech Cement 1.92 June
Tata Coffee 0.44 June
Dena Bank 0.35 June
Canara Bank 0.10 January
Container Corp 0.04 October
Syndicate Bank 0.04 September
BHEL 0.03 March

Source: The Economic Times

Interestingly, LIC's investment in listed stocks has on an average been around 37% of the BSE Sensex's market capitalization over the past nine years. Insurance companies have a steady flow of insurance premiums that they need to invest, which certainly helps them maintain a long term outlook. It may be noted that it is this characteristic of insurance companies that fuelled legendary Warren Buffett's investment vehicle Berkshire Hathaway. In our opinion, credit is due to any investor, individual or institutional, that had the good sense of buying great companies when they were being offered at a bargain. On that score, LIC certainly does well.

00:49 Chart of the day
Today's chart of the day shows how the economic packages meant to stimulate economies out of the recession are taking their toll on government finances. In India, the government had to cut excise and customs tax rates, raise government salaries and step up spending on roads and power. As a result, India's national budget deficit, including central and state government finances, may reach 10% of the GDP in FY10 as per the Organization for Economic Cooperation and Development (OECD). In fact, the situation isn't likely to improve rapidly in the years ahead given that measures such as salary hikes are permanent in nature.

Source: OECD Economic Outlook, Nov 09

01:16

SEBI has cracked the whip on brokers after receiving complaints from investors that brokers are misusing their funds. SEBI has now made it mandatory for brokers to maintain member-client agreement, know your client (KYC) form and the risk disclosure document. Furthermore, the investor will specify the stock exchange as well as the market segment where he would like to execute the trade. SEBI has also directed that actual settlement of funds and securities shall be done by the broker. This settlement shall be done at least once in a calendar month or quarter, depending on the preference of the client. In our view, these guidelines will help make the process of trading more investor friendly and transparent. Furthermore, these guidelines will help provide a stricter client broker agreement, and give investors more control over their funds lying with the broker.

01:48

After being adamant on not caving in to the demands of the developed nations especially when it came to the prickly issue of climate change, the Indian government has agreed to soften its stance. The government has said that it was willing to extend more concessions if the rest of the world could arrive at a fair and equitable climate change agreement in Copenhagen. As reported in a leading business daily, the government has pledged a 20-25% cut in emissions intensity per unit of gross domestic product (GDP) by 2020. This is what the environment minister Jairam Ramesh had to say, "India has not caused global warming, but the country will try and make sure that it is part of the solution." Earlier, the stance adopted by India was that cuts should be distributed on the basis of per capita carbon emissions. According to this measure, India is well below the global average and the two lead polluters, China and the US. The fact that the environment minister has chosen to adopt a different approach and also that he was well supported in Parliament means that the country is ready to consider climate change as an important issue and accept moral responsibility.

02:33

How would you like a 150% hike in salary? Yes, that means getting paid two and half times your current salary. If your reaction is 'it is probably too good to be true', think again. Financial services firm Barclays is set to award its 22,000 investment bankers a pay hike of up to 150%. That too with retrospective effect; backdated to June 2009. This is something it has resorted to off late to dodge the government's moves to clamp down on multimillion-pound bonuses. Hefty bonuses have been blamed as one of the biggest causes for chasing short term profits by many banks. That eventually led to the credit crisis which almost took down the entire world's financial system. But financial companies are almost sure to find ways and means around these bonus clampdowns, and this is just one of them.

03:05

While everyone seemed almost unanimous in their view that the subprime crisis was easily the biggest since the great depression, the speed with which the global economy recovered was nothing short of miraculous. And besides having to thank the governments, who kept pumping money into the economy without worrying about near term deficits and public debts, investors also owe a good deal of gratitude to the multilateral lending agency IMF. Of course, IMF's hand was strengthened by the G20 nations who chose to provide more funds to the former but IMF's role in ensuring speedy disbursal of the same and reducing conditions for providing the assistance should also be lauded. As a result of all these efforts, we seem to have avoided the crisis, which was threatening to become far worse.

IMF, however, is not wishing to rest on its laurels. While the withdrawal of stimulus may still be some months away, IMF has declared that it is shifting from rescue efforts to helping take the world economy to its steady state, something it has not been in for over a year now. It would soon develop a set of principles that would ensure an orderly and cooperative exit from fiscal, monetary and financial sector support, observed Reuters. Looks like the IMF wants to have a greater say in global economic affairs and this indeed is a welcome sign. Surely, someone was needed to help prevent the huge imbalances like the US trade deficit and the Chinese trade surplus from pushing the global economy on the brink of a collapse. Hopefully, IMF will discharge its duties just as skillfully this time around as well.

04:06

Political and economic pressures on the dragon nation are rising by the day. Primarily for the China's manipulated currency devaluation and willful support to asset bubbles. However, the country is in no mood to mend its ways. On the contrary, China has squarely placed the blame for the losses in derivatives posted by its companies on foreign banks! A leading Chinese bureaucrat has been quoted by Bloomberg calling the foreign banks 'fraudulent'. He has further blamed the banks for mis-selling the complex financial products to Chinese government owned entities. Chinese companies bought oil and interest-rate linked derivative products from the foreign banks. These brought them derivative losses to the tune of 11.4 bn Yuan in 2008. China has nonetheless rescued its state owned companies from any blame. As in the past, the country seems to be making an attempt to hide its internal loopholes.

US$ 2,000 gold is outdated. It could go to...

2009-12-03T02:41:00.000-08:00

First, the facts. If you were to take a pen and put a small dot on where the gold price has been at the end of every year starting 2000, every dot of yours would have come higher than the one before it. In other words, gold seems to be all set for a ninth consecutive annual gain as investors across the world seek insurance from potential debasement of paper currencies and higher inflation. Under such a scenario, it is quite normal for one to feel that the gold story may have run its course and we could be in uncharted territories where a sharp decline in gold prices could be just around the corner.

Nothing could be further from the truth. Infact, US$ 2,000 gold seems to be passé. The new target is significantly higher than that. Around 30% higher to be precise. What makes us say that? Bloomberg quotes a statement from an influential Chinese official who has suggested that Chinese central bank increase its gold reserves to 6,000 metric tonnes within 3-5 years and possibly to 10,000 tonnes in 8 to 10 years. Considering the kind of furor gold buying to the tune of 200 tonnes by India created, even if China achieves a small portion of its own gold buying objective, the resultant impact on gold prices can only be imagined. Exactly when the price target would be achieved is not known to us. But it certainly looks like US$ 2,000 an ounce gold is old fashioned and we will shortly have a new high to look up to.

TOP MARKET CAP

2009-12-02T00:02:00.000-08:00

Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
3M INDIA LIMITED 3MINDIA 1.13 1,825.65 2,056.61 0.04
AARTI INDUSTRIES LTD AARTIIND 7.37 43.70 322.05 0.01
ABAN OFFSHORE LTD. ABAN 4.35 1,325.15 5,762.70 0.11
ABB LTD. ABB 21.19 743.70 15,759.63 0.31
ABG SHIPYARD LTD ABGSHIP 5.09 188.70 960.89 0.02
ABHISHEK INDUSTRIES LTD. ABSHEKINDS 22.22 14.70 326.63 0.01
ACC LIMITED ACC 18.77 809.40 15,192.95 0.30
ACKRUTI CITY LIMITED ACKRUTI 7.27 537.25 3,907.73 0.08
ADANI ENTERPRISES LIMITED ADANIENT 24.73 822.75 20,349.42 0.40
ADITYA BIRLA NUVO LIMITED ABIRLANUVO 10.30 846.30 8,717.46 0.17
ADOR WELDING LTD ADORWELD 1.36 160.85 218.73 0.00
ADVANTA INDIA LTD ADVANTA 1.68 595.55 1,002.84 0.02
AFTEK LIMITED AFTEK 9.35 16.80 157.13 0.00
AGRO TECH FOODS LIMITED ATFL 2.44 267.05 650.78 0.01
AJANTA PHARMA LIMITED AJANTPHARM 1.17 98.25 115.04 0.00
AKSH OPTIFIBRE LIMITED AKSHOPTFBR 5.90 21.00 123.83 0.00
ALEMBIC LIMITED ALEMBICLTD 13.49 43.35 584.88 0.01
ALFA LAVAL (INDIA) LTD. ALFALAVAL 1.82 1,189.10 2,159.46 0.04
ALLAHABAD BANK ALBK 44.67 135.10 6,034.92 0.12
ALLCARGO GLOBAL LOG. LTD. ALLCARGO 11.18 193.55 2,164.63 0.04
ALOK INDUSTRIES LTD ALOKTEXT 60.57 20.70 1,253.79 0.02
ALSTOM PROJECTS INDIA LTD APIL 6.70 538.90 3,611.93 0.07
AMARA RAJA BATTERIES LTD. AMARAJABAT 8.54 170.35 1,454.90 0.03
AMBUJA CEMENTS LTD AMBUJACEM 152.32 94.25 14,356.02 0.28
AMTEK AUTO LTD. AMTEKAUTO 14.10 185.20 2,611.19 0.05
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
AMTEK INDIA LIMITED AMTEKINDIA 11.22 51.25 574.82 0.01
ANANT RAJ INDUS LTD ANANTRAJ 29.51 132.40 3,907.75 0.08
ANDHRA BANK ANDHRABANK 48.50 115.70 5,611.45 0.11
ANDHRA SUGARS LTD ANDHRSUGAR 2.71 118.35 320.81 0.01
ANSAL PROP & INFRA LTD ANSALINFRA 11.35 67.25 763.29 0.01
APOLLO HOSPITALS ENTER. L APOLLOHOSP 6.18 532.75 3,291.59 0.06
APOLLO TYRES LTD APOLLOTYRE 50.40 47.95 2,416.80 0.05
APTECH LIMITED APTECHT 4.65 169.05 786.12 0.02
AREVA T&D INDIA LIMITED AREVAT&D 23.91 299.05 7,150.41 0.14
ARVIND LIMITED ARVIND 22.65 35.70 808.52 0.02
ASAHI INDIA GLASS LIMITED ASAHIINDIA 15.99 63.90 1,021.94 0.02
ASHOK LEYLAND LTD ASHOKLEY 133.03 53.00 7,050.79 0.14
ASIAN ELECTRONICS LTD ASIANELEC 2.78 41.10 114.40 0.00
ASIAN HOTELS LTD ASIANHOTEL 2.28 428.95 978.16 0.02
ASIAN PAINTS LIMITED ASIANPAINT 9.59 1,707.45 16,377.82 0.32
ASTRAZENECA PHARMA IND LT ASTRAZEN 2.50 945.50 2,363.75 0.05
ATUL LTD ATUL 2.97 81.55 241.89 0.00
AUROBINDO PHARMA LTD AUROPHARMA 5.38 864.25 4,646.66 0.09
AUTOMOTIVE AXLES LIMITED AUTOAXLES 1.51 306.95 463.86 0.01
AVAYA GLOBAL CONNECT LTD. AVAYAGCL 1.42 174.30 248.09 0.00
AVENTIS PHARMA LIMITED AVENTIS 2.30 1,567.55 3,610.17 0.07
AXIS BANK LIMITED AXISBANK 40.19 1,036.85 41,675.91 0.81
B.L.KASHYAP & SON LTD BLKASHYAP 2.05 406.85 835.83 0.02
BAJAJ AUTO FINANCE LTD BAJAUTOFIN 3.66 293.45 1,073.91 0.02
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
BAJAJ AUTO LIMITED BAJAJ-AUTO 14.47 1,637.90 23,697.71 0.46
BAJAJ FINSERV LTD. BAJAJFINSV 14.47 321.45 4,650.85 0.09
BAJAJ HINDUSTAN LTD BAJAJHIND 17.69 220.90 3,906.77 0.08
BAJAJ HOLDINGS & INVS LTD BAJAJHLDNG 10.12 537.35 5,437.10 0.11
BALAJI TELEFILMS LIMITED. BALAJITELE 6.52 54.00 352.14 0.01
BALLARPUR INDUSTRIES LTD BALLARPUR 55.71 24.35 1,356.59 0.03
BALMER LAWRIE & CO LTD BALMLAWRIE 1.63 542.40 883.36 0.02
BALRAMPUR CHINI MILLS LTD BALRAMCHIN 25.68 134.95 3,464.91 0.07
BANK OF BARODA BANKBARODA 36.43 523.80 19,080.27 0.37
BANK OF INDIA BANKINDIA 52.52 389.85 20,473.86 0.40
BANNARI AMMAN SUGARS LTD BANARISUG 1.14 1,202.50 1,375.62 0.03
BASF INDIA LTD BASF 2.82 346.95 978.06 0.02
BATA INDIA LTD BATAINDIA 6.43 180.85 1,162.46 0.02
BEML LIMITED BEML 4.16 1,014.25 4,223.79 0.08
BERGER PAINTS (I) LTD BERGEPAINT 31.89 56.90 1,814.38 0.04
BHANSALI ENG. POLYMERS LT BEPL 16.59 15.00 248.86 0.00
BHARAT ELECTRONICS LTD BEL 8.00 1,810.30 14,482.40 0.28
BHARAT FORGE LTD BHARATFORG 22.27 274.90 6,120.71 0.12
BHARAT PETROLEUM CORP LT BPCL 36.15 605.60 21,894.99 0.43
BHARTI AIRTEL LIMITED BHARTIARTL 379.68 304.55 115,632.83 2.25
BHEL BHEL 48.95 2,230.25 109,175.20 2.12
BHUSHAN STEEL LIMITED BHUSANSTL 4.25 1,345.55 5,714.77 0.11
BIOCON LIMITED. BIOCON 20.00 267.50 5,350.00 0.10
BIRLA CORPORATION LTD BIRLACORPN 7.70 320.90 2,471.10 0.05
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
BLUE DART EXPRESS LTD BLUEDART 2.37 565.00 1,340.63 0.03
BLUE STAR LIMITED BLUESTARCO 8.99 344.45 3,097.85 0.06
BOC INDIA LIMITED BOC 8.53 167.95 1,432.35 0.03
BOMBAY DYEING & MFG. CO L BOMDYEING 3.86 371.25 1,433.66 0.03
BOMBAY RAYON FASHIONS LTD BRFL 8.71 192.40 1,675.80 0.03
BOSCH LIMITED BOSCHLTD 3.14 4,470.60 14,037.19 0.27
BPL LTD BPL 4.85 38.25 185.55 0.00
BRITANNIA INDUSTRIES LTD BRITANNIA 2.39 1,625.55 3,883.47 0.08
CADILA HEALTHCARE LIMITED CADILAHC 13.65 626.50 8,551.66 0.17
CAIRN INDIA LIMITED CAIRN 189.67 285.65 54,178.32 1.05
CAN FIN HOMES LTD CANFINHOME 2.05 85.40 174.94 0.00
CANARA BANK CANBK 41.00 413.90 16,969.90 0.33
CARBORUNDUM UNIVERSAL LTD CARBORUNIV 9.34 146.05 1,363.44 0.03
CAROL INFO SERVICES LTD CAROLINFO 3.54 56.50 200.22 0.00
CASTROL INDIA LTD CASTROL 12.36 541.80 6,698.83 0.13
CENTURY ENKA LTD CENTENKA 2.01 191.90 384.77 0.01
CENTURY PLYBOARDS (I) LTD CENTURYPLY 22.22 41.65 925.35 0.02
CENTURY TEXTILES LTD CENTURYTEX 9.30 485.35 4,515.97 0.09
CESC LTD CESC 12.49 391.75 4,894.36 0.10
CHAMBAL FERTILIZERS LTD CHAMBLFERT 41.62 56.30 2,343.25 0.05
CHEMPLAST SANMAR LTD CHEMPLAST 79.97 9.30 743.72 0.01
CHENNAI PETROLEUM CORP LT CHENNPETRO 14.89 220.15 3,278.28 0.06
CHOLAMANDALAM DBS FINANCE CHOLADBS 6.64 58.45 388.20 0.01
CIPLA LTD CIPLA 80.29 328.80 26,400.05 0.51
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
CITY UNION BANK LTD CUB 40.00 25.45 1,018.00 0.02
CLARIANT CHEMICALS (INDIA CLNINDIA 2.67 415.30 1,107.22 0.02
CMC LTD CMC 1.52 1,342.75 2,034.27 0.04
COLGATE PALMOLIVE LTD. COLPAL 13.60 692.05 9,411.38 0.18
CONSO. FIN. & HOLD. LTD. CONSOFINVT 3.23 50.40 162.92 0.00
CONTAINER CORP OF IND LTD CONCOR 13.00 1,199.55 15,592.09 0.30
COROMANDEL INTERNTL. LTD COROMANDEL 14.01 220.15 3,083.33 0.06
CORPORATION BANK CORPBANK 14.34 453.40 6,503.57 0.13
COSMO FILMS LTD COSMOFILMS 1.94 102.95 200.14 0.00
CRISIL LTD CRISIL 0.72 4,340.75 3,136.19 0.06
CROMPTON GREAVES LTD CROMPGREAV 36.66 406.40 14,897.27 0.29
CUMMINS INDIA LTD CUMMINSIND 19.80 390.90 7,739.82 0.15
D S KULKARNI DEVELOPERS L DSKULKARNI 2.58 70.90 182.93 0.00
DABUR INDIA LTD DABUR 86.58 166.80 14,440.94 0.28
DALMIA CEMENT (BHARAT) LT DALMIACEM 8.09 147.30 1,192.24 0.02
DCM SHRIRAM CONSOLIDATED DCMSRMCONS 16.59 51.70 857.72 0.02
DCW LTD DCW 19.62 21.70 425.70 0.01
DECCAN CHRONICLE HOLD LTD DCHL 24.22 158.80 3,846.50 0.07
DEEPAK FERTILIZERS & PETR DEEPAKFERT 8.82 91.95 811.04 0.02
DENA BANK DENABANK 28.68 81.60 2,340.48 0.05
DHAMPUR SUGAR MILLS LTD DHAMPURSUG 4.76 131.70 626.25 0.01
DISHMAN PHARMA & CHEM LTD DISHMAN 8.07 221.70 1,789.06 0.03
DIVI'S LABORATORIES LTD DIVISLAB 13.06 620.80 8,104.98 0.16
DLF LIMITED DLF 169.72 370.65 62,906.21 1.22
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
DONEAR IND. LIMITED DONEAR 5.20 31.35 163.02 0.00
DR. REDDY'S LABORATORIES DRREDDY 16.87 1,145.00 19,321.33 0.38
DREDGING CORP OF INDIA DREDGECORP 2.80 481.10 1,347.08 0.03
DWARIKESH SUGAR IND LTD DWARKESH 1.63 122.25 199.45 0.00
DYNAMATIC TECHNOLOGIES DYNAMATECH 0.54 899.95 487.30 0.01
EDELWEISS CAP LTD EDELWEISS 7.50 486.35 3,647.91 0.07
EDUCOMP SOLUTIONS LTD EDUCOMP 9.49 756.70 7,179.91 0.14
EICHER MOTORS LTD EICHERMOT 2.67 587.75 1,568.41 0.03
EID PARRY INDIA LTD EIDPARRY 8.63 347.60 2,998.23 0.06
EIH LIMITED EIHOTEL 39.30 139.85 5,495.46 0.11
ELDER PHARMACEUTICALS LTD ELDERPHARM 1.89 262.65 495.29 0.01
ELECTROSTEEL CASTINGS LTD ELECTCAST 30.65 43.15 1,322.75 0.03
ELGI EQUIPMENTS LTD ELGIEQUIP 6.00 83.10 498.60 0.01
ENGINEERS INDIA LTD ENGINERSIN 5.62 1,413.10 7,935.42 0.15
ENTERTAIN NET. IND. LTD. ENIL 4.77 208.30 992.97 0.02
ERA INFRA ENGINEERING LTD ERAINFRA 17.87 201.55 3,601.50 0.07
ESAB INDIA LTD ESABINDIA 1.54 499.90 769.50 0.01
ESCORTS INDIA LTD ESCORTS 8.71 116.00 1,010.34 0.02
ESSAR OIL LTD ESSAROIL 120.15 134.90 16,208.63 0.32
ESSAR SHIP PORT & LOG LTD ESSARSHIP 61.57 62.95 3,875.73 0.08
ESSEL PROPACK LTD ESSELPACK 15.66 42.20 660.86 0.01
EVEREST INDUSTRIES LTD EVERESTIND 1.48 150.60 222.89 0.00
EVEREST KANTO CYLINDERLTD EKC 10.12 144.85 1,465.27 0.03
EXIDE INDUSTRIES LTD EXIDEIND 80.00 110.00 8,800.00 0.17
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
FAG BEARINGS INDIA LTD FAGBEARING 1.66 539.70 896.83 0.02
FDC LIMITED FDC 18.63 63.45 1,181.94 0.02
FEDERAL BANK LTD FEDERALBNK 17.12 243.30 4,165.58 0.08
FEDERAL-MOGUL GOETZE (IND FMGOETZE 5.56 140.95 784.13 0.02
FINANCIAL TECHNO (I) LTD FINANTECH 4.59 1,319.85 6,064.60 0.12
FINOLEX CABLES LTD FINCABLES 15.29 55.00 841.17 0.02
FINOLEX INDUSTRIES LTD FINPIPE 12.45 51.45 640.64 0.01
FIRST LEASING COMPANY OF FIRSTLEASE 2.28 48.75 111.10 0.00
FIRSTSOURCE SOLU. LTD. FSL 42.89 36.70 1,573.89 0.03
FORTIS HEALTHCARE LTD FORTIS 31.73 109.60 3,478.07 0.07
FRESENIUS KABI ONCO. LTD FKONCO 15.82 91.40 1,446.20 0.03
FUTURE CAP HOLDING LTD. FCH 6.35 229.80 1,459.87 0.03
GAIL (INDIA) LTD GAIL 126.85 411.40 52,185.16 1.02
GAMMON INDIA LTD GAMMONIND 10.69 240.60 2,571.07 0.05
GARDEN SILK MILLS LTD GARDENSILK 3.83 77.10 295.22 0.01
GATEWAY DISTRIPARKS LTD. GDL 10.77 132.80 1,430.54 0.03
GEOJIT BNP P. FIN SER LTD GEOJITBNPP 22.45 36.90 828.40 0.02
GEOMETRIC LIMITED GEOMETRIC 6.21 61.00 378.90 0.01
GHCL LIMITED GHCL 10.00 45.05 450.59 0.01
GILLETTE INDIA LTD GILLETTE 3.26 1,374.45 4,478.68 0.09
GITANJALI GEMS LIMITED GITANJALI 8.51 115.50 982.48 0.02
GLAXOSMITHKLINE CONSUMER GSKCONS 4.21 1,392.15 5,854.76 0.11
GLAXOSMITHKLINE PHARMA LT GLAXO 8.47 1,686.55 14,285.59 0.28
GLENMARK PHARMACEUTICALS GLENMARK 26.96 242.65 6,542.18 0.13
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
GMR INFRASTRUCTURE LTD. GMRINFRA 366.74 68.30 25,048.03 0.49
GODFREY PHILLIPS INDIA LT GODFRYPHLP 1.04 1,797.30 1,868.97 0.04
GODREJ CONSUMER PRODUCTS GODREJCP 30.82 288.45 8,889.74 0.17
GODREJ INDUSTRIES LTD GODREJIND 31.84 210.95 6,717.02 0.13
GOKALDAS EXPORTS LTD. GOKEX 3.44 153.15 526.47 0.01
GRAPHITE INDIA LTD GRAPHITE 17.10 71.40 1,220.75 0.02
GRASIM INDUSTRIES LTD GRASIM 9.17 2,398.00 21,984.06 0.43
GREAT OFFSHORE LTD GTOFFSHORE 3.71 545.65 2,026.60 0.04
GREAVES COTTON LTD. GREAVESCOT 4.88 221.20 1,080.37 0.02
GTL INFRA.LTD GTLINFRA 95.08 35.55 3,380.13 0.07
GTL LTD GTL 9.58 350.85 3,359.93 0.07
GUJ IND POW CO. LTD GIPCL 15.13 118.00 1,784.76 0.03
GUJ STATE FERT & CHEM LTD GSFC 7.97 170.10 1,355.62 0.03
GUJARAT ALKALIES & CHEM GUJALKALI 7.34 118.05 867.02 0.02
GUJARAT AMBUJA EXPORTS LT GAEL 13.84 22.40 309.91 0.01
GUJARAT FLUOROCHEMICALS L GUJFLUORO 10.99 131.75 1,447.27 0.03
GUJARAT GAS CO. LTD GUJRATGAS 12.83 232.30 2,979.25 0.06
GUJARAT MINERAL DEV CORP GMDCLTD 31.80 140.05 4,453.59 0.09
GUJARAT N R E COKE LTD GUJNRECOKE 48.09 68.05 3,272.67 0.06
GUJARAT NARMADA FERT. CO GNFC 15.54 94.50 1,468.71 0.03
GUJARAT STATE PETRO LTD GSPL 56.23 99.40 5,589.53 0.11
GVK POW. & INFRA LTD. GVKPIL 157.92 51.25 8,093.45 0.16
HARRISON MALAYALAM LTD HARRMALAYA 1.83 123.30 225.71 0.00
HAVELLS INDIA LIMITED HAVELLS 6.02 400.85 2,411.85 0.05
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
HCL INFOSYSTEMS LTD HCL-INSYS 21.82 152.60 3,329.90 0.06
HCL TECHNOLOGIES LTD HCLTECH 67.19 340.60 22,885.95 0.45
HDFC BANK LTD HDFCBANK 42.74 1,789.70 76,484.18 1.49
HDFC LTD HDFC 28.52 2,804.45 79,996.52 1.56
HEG LTD HEG 4.10 317.75 1,303.48 0.03
HERITAGE FOODS (INDIA) LT HERITGFOOD 1.15 200.00 230.59 0.00
HERO HONDA MOTORS LTD HEROHONDA 19.97 1,730.60 34,557.92 0.67
HEXAWARE TECHNOLOGIES LTD HEXAWARE 14.37 91.20 1,310.09 0.03
HIKAL LIMITED HIKAL 1.64 413.75 680.21 0.01
HIMACHAL FUTURISTICS COMM HIMACHLFUT 44.28 10.10 447.22 0.01
HIMATSINGKA SEIDE LTD HIMATSEIDE 9.85 40.05 394.32 0.01
HINDALCO INDUSTRIES LTD HINDALCO 170.06 142.10 24,165.05 0.47
HINDUSTAN CONSTRUCTION CO HCC 30.32 142.35 4,316.76 0.08
HINDUSTAN MACHINE TOOLS L HMT 46.82 68.35 3,199.95 0.06
HINDUSTAN MOTORS LIMITED HINDMOTOR 16.12 23.70 381.98 0.01
HINDUSTAN OIL EXPLORATION HINDOILEXP 13.05 272.00 3,550.80 0.07
HINDUSTAN PETROLEUM CORP HINDPETRO 33.86 361.00 12,224.44 0.24
HINDUSTAN UNILEVER LTD. HINDUNILVR 218.09 278.65 60,770.73 1.18
HINDUSTAN ZINC LIMITED HINDZINC 42.25 1,179.90 49,854.54 0.97
HONEYWELL AUTOMATION IND HONAUT 0.88 2,148.00 1,899.16 0.04
HOTEL LEELA VENTURES LTD HOTELEELA 37.78 42.15 1,592.53 0.03
HOUSE OF PEARL FASH LTD HOPFL 1.95 87.10 169.85 0.00
HOUSING DEV & INFRA LTD HDIL 34.58 340.10 11,762.11 0.23
HSBC INVESTDIRECT (I) LTD HINVDIR 7.04 263.20 1,852.88 0.04
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
HSIL LIMITED HSIL 5.50 57.25 315.02 0.01
HT MEDIA LIMITED HTMEDIA 23.50 139.70 3,283.24 0.06
IBN18 BROADCAST LIMITED IBN18 17.92 91.65 1,641.92 0.03
ICI INDIA LTD ICI 3.86 578.50 2,233.03 0.04
ICICI BANK LTD. ICICIBANK 111.32 887.20 98,765.50 1.92
IDBI BANK LIMITED IDBI 72.47 125.15 9,070.24 0.18
IDEA CELLULAR LIMITED IDEA 310.01 52.00 16,120.50 0.31
IFCI LTD IFCI 73.78 53.35 3,936.36 0.08
IND SWIFT LABORATORIES LT INDSWFTLAB 2.65 66.60 176.31 0.00
INDIA GLYCOLS LTD INDIAGLYCO 2.79 122.85 342.54 0.01
INDIA INFOLINE LIMITED INDIAINFO 28.60 136.00 3,889.03 0.08
INDIABULLS FIN. SER. LTD. INDIABULLS 30.99 125.75 3,896.75 0.08
INDIABULLS REAL EST. LTD IBREALEST 40.13 213.55 8,570.62 0.17
INDIABULLS SEC. LTD. IBSEC 25.34 35.90 909.78 0.02
INDIAN OIL CORP LTD IOC 242.80 300.90 73,057.09 1.42
INDIAN OVERSEAS BANK IOB 54.48 117.55 6,404.12 0.12
INDO RAMA SYNTHETICS LTD INDORAMA 15.18 32.05 486.59 0.01
INDRAPRASTHA GAS LTD IGL 14.00 172.50 2,415.00 0.05
INDRAPRASTHA MEDICAL CORP INDRAMEDCO 9.17 39.20 359.36 0.01
INDUSIND BANK LIMITED INDUSINDBK 40.99 124.95 5,122.28 0.10
INFO EDGE (I) LTD NAUKRI 2.73 817.75 2,232.07 0.04
INFOSYS TECHNOLOGIES LTD INFOSYSTCH 57.33 2,395.75 137,351.15 2.67
INFOTECH ENTERPRISES LTD INFOTECENT 5.52 289.10 1,597.12 0.03
INFRA. DEV. FIN. CO. LTD IDFC 129.55 168.10 21,777.34 0.42
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
ING VYSYA BANK LTD INGVYSYABK 11.95 311.00 3,715.31 0.07
INGERSOLL-RAND INDIA LTD INGERRAND 3.16 318.95 1,006.86 0.02
INOX LEISURE LIMITED INOXLEISUR 6.19 56.50 349.71 0.01
IPCA LABORATORIES LTD IPCALAB 2.49 954.10 2,379.12 0.05
IRB INFRA DEV LTD. IRB 33.24 258.65 8,596.60 0.17
ISPAT INDUSTRIES LIMITED ISPATIND 122.24 20.35 2,487.67 0.05
ITC LTD ITC 378.36 258.05 97,634.57 1.90
IVRCL INFRAST & PROJ LTD. IVRCLINFRA 13.35 378.30 5,050.49 0.10
J & K BANK LTD. J&KBANK 4.85 620.15 3,006.35 0.06
J B CHEMICALS AND PHARMA JBCHEPHARM 8.43 50.90 429.22 0.01
JAGRAN PRAKASHAN LIMITED JAGRAN 30.12 119.15 3,588.45 0.07
JAI CORP LIMITED JAICORPLTD 17.84 212.15 3,785.80 0.07
JAIN IRRIGATION SYSTEMS JISLJALEQS 7.55 869.20 6,563.30 0.13
JAIPRAKASH ASSOCIATES LTD JPASSOCIAT 140.21 229.25 32,142.03 0.63
JAYSHREE TEA & INDUSTRIES JAYSREETEA 1.12 352.20 393.56 0.01
JET AIRWAYS (INDIA) LTD. JETAIRWAYS 8.63 495.35 4,276.56 0.08
JINDAL POLY FILMS LIMITED JINDALPOLY 2.81 315.25 885.72 0.02
JINDAL SAW LIMITED JINDALSAW 5.47 959.50 5,250.68 0.10
JINDAL STEEL & POWER LTD JINDALSTEL 93.08 706.80 65,787.66 1.28
JM FINANCIAL LIMITED JMFINANCIL 74.98 40.75 3,055.36 0.06
JSL LIMITED JSL 16.21 110.80 1,796.46 0.03
JSW STEEL LIMITED JSWSTEEL 18.70 1,015.85 19,001.34 0.37
JUBILANT ORGANOSYS LTD. JUBILANT 14.75 310.55 4,581.92 0.09
JYOTI STRUCTURES LTD JYOTISTRUC 8.18 146.85 1,201.52 0.02
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
K S OILS LIMITED KSOILS 38.42 64.15 2,464.62 0.05
KAJARIA CERAMICS LTD KAJARIACER 7.36 45.15 332.23 0.01
KALPATARU POWER TRANS. LT KALPATPOWR 2.65 917.55 2,431.51 0.05
KANSAI NEROLAC PAINTS LTD KANSAINER 2.69 1,109.00 2,988.31 0.06
KARNATAKA BANK LIMITED KTKBANK 12.17 128.20 1,560.41 0.03
KARUR VYSYA BANK LTD KARURVYSYA 5.39 372.85 2,009.61 0.04
KCP LTD KCP 1.29 275.60 355.31 0.01
KEC INTL. LIMITED KEC 4.84 570.30 2,760.55 0.05
KESORAM INDUSTRIES LTD KESORAMIND 4.57 351.35 1,607.19 0.03
KIRLOSKAR BROTHERS LTD KBL 10.58 240.15 2,539.93 0.05
KIRLOSKAR OIL ENGINES LTD KIRLOSOIL 19.42 148.80 2,889.29 0.06
KOHINOOR FOODS LIMITED KOHINOOR 2.82 51.05 143.93 0.00
KOTAK MAHINDRA BANK LTD KOTAKBANK 34.70 815.45 28,293.37 0.55
KOUTONS RETAIL (I) LTD KOUTONS 3.06 348.30 1,064.11 0.02
KPIT CUMMINS INFOSYSTEMS KPIT 7.80 120.60 941.26 0.02
KSB PUMPS LTD KSBPUMPS 1.74 396.95 690.85 0.01
LAKSHMI ENG. & FOODS LTD LAKSHMIEFL 6.32 134.35 848.96 0.02
LAKSHMI MACHINES LTD LAXMIMACH 1.24 1,789.60 2,213.60 0.04
LAKSHMI VILAS BANK LTD LAKSHVILAS 9.78 73.15 715.25 0.01
LANCO INFRATECH LTD. LITL 24.08 557.55 13,424.72 0.26
LARSEN & TOUBRO LTD. LT 59.89 1,629.20 97,575.38 1.90
LIC HOUSING FINANCE LTD LICHSGFIN 9.49 869.55 8,254.86 0.16
LUPIN LIMITED LUPIN 8.79 1,400.35 12,314.47 0.24
M&M FIN. SERVICES LTD M&MFIN 9.69 302.30 2,929.30 0.06
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
MADRAS CEMENTS LTD MADRASCEM 23.80 117.00 2,784.24 0.05
MAHANAGAR TELEPHONE NIGAM MTNL 63.00 75.90 4,781.70 0.09
MAHARASHTRA SEAMLESS LTD MAHSEAMLES 7.05 352.70 2,487.71 0.05
MAHINDRA & MAHINDRA LTD M&M 27.88 1,080.15 30,116.88 0.59
MAHINDRA LIFESPACE DEVLTD MAHLIFE 4.08 344.15 1,404.45 0.03
MAHINDRA UGINE STEEL CO. MAHINDUGIN 3.25 53.75 174.59 0.00
MARICO LIMITED MARICO 60.92 102.50 6,243.93 0.12
MARUTI SUZUKI INDIA LTD. MARUTI 28.89 1,587.20 45,855.80 0.89
MASTEK LTD MASTEK 2.69 374.70 1,008.30 0.02
MAX INDIA LTD MAX 23.24 225.55 5,240.80 0.10
MCLEOD RUSSEL INDIA LTD. MCLEODRUSS 10.95 280.75 3,072.97 0.06
MERCATOR LINES LIMITED MLL 23.60 58.85 1,388.81 0.03
MERCK LIMITED MERCK 1.69 548.45 924.75 0.02
MICRO INKS LTD MICRO 2.49 465.55 1,157.91 0.02
MID-DAY MULTIMEDIA LTD MID-DAY 5.28 23.45 123.90 0.00
MINDTREE LIMITED MINDTREE 3.92 649.80 2,546.42 0.05
MIRC ELECTRONICS LTD MIRCELECTR 14.20 17.55 249.21 0.00
MIRZA INTERNATIONAL LIMIT MIRZAINT 9.27 15.10 139.99 0.00
MONNET ISPAT LTD MONNETISPA 4.80 397.40 1,905.85 0.04
MONSANTO INDIA LIMITED MONSANTO 0.86 1,551.35 1,339.00 0.03
MOSER-BAER (I) LTD MOSERBAER 16.83 82.95 1,396.10 0.03
MOTHERSON SUMI SYSTEMS LT MOTHERSUMI 35.56 128.10 4,554.64 0.09
MOTILAL OSWAL FIN LTD MOTILALOFS 14.31 171.85 2,458.35 0.05
MPHASIS LIMITED MPHASIS 20.95 681.15 14,273.34 0.28
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
MRF LTD MRF 0.42 6,076.75 2,577.24 0.05
MRPL MRPL 175.29 79.00 13,847.93 0.27
MUKTA ARTS LIMITED MUKTAARTS 2.26 47.50 107.26 0.00
MUNDRA PORT & SEZ LTD MUNDRAPORT 40.07 556.80 22,309.80 0.43
MUNJAL SHOWA LTD MUNJALSHOW 4.00 52.45 209.70 0.00
NAGARJUNA CONSTRN. CO. LT NAGARCONST 25.66 164.20 4,213.11 0.08
NAGARJUNA FERT & CHEM LTD NAGARFERT 42.78 31.65 1,354.01 0.03
NATIONAL ALUMINIUM CO LTD NATIONALUM 64.43 384.45 24,770.48 0.48
NATIONAL FERT. LTD NFL 49.06 63.85 3,132.34 0.06
NAVA BHARAT VENTURES LIMI NBVENTURES 7.60 374.40 2,844.42 0.06
NAVNEET PUBLICATION I LTD NAVNETPUBL 23.82 40.20 957.62 0.02
NDTV LTD NDTV 6.27 138.90 871.15 0.02
NELCO LTD NELCO 2.28 75.50 172.28 0.00
NEYVELI LIGNITE CORPORATI NEYVELILIG 167.77 151.60 25,434.08 0.50
NIIT LIMITED NIITLTD 16.51 69.10 1,140.81 0.02
NILKAMAL LIMITED NILKAMAL 1.28 154.50 197.49 0.00
NIRMA LTD NIRMA 15.91 184.90 2,942.54 0.06
NMDC LTD. NMDC 396.47 415.75 164,833.07 3.21
NOIDA TOLL BRIDGE CO LTD NOIDATOLL 18.62 39.90 742.92 0.01
NRB BEARING LIMITED NRBBEARING 4.85 57.70 279.62 0.01
NTPC LTD NTPC 824.55 210.45 173,525.80 3.38
OIL AND NATURAL GAS CORP. ONGC 213.89 1,197.80 256,194.15 4.99
OMAX AUTOS LTD OMAXAUTO 2.14 56.00 119.68 0.00
OMAXE LIMITED OMAXE 17.36 96.50 1,674.92 0.03
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
ORACLE FIN SERV SOFT LTD. OFSS 8.38 2,120.20 17,761.21 0.35
ORCHID CHEM & PHARMA LTD ORCHIDCHEM 7.04 202.15 1,423.99 0.03
ORIENT HOTELS LTD ORIENTHOT 1.79 236.70 422.74 0.01
ORIENT PAPER AND INDS LTD ORIENTPPR 19.29 46.55 897.88 0.02
ORIENTAL BANK OF COMMERCE ORIENTBANK 25.05 276.70 6,932.43 0.13
OSWAL CHEM. & FERT. LTD. BINDALAGRO 22.74 18.00 409.34 0.01
P&G HYGIENE & HEALTH CARE PGHH 3.25 1,751.60 5,685.82 0.11
PANACEA BIOTEC LTD PANACEABIO 6.68 186.25 1,244.95 0.02
PANTALOON RETAIL (I) LTD PANTALOONR 15.93 362.85 5,779.89 0.11
PARSVNATH DEVELOPER LTD PARSVNATH 19.86 109.25 2,169.19 0.04
PATEL ENGINEERING LTD. PATELENG 6.69 451.00 3,016.16 0.06
PATNI COMPUTER SYST LTD PATNI 12.84 448.15 5,753.84 0.11
PETRONET LNG LIMITED PETRONET 75.00 69.05 5,178.75 0.10
PFIZER LTD PFIZER 2.98 963.25 2,874.48 0.06
PIDILITE INDUSTRIES LTD PIDILITIND 25.31 194.90 4,932.28 0.10
PIRAMAL HEALTHCARE LTD PIRHEALTH 20.90 396.65 8,290.68 0.16
PNB GILTS LIMITED PNBGILTS 13.50 30.25 408.40 0.01
POLARIS SOFTWARE LAB LTD POLARIS 9.87 173.10 1,708.30 0.03
POWER FIN CORP LTD. PFC 114.78 251.60 28,877.81 0.56
POWER GRID CORP. LTD. POWERGRID 420.88 102.50 43,140.62 0.84
PRAJ INDUSTRIES LTD PRAJIND 18.47 90.35 1,668.63 0.03
PRICOL LIMITED PRICOL 9.00 17.30 155.70 0.00
PRISM CEMENTS LTD PRISMCEM 29.83 43.65 1,301.86 0.03
PROVOGUE (INDIA) LIMITED PROVOGUE 11.64 58.55 681.56 0.01
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
PSL LIMITED PSL 5.35 158.55 847.62 0.02
PTC INDIA LIMITED PTC 29.41 108.90 3,202.58 0.06
PUNJ LLOYD LIMITED PUNJLLOYD 33.18 199.50 6,619.02 0.13
PUNJAB NATIONAL BANK PNB 31.53 920.70 29,029.90 0.57
PURAVANKARA PROJ. LTD. PURVA 21.34 94.85 2,024.33 0.04
PVP VENTURES LIMITED PVP 23.16 26.05 603.43 0.01
RADICO KHAITAN LTD RADICO 10.26 119.40 1,224.89 0.02
RAJESH EXPORTS LTD RAJESHEXPO 25.70 76.90 1,976.39 0.04
RALLIS INDIA LTD RALLIS 1.20 902.55 1,081.67 0.02
RAMCO INDUSTRIES LIMITED RAMCOIND 8.67 57.70 500.05 0.01
RAMCO SYSTEMS LTD. RAMCOSYS 1.54 96.10 147.59 0.00
RANBAXY LABS LTD RANBAXY 42.04 469.40 19,734.39 0.38
RASHTRIYA CHEMICALS & FER RCF 55.17 72.05 3,974.91 0.08
RAYMOND LTD RAYMOND 6.14 191.95 1,178.21 0.02
REDINGTON (INDIA) LTD. REDINGTON 7.85 306.10 2,403.78 0.05
REI AGRO LIMITED REIAGROLTD 31.90 43.15 1,376.38 0.03
REL. NAT. RESOURCES LTD. RNRL 163.31 70.85 11,570.73 0.23
RELIANCE CAPITAL LTD RELCAPITAL 24.56 857.00 21,050.73 0.41
RELIANCE COMMUNICATIONS L RCOM 206.40 176.90 36,512.64 0.71
RELIANCE INDUSTRIAL INFRA RIIL 1.51 938.30 1,416.83 0.03
RELIANCE INDUSTRIES LTD RELIANCE 328.62 1,098.00 360,829.43 7.02
RELIANCE INFRASTRUCTU LTD RELINFRA 22.53 1,080.60 24,342.70 0.47
RELIANCE POWER LTD. RPOWER 239.68 146.65 35,149.07 0.68
RELIGARE ENTER. LTD. RELIGARE 7.64 404.25 3,088.18 0.06
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
RICO AUTO INDUSTRIES LTD RICOAUTO 12.56 28.30 355.41 0.01
ROLTA INDIA LTD ROLTA 16.10 174.80 2,814.64 0.05
RUCHI SOYA INDUSTRIES LTD RUCHISOYA 17.78 87.00 1,547.28 0.03
RURAL ELEC CORP. LTD. RECLTD 85.87 252.25 21,659.70 0.42
S KUMARS NATIONWIDE LTD SKUMARSYNF 21.53 43.20 930.31 0.02
SAKTHI SUGARS LTD SAKHTISUG 3.14 91.80 288.00 0.01
SAREGAMA INDIA LIMITED SAREGAMA 1.47 72.35 106.23 0.00
SEAMEC LIMITED SEAMECLTD 3.39 242.35 821.57 0.02
SESA GOA LTD SESAGOA 82.05 368.10 30,203.14 0.59
SHANTHI GEARS LTD SHANTIGEAR 8.17 42.20 344.84 0.01
SHASUN CHEMICALS & DRUGS SHASUNCHEM 4.82 36.15 174.41 0.00
SHIPPING CORP OF INDIA LT SCI 42.35 147.10 6,229.00 0.12
SHOPPERS STOP LIMITED SHOPERSTOP 3.49 359.00 1,251.68 0.02
SHREE CEMENTS LTD SHREECEM 3.48 1,807.15 6,295.61 0.12
SHREE RENUKA SUGARS LTD RENUKA 31.69 230.55 7,306.13 0.14
SHRENUJ & CO LTD SHRENUJ 6.93 36.40 252.33 0.00
SHRIRAM TRANSPORT FIN CO. SRTRANSFIN 21.16 419.20 8,872.00 0.17
SIEMENS LTD SIEMENS 33.72 536.70 18,095.39 0.35
SIMPLEX INFRASTRUCTURES L SIMPLEXINF 4.95 532.40 2,633.91 0.05
SINTEX INDUSTRIES LTD SINTEX 13.65 254.50 3,473.81 0.07
SIRPUR PAPER MILLS LTD SIRPAPER 1.50 53.85 80.85 0.00
SKF INDIA LTD SKFINDIA 5.27 298.50 1,574.07 0.03
SMARTLINK NETWORK SYS LTD SMARTLINK 3.00 46.55 139.67 0.00
SOBHA DEVELOPERS LTD SOBHA 9.81 236.50 2,319.21 0.05
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
SONA KOYO STER SYS LTD SONASTEER 19.87 16.05 318.98 0.01
SONATA SOFTWARE LTD SONATSOFTW 10.52 36.15 380.15 0.01
SREI INFRASTRUCTURE FINAN SREINTFIN 11.61 77.05 894.90 0.02
SRF LTD SRF 6.05 186.10 1,125.97 0.02
STATE BANK OF INDIA SBIN 63.49 2,291.60 145,489.15 2.83
STEEL AUTHORITY OF INDIA SAIL 413.04 204.90 84,631.91 1.65
STERLING BIOTECH LTD STERLINBIO 25.02 93.75 2,345.59 0.05
STERLITE INDS (IND) LTD STER 84.04 884.65 74,345.27 1.45
STERLITE TECHNOLOGIES LTD STRTECH 6.46 324.90 2,099.08 0.04
STRIDES ARCOLAB LIMITED STAR 4.02 212.00 851.30 0.02
SUN PHARMACEUTICALS IND. SUNPHARMA 20.71 1,539.90 31,893.85 0.62
SUN TV NETWORK LIMITED SUNTV 39.41 344.10 13,560.45 0.26
SUNDARAM FINANCE LTD SUNDARMFIN 5.56 326.35 1,812.94 0.04
SUNDRAM FASTENERS LTD SUNDRMFAST 21.01 53.00 1,113.68 0.02
SUPREME INDUSTRIES LTD SUPREMEIND 2.54 299.95 762.03 0.01
SUPREME PETROCHEMICALS LT SUPPETRO 9.68 26.00 251.78 0.00
SURYA ROSHNI LTD SURYAROSNI 2.60 57.95 150.68 0.00
SUZLON ENERGY LIMITED SUZLON 155.67 81.15 12,632.81 0.25
SWARAJ ENGINES LTD SWARAJENG 1.24 315.20 391.47 0.01
SYNDICATE BANK SYNDIBANK 52.20 93.75 4,893.45 0.10
TAJ GVK HOTELS & RESORTS TAJGVK 6.27 154.30 967.48 0.02
TAMILNADU NEWSPRT & PAPER TNPL 6.92 80.35 556.11 0.01
TAMILNADU PETROPRODUCTS L TNPETRO 9.00 19.00 170.95 0.00
TATA CHEMICALS LTD TATACHEM 23.52 293.85 6,910.45 0.13
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
TATA COFFEE LIMITED TATACOFFEE 1.87 336.35 629.08 0.01
TATA COMMUNICATIONS LTD TATACOMM 28.50 391.35 11,153.48 0.22
TATA CONSULTANCY SERV LT TCS 195.72 685.75 134,216.43 2.61
TATA ELXSI (I) LTD TATAELXSI 3.11 169.70 528.42 0.01
TATA INVESTMENT CORP LTD TATAINVEST 4.13 482.95 1,996.94 0.04
TATA METALIKS LTD TATAMETALI 2.53 112.40 284.24 0.01
TATA MOTORS LIMITED TATAMOTORS 47.98 703.00 33,732.62 0.66
TATA POWER CO LTD TATAPOWER 23.71 1,359.65 32,236.38 0.63
TATA SPONGE IRON LIMITED TATASPONGE 1.54 252.95 389.54 0.01
TATA STEEL LIMITED TATASTEEL 88.74 581.65 51,614.98 1.00
TATA TEA LTD TATATEA 6.18 904.80 5,595.27 0.11
TECH MAHINDRA LIMITED TECHM 12.20 938.30 11,451.30 0.22
THE GE SHPG.LTD GESHIP 15.23 283.10 4,311.32 0.08
THE INDIA CEMENTS LIMITED INDIACEM 28.25 113.50 3,206.94 0.06
THE INDIAN HOTELS CO. LTD INDHOTEL 72.35 88.10 6,373.80 0.12
THE PAPER PRODUCTS LTD PAPERPROD 6.27 59.05 370.17 0.01
THE PHOENIX MILLS LTD PHOENIXLTD 14.48 191.20 2,769.44 0.05
THE SOUTH INDIAN BANK LTD SOUTHBANK 11.30 143.25 1,618.82 0.03
THE STATE TRADING CORPN STCINDIA 6.00 336.10 2,016.60 0.04
THERMAX LTD THERMAX 11.92 595.15 7,091.59 0.14
THOMAS COOK (INDIA) LTD THOMASCOOK 21.14 68.35 1,445.24 0.03
TITAN INDUSTRIES LTD TITAN 4.44 1,340.75 5,951.60 0.12
TORRENT PHARMACEUTICALS L TORNTPHARM 8.46 390.05 3,300.27 0.06
TORRENT POWER LTD TORNTPOWER 47.24 319.50 15,094.72 0.29
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
TOURISM FINANCE CORP. OF TFCILTD 8.07 24.00 193.72 0.00
TRENT LTD TRENT 1.95 823.20 1,608.14 0.03
TRIVENI ENGG. & INDS. LTD TRIVENI 25.79 105.40 2,718.06 0.05
TUBE INVESTMENTS OF INDIA TUBEINVEST 18.48 59.50 1,099.44 0.02
TULIP TELECOM LIMITED TULIP 2.90 932.55 2,704.40 0.05
TV TODAY NETWORK LTD TVTODAY 5.78 121.70 702.99 0.01
TV18 INDIA LIMITED TV-18 18.00 79.00 1,422.17 0.03
TVS MOTOR COMPANY LTD TVSMOTOR 23.75 57.80 1,373.00 0.03
UCO BANK UCOBANK 54.94 57.20 3,142.34 0.06
UFLEX LIMITED UFLEX 6.50 91.90 597.41 0.01
ULTRATECH CEMENT LIMITED ULTRACEMCO 12.45 840.95 10,468.64 0.20
UNICHEM LABORATORIES LTD UNICHEMLAB 3.61 258.20 931.10 0.02
UNION BANK OF INDIA UNIONBANK 50.51 283.95 14,342.82 0.28
UNITECH LTD UNITECH 238.88 88.80 21,212.55 0.41
UNITED BREWERIES LTD UBL 24.00 149.05 3,577.92 0.07
UNITED PHOSPHORUS LIMITED UNIPHOS 43.96 158.05 6,947.30 0.14
UNITED SPIRITS LIMITED MCDOWELL-N 12.56 1,267.90 15,924.10 0.31
UNITY INFRAPROJECTS LTD UNITY 1.34 503.15 672.61 0.01
USHA MARTIN LTD. USHAMART 25.02 74.50 1,864.30 0.04
UTTAM GALVA STEELS LTD UTTAMSTL 11.40 118.40 1,349.45 0.03
UTV SOFT. COMM. LTD. UTVSOF 3.42 475.90 1,627.36 0.03
VARDHMAN TEXTILES LIMITED VTL 5.78 187.10 1,080.85 0.02
VARUN SHIPPING LTD VARUNSHIP 15.00 55.70 835.54 0.02
VENKY'S (INDIA) LIMITED VENKEYS 0.94 249.35 234.18 0.00
Company Name Symbol Issue Cap
in Cr. Close
01/12/2009 Mkt. Capital
in Cr. Weightage
%
VESUVIUS INDIA LTD VESUVIUS 2.03 177.75 360.76 0.01
VIDEOCON INDUSTRIES LIMIT VIDEOIND 22.94 237.15 5,440.38 0.11
VIJAYA BANK VIJAYABANK 43.35 54.40 2,358.34 0.05
VIP INDUSTRIES LTD VIPIND 2.83 143.50 405.58 0.01
VISHAL RETAIL LIMITED VISHALRET 2.24 65.40 146.49 0.00
VOLTAS LTD VOLTAS 33.09 175.75 5,815.30 0.11
VST INDUSTRIES LTD VSTIND 1.54 493.75 762.44 0.01
WELSPUN GUJ ST. RO. LTD. WELGUJ 18.70 280.10 5,238.90 0.10
WEST COAST PAPER MILLS LT WSTCSTPAPR 6.27 70.40 441.75 0.01
WIPRO LTD WIPRO 146.64 638.15 93,580.46 1.82
WOCKHARDT LIMITED WOCKPHARMA 10.94 177.55 1,943.03 0.04
WYETH LTD. WYETH 2.27 739.45 1,680.03 0.03
YES BANK LIMITED YESBANK 29.82 270.30 8,059.54 0.16
ZANDU PHARMA WORKS LTD ZANDUPHARM 0.08 9,833.90 793.01 0.02
ZEE ENTERTAINMENT ENT LTD ZEEL 43.40 263.20 11,423.07 0.22
ZEE NEWS LIMITED ZEENEWS 23.98 60.30 1,445.78 0.03
ZENSAR TECHNOLOGIES LTD ZENSARTECH 2.40 302.50 725.40 0.01
ZODIAC CLOTHING CO. LTD. ZODIACLOTH 0.84 376.35 315.63 0.01
ZUARI INDUSTRIES LTD ZUARIAGRO 2.94 399.45 1,176.00 0.02

Result Analysis

2009-12-02T00:00:00.000-08:00

02 Dec, 2009 09:53 am
Nurturing performance
NecLife (Nectar Lifesciences) is an integrated pharma company, developing, manufacturing and marketing Oral and Sterile Cephalosporins, Semi Synthetic Penicillins and other Active Pharmaceutical Ingredients (APIs). It has now ventured into the manufacture of phyto-chemicals with launch of “N

Is this the surest indicator of a slowdown?

2009-12-01T03:31:00.000-08:00

For someone interested in modern architectural marvels, not knowing Burj Dubai is akin to being a car enthusiast and not knowing the Ferrari! At 2,684 feet, it is the tallest man made structure ever built. And until most recently, it was a testimony to the rapid strides the Emirate kingdom of Dubai had taken in establishing itself as one of the most popular destinations in the world. But henceforth, Burj Dubai is also going to be remembered for something else. It will be remembered for validating once again, an economic theory called as 'The Skyscraper Index'. Created by the economist Andrew Lawrence, the theory states that the building of world's tallest building may be a useful way to predict the onset of a major economic downturn.

Interestingly, in October 2009, Emaar, the construction company that was constructing Burj Dubai announced that it had completed the exterior of the building and within two months, the Dubai government came close to defaulting on its loans. And this is not an isolated case. As shown in the table below, there seems to be a healthy correlation between construction of landmark buildings and the occurrence of a financial crisis.

Skyscrapers & economic crisis: Is there a link?
Year Skyscrapers Height Economic crisis
1907 Singer Building 612 ft US banking panic
1931 Empire State Building 1,250 ft The Depression
1973 Sears Tower, Chicago 1,450 ft Oil crisis
1998 Petronas Tower, Malaysia 1,483 ft Asian crisis
2009 The Burj, Dubai 2,684 ft Subprime crisis?
Source: Research Org.

And this phenomenon could not be without reason? Construction of tall buildings is a long gestation and a capital intensive project and the most favorable time for it to start is during a low interest and strong liquidity regime. Hence, by the time the building gets completed, the loose policy may have run its course and the markets ripe for a correction, leading to the completion of construction coinciding with a slowdown. It should be noted that like all economic theories, this one may also not be a foolproof one, but is definitely an important tool towards assessing the health of the economy.

Is India a global power?

2009-11-28T23:11:00.000-08:00

Thanks largely to globalisation, it is the four BRIC countries (Brazil, Russia, India and China) that have emerged as potential economic giants. As the Economist of Nov 5 points out these 4 powers were, interestingly, statist power, where Governments were dominant and free markets less open. The fall of the Berlin Wall encouraged, in the absence of a viable option, their shift to free market economics. The rest, as they say, was history.

Of the four it was China that has led the economic race and has become the contender for a gradual shift in global power, such as had occurred post World War II, when the US took over the reins from a war devastated UK. This process would take decades, were it to happen, since China does not (yet) have democratic freedom, which was the hope of globalisation.

The current global stock market rallies in the BRIC countries are driven both by better economic fundamentals (the developed world is growing at 1%) as well as the surge in global liquidity as a means to avert a financial collapse. The stock of financial savings in the developed world is 3 times its GDP and this is largely institutionalised. Prior to institutionalisation of savings, in the 60s (when mutual funds came into prominence) individuals held some 75% of equity and institutions (like banks) 25%; the ratio is now more than reversed. Institutional investors look mainly to maximising profits, and move wherever expected returns are higher. This positions India well. But there are some ifs.

One if is the capacity of the global money flow to be able to absorb it. A few countries have, in fear of creating bubbles, restricted foreign inflows. Brazil has constrained its companies from borrowing and has imposed a tax on FII inflows. India, specifically RBI, is also contemplating such move, which may be sensible. However, the Government is keener to let the markets rise, as there is a pipeline of public sector company stock which they wish to sell. This stock could well absorb more foreign inflows.

The bigger if is in the quality of governance and of planning. The political class is Teflon coated and is never ever brought to task. Madhu Koda, former CM of Jharkhand who is being investigated for amassing Rs 2000 crores in 5 years (even as his father remains a subsistence farmer) is but the latest of many examples where no action is taken. Nor has action been taken against political leaders found by the Liberhan commission to have been involved in the destruction of a mosque; that the report also took 17 years to prepare is another indication of poor governance and accountability. According to a report, some $40 b. are paid in bribes in the 4 BRIC countries! Is it any wonder that the Indian Government is not asking Swiss banks for information, as the US has done?

Such poor governance, of course, impacts economic performance. Let us see its impact on the 30 sensex scrips.

Finance companies (ICICI Bank, HDFC, SBI and HDFC Bank) account for 23.2% of weightage of the sensex. Around 80% of banking sector assets are with public sector banks and Government policy is to hold a majority stake in them. The banks are prudently managed, but, not being subject to pressures of corporate democracy, are slow and steady, and have a far lower P/E multiple than warranted by performance. The Government would not put at risk the safety of India's financial system by reducing its stake below majority in all but, say 3 of the largest banks, but that is a politically tough decision no party would ever take the risk of.

Much of India's household savings is channelized through banks, earning a return lower than the rate of inflation thereby eroding wealth. Just consider the figures for FII and Domestic Mutual Fund investment to date in 2009:

Net investment, in Rs crores
FII DMF
Equity 74,193 - 3,554
Debt 9,519 195,464
Total 83,710 191,910

A second wave of crisis is coming... In this issue: » The Dubai debt restructuring sends shivers across markets » Food price inflation highest since

2009-11-28T23:10:00.001-08:00

The developed economies are slowly but steadily recovering from the meltdown. Stock markets have already given their verdict and propelled by massive dosages of liquidity, have staged spectacular recoveries from their shaky lows. Commodity prices are also on their way up. Slowly, but surely the financial crisis is over, right? Not so fast. If the red splashed on stock markets around the world today is any indication.

Debt was fuelling not only the American housing bubble. Closer home, it was fuelling Dubai, which had taken on debt to the tune of US$ 80 bn. Out of this US$ 59 bn was taken by Dubai World, the emirate's corporate arm in charge of its ambitious real estate projects. With the severe correction in real estate prices, these projects have now become the proverbial while elephant.

Yesterday, Dubai asked its lenders to defer its debt repayments by six months. It is also looking towards its oil rich and more financially conservative neighbor, Abu Dhabi, for lending a helping hand. While some help has come it way, it is not enough to completely bail out Dubai.

Bloomberg in fact has quoted Mark Mobius, Chairman of Templeton Asset Management, as saying, "If Dubai has to default, that could start a wave of defaults in other areas. This may be the trigger to allow for the market to take a rest and pull back." Mobius oversees US$ 25 bn in emerging-market assets and has a very good idea on the implications of the Dubai default scare.

These developments show that it is premature to declare that the world economy is out of danger. There could be more countries, especially in Eastern Europe, waiting to be bailed out. The developed economies and especially their banks are still vulnerable. In our opinion, investors would do well to remember that there are substantial risks to the buoyant markets. For every bubble, there is always a needle somewhere. And when they meet, all of us learn some very old lessons.

n this issue: » Dollar falls to a 14-year low against the Yen » Indian companies to look at more foreign acquisitions » Strong growth ahead for the In

2009-11-26T19:21:00.000-08:00

» Dollar falls to a 14-year low against the Yen
» Indian companies to look at more foreign acquisitions
» Strong growth ahead for the Indian healthcare industry
» India and China most likely successors to US, says Bill Gate

If Morgan Stanley India head, Narayan Ramachandran is to believed, Indian companies are expected to raise more than Rs 3 lakh crores (US$ 70 bn) through share sales over the next three years. Speaking at the Reuters India investment summit, Ramachandran, an investment banking veteran, opined that a long list of firms are waiting in the wings, hoping to come out with IPOs and secondary offerings in Asia's third largest economy.

This brings us to our chart of the day. As per data available with CMIE, total funds mobilized through primary markets had reached in the vicinity of US$ 12 bn for the first seven months of the fiscal. And given the healthy pipeline, looks like we could exceed the highs of the past few years pretty comfortably. Soon, it will be like the crisis never happened!

The phenomenon driving emerging markets is...

2009-11-21T20:44:00.001-08:00

If your money doubles every five years, the compounded return that you are earning on your investment is somewhere close to 15%. Similarly, if it is doubling in every four years, the compounded return is in the vicinity of 19%. Have you ever wondered how long it will take to double your money if the interest rate is as low as 0.01%? Well, you don't have to do the math. We will save you the effort and let you know that it will take all of 6,932 years! Yes, you've read that right. It will take a mammoth 6,932 years to double your money if you are earning a return of 0.01%. While this may seem like a joke to you, people invested in the US money market instruments currently are earning just that, a paltry return of 0.01%.

Beware of holding too much cash

2009-11-19T06:04:00.000-08:00

High economic growth and corporate earnings is what he believes will make stocks rise in these markets.

The Economic Times reports Mobius saying that the biggest growth areas in emerging markets are in the consumer and commodity industries. He is also of the view that China and Brazil are among the cheapest markets worldwide.

Well, what's his best advice? It is important for people to be invested and not to hold too much cash at this stage of the game. While we completely agree with him on this count, we would like to add a word of caution. Being invested does not mean putting all eggs in one basket. It also does not mean buying anything and everything that is available. Investors must thus carefully make an attempt to diversify their portfolio and only buy at reasonable bargains.

"Stocks are not terribly expensive"

2009-11-17T07:00:00.000-08:00

INDIAN STOCK» India's urban share is lower but rising
» US economy still faces big challenges, says Bernanke
» MF investors not too enthused about SEBI's move
» India is not a place to do R&D opines Novartis
» ...and more!
SEBIS REDUCULOUS DECISION
to one hand banning commission to mutual fund distributors and other hand allowing brokers to milk their clients by churning their portfolios, readers seemed rather confused about where the mutual fund industry was heading.
Markets got off to a shaky start today and were languishing deep in the red throughout the session as profit booking took toll. At the time of writing, the Sensex was trading lower by 127 points (0.7%). Losses were seen in energy and banking stocks. The Asian indices were trading mixed at the time of writing while the European indices are trading in the red currently.

A member of the World Bank, International Finance Corporation (IFC), plans to invest US$ 1 bn in India this year. IFC has been increasing its exposure to India in the last couple of years to the point that it is now the entity's single largest investment in any one country. These investments will go towards fostering sustainable economic growth, supporting private sector development, mobilising private capital, and providing advisory and risk mitigation services to businesses and governments.

market trends

2009-11-02T04:49:00.000-08:00

OVERBROUGHT STOCKS
ASIAN HOTEL,

OVERSOLD
BAG FILM,BHARTI AIRTEL,BHARTI SHIPYARD,BIRLA POWER,DCB,DISH TV,EDUCOMP

NORMAL
BAJAJ HIND,CAIRN,BALARMPUR CHINNI,RENUKA SUGARS

2009-10-25T09:36:00.000-07:00

YOU BETTER TO HAVE A HEN TOMORROW, TAHN AN EGG TODAY

2009-10-22T07:34:00.000-07:00

Mob:
Email: dmm0258@gamil.com

2009-10-22T07:31:00.000-07:00

1000 rs only per month

2009-10-22T06:56:00.000-07:00

WEEKLY ONE CALL ONLY WITH LOW INVESTMENT AROUND ABOUT 25000/- TARGET ACHIVEMENT IS MAXIMUM THREE MONTHS

2009-10-22T06:50:00.000-07:00

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2009-10-22T06:49:00.000-07:00

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