Technical Buy

Buy Greaves cotton ltd with a target of Rs 90 for a period of 3 months. 

Currently its trading at Rs 66. 

As per following technical parameters its coming to be a buy:

100 day mva : its trading above its 100 day mva. 

MACD : As per this indicator also its coming to be buy. 

Trendline: Its current chart is forming a upward trend. 

Sensex slipss !!

Inspite of the early gains in the sensex, the sensex ends up in red. Why ? The reason fir this is the higher WPI of 7.52. 

This higher wpi raised the concerns of a hike in interst rates by the RBI in its meeting schduled to be held later this week. 

Economic crisis ?

With the beginning of the elections, the indian govt is going to face the pressure of keeping its fiscals goals under their limits. UPA has felt the heat of state elections and in order to sustain its power in other states it would have to loosen its wallets and have to spend with both hands open in order to win the trust of the common man. Already the govt has exhausted its 85% of the expenditure in first half of the fiscal, with very little remaing for the other half and that too in the election times. So its hard to believe that govt can restrict its fiscal deficiet target to 4.8%. At this point of time govt cant even think of reducing the subsidies on diesel etc. In fact govt would try to lure the common man by offering more subsidies and other welfare programmes, that would lead to presure on govt funds and in a way lead to increasing of fiscal defciet. 

Catch The Crash

Is it the time to pessimistic about the Indian Stock Market? If we go as per the macros and the experts, most people will say yes its the time to be pessimistic and advice you to stay away from the Indian Stock Market. But personally i don't think so. As per my view its the time to invest in stock market but in fundamentally strong stocks. People are being very pessimistic and are selling the fundamentally strong stocks also out of panic and fear and this has led to the price of some good stocks also falling down. One should take the benefit of this pessimism and invest in these stocks. When the market will revive and macros will turn to positive from negative then one can earn good returns. My this view has also got the support from an article in Economic Times. Bill McGlashan who heads TPG Growth, an investment platform for growth investments, is optimistic about India.

A testimony to his belief in Indian businesses is that he has moved his residence to Mumbai a couple of months ago. This is very unusual. So many private equity funds have been struggling to survive. And here we have an American who sees opportunity in India.

How does Bill manage to take a contrary view? He says, "Our discipline is around micro stories. We are more concerned about individual companies and try not to get bogged down too much by the macro." Take benefit of this fall of the market. I am not saying that market will not fall further but start investing now in a staggered manner, meaning that dont invest your money in a stock at once, buy at dips. Also invets in one sector. Diversify your portfolio.
Here are some recommendations from me :
IFCI-Financial Instituion
PFC-Finance
HDIL-Realty
TATA STEEL-Iron & Steel
INDIABULLS POWER-Power Genration
STERLING INTERNATIONAL-IT
DENA BANK-Banking

Is it worth doing business in India ?

That the Indian economy is facing challenges is not new. The country is facing a mountainous problem in the form of high deficits, weakening currency and failing investor confidence. This has hurt nearly every industry and company in the country. And this has prompted many of them to move beyond the country's borders to try and boost their fortunes. The country's policy framework has not really helped companies. The red tapism and bureaucratic procedures have made doing business next to impossible. The government dillydallying on existing policies has not helped the situation either. At the same time structural roadblocks have kept inflation high. To add to this is the problem of the falling Rupee. All this have forced RBI to keep interest rates high as well. Therefore the only way out for many companies is to move out of the country. Leading business tycoon, Kumar Manglam Birla has already indicated that he prefer to do business outside the country due to lack of transparency in the government policies. As things are worsening many more businesses seem to be opting to either cancel their expansion plans in India or to shift focus to overseas markets. The only way out is for the government to step in and do its job. But is it willing to do so?

Where will businessmen go? Is growth potential all that matters? The answer seems to be no. Some very critical factors that play a decisive role in where businessmen will invest are red tape, corruption, infrastructure, etc. India ranks very poorly on these important parameters. This explains why despite having great untapped growth potential, the Indian economy is struggling. And this is also why economic activity is shifting out of India. 

An article in The Economist very aptly articulates this point. Here are some noteworthy instances. Indian airplanes are usually serviced in Dubai, Malaysia and Singapore. Why not in India? The reasons are high penal taxes in India and high customs duties on imported spare parts. Many Indians have headquartered their businesses in Dubai. The reason is simple. Dubai offers a much better logistical base with its ports, air links and immigration rules. 

Take Singapore. It is said to be the largest hub for Indian trade. It thrives as an investment banking center owing to stringent regulation of India's banks and debt markets. Indian e-commerce firms too often get their data crunched in Singapore. Similar is the case with legal services. It is worth noting that at least half of all rupee trading takes place outside India. 

Then there is Colombo, a very important port in Sri Lanka. Of the containers bound to India, about 30% go via intermediate hubs fed by small vessels. Why so? There are majorly two reasons. Either big shipping lines do not want to deal with India's customs regime or their ships are too big for India's ports. 

One can understand economic activity moving out of developed economies owing to high costs. But for a developing country like India, it is a very grave sign. Policymakers ought to wake up before India's growth prospects go down the drain. 

Source : Equity Master

All Women Bank

Paving the way for setting up of all-women bank , the government on Thursday approved Rs 1,000-crore seed capital for Bhartiya Mahila Bank Ltd.

The Cabinet cleared setting up of all-women bank, sources said.

The proposed bank will be headquartered in New Delhi. It will start with 6 branches in North, South, West, Central and North Eastern part of the country.

The bank is expected to become profitable in five years of its operation.

The initial capital of Rs 1,000 crore for the bank has been so decided that the bank is not capital constrained for expansion of normal business, he had said.

The move to set up Bhartiya Mahila Bank is aimed at encouraging women in general and women self-help groups (SHGs) in particular, he had said.


The proposed bank is likely to be operational by November this year.

Companies warming up for raising funds through IPO

Even in this sluggish secondary market there are companies that have filed their applications for raising funds through primary market-IPO. Inox Wind, Shemaroo Entertainment & Trimax IT are set to raise funds through IPO.

Lets see whther these companies get the desired response from the investors. 

Experts say that untill there are 5 IPO's from different sector in a month for IPO, it cannot be called the revival of the primary market. So lets see whther these companies can do the magic and bring back the winds of succesful primary market. 

Highlights of New Companies Bill

-- The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20.

-- Independent directors' shall be excluded for the purpose of computing 'one third of retiring directors'.

-- Appointment of auditors for 5 years shall be subject to ratification by members at every Annual General Meeting.

-- 'Whole-time director' has been included in the definition of the term 'key managerial personnel'.

-- The term 'private placement' has been defined to bring clarity.

-- Maximum number of directors in a private company increased from 12 to 15 which can be increased further by special resolution.

-- Financial Year of any company can end only on March 31 and only exception is for companies, which are holding / subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.

-- To help in curbing a major source of corporate delinquency, introduces punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.

-  Under the new bill, companies are required to spend at least 2 per cent of their average net profits for the three immediately preceeding financial years on CSR. This is applicable to companies with a networth of Rs 500 crore or more, or Rs 1,000 crore turnover or Rs 5 crore net profits, who have to set up a corporate social responsibility committee. The companies will also have to give preference to the local areas of their operation for such spending. 

- The concept of One Person Company has been introduced in the new company law.

- The bill increased the number of members of private companies from 50 to 200. This allows companies access to large pool of capital without going public.

- The new bill gives recognition to transfer restrictions on inter-se shareholders – ‘Right of First Refusal’ will be enforceable. This would clear existing ambiguity on legal enforceability on transfer restrictions under JV/shareholder agreements.

- While the old bill only permitted merger of a foreign company with an Indian company, the new bill allows merger of Indian companies into foreign companies which would aid in consolidation of cross-border businesses/assets.

- The new bill permits merger of a listed company with an unlisted one, subject to exit opportunity being offered to shareholders of the listed company.

- While the old bill depended on precedents for merger of a subsidiary with a parent (or between two small companies), the new bill provides a separate and simplified regime for this without any approval from High Court.

- The new bill also gives rights for objections to schemes to only creditors who owed over 5 per cent and minority shareholders with over 10 per cent stake against no thresholds earlier.

- The new bill also has a detailed mechanism for acquisition of shares by majority shareholder from minority shareholders.

- The bill restricts creation of multi-layered holding structures, prohibiting making investments through more than two layers of investment companies.

- The new bill bans holding ‘Treasury Stock’, which is often used by companies to increase shareholding or future monetisation after consolidation.

Source : Internet 

New rules for Buy-Back

Market Regulator SEBI has declared new rules for the buy back. In the new rules the company has to repurchase minimum 50% of their offers. The companies have to complete the buy back in 6 months instead of the 12 months. Those not able to meet the target will be barred from launching new offers for a period of one year. Under the new norms the companies are required to keep 25% of the proposed offer in escrow account so as to check the non serious offers by the companies. These changes in the rules are meant to safeguard the interest of investors because some companies declare buyback in order to raise the prices of the stock.

Stock Recommendation-PFC,IFCI,DENA BANK

As we all know that these days markets are not performing well, so there are plenty of stocks that even though have strong fundamentals, are trading below their intrinsic value. Its the time to buy these undervalued stocks and hold them for certain period to enjoy good returns.

FDI rules for multi brand retail eased

In a bid to attract FDI into India, indian government has eased some rules in multi brand retail. These steps are taken because of the fact that even after 10 months of allowing FDI in multi brand retail no major companies have opened their stores in India.

Following are the changes :

• Foreign retailers are now allowed to open stores in cities having population of less than 1 million. Earlier it was not allowed. a relaxation was permitted only in case of states that do not have single city with the population of 1 million.
• Retailers can now source good from medium,small and micro enterprises, where the investment cap will be 2 million (earlier it was 1 million) to comply with their sourcing requirement of 30%.

Interesting Read

There is always a feeling in India that Indian lawmakers seem to be overpaid in view of the absolutely slow pace of work they are so accustomed to. It appears as if it takes forever for files to move from one place to another. However, as today's chart of the day highlights, Indian lawmakers are also way overpaid as opposed to other countries when one considers the ratio of their salaries to the GDP per person in India. As highlighted, salaries for Indian lawmakers are nearly 8 times higher than India's GDP per person. This contrasts with the 2-4 times GDP per person that lawmakers in rich countries get paid. Of course, there is a lot of income inequality in India and hence the higher ratio for India some would argue. However, try linking these salaries to the performance of law makers and may be it will be hard to justify even the current level of salaries. 

Interesting Read

Taxes are levied for income re-distribution. And this re-distribution job is done by the government. It taxes the rich for benefit of the poor. But when the benefit flows to the government itself, responsible taxpaying citizens are bound to feel cheated. In short, citizen tax enriches the government and not the poor. This is the face of Indian politics. Take the case of Karnataka. Recently, Rs 50 m have been used to buy luxury cars for the ministers of Karnataka. Not that these ministers don't deserve any benefits for serving the nation. But was this expense really needed? It may be noted that Congress came into power in Karnataka recently. The cars that the BJP ministers used previously are in good shape and condition. Hence, the new expense on cars is questionable. More questionable is the state department's policy which provides for allotting new cars every time the government changes! Any minister can also change his car if he wants to in every 3 years. And mind y ou all this money comes from the tax payers' pocket. At a time when most people in India are living below poverty line ruining tax payer's money on such luxury items is questionable. These ministers work for the society in general. Hence, they need to be frugal. 

Deduction on ESOP

In a landmark decision by ITAT that discount on ESOP(employee stock options) will be treated as employee cost and should be allowed as deduction from the business income during the vesting period of the ESOP. Earlier the discount was treat as the capital expense by the tax authorities. But now it will be treated as business expense.
Ex : market price of share is Rs 100. Company issues the stock to its employee at Rs 60. So Rs 40 is discount. Vesting period is 2 years. So now Rs 20(40/2) will allowed as expense for 2 years. 

FDI Mismatch

This is the irony of our government that on one side they are leaving no stone unturned to bring FDI into India and on other side the BIG Multinational Giants are leaving India due to the procedural delays by the government. POSCO and Arcellor Mittal(Odisha Project) are backing out of their plans of investment in India due to the procedural delays and not getting the neccessary approvals. Even the Investment Guru "Warren Buffet" is also moving out of India. His firm Berkshire Hathway that has forayed into India
as the online broker for non life insurance is set to close its business in India. All this has added to the misery of India that is fighting hard to get FDI. "It is like filling the sack that is open from both ends.
You keep filling it from one side and it keep coming out from the other.

Fundamental Buy-Opto Circuts

Sector : Medical Services
CMP : Rs 29.40
Life time High : Rs 262
One year High : Rs 163
Dividend : Rs 3-4 annually ( Return of approx 11% on your investment annually-more than the interest on FD)
Book Value : Rs 70
Net Profit Margin : 34.58%
Return On Net Worth : 19.35%
Return on Long Term Funds : 22.48%
P/E : 2.94(industry p/e is 4.86). It is undervalued.


  

Should you buy a firms's asset or earnings ?

He has never possessed a computer and gets all his prices from the morning newspaper. Further, most of the financial data he wants is delivered to him by mail. Well, this statement does look straight from the 60s and 70s, isn't it? However, this is exactly how a gentleman named Walter Schloss used to invest till over a year back until he passed away. And how did he do with his investing? Well, he knocked the daylights out of market indices over a career spanning nearly 50 years. Little wonder, Warren Buffett used to refer to him as the super investor. 

These were not his only quirks though. In fact, we believe that his biggest quirk had to do with the way he used to pick his stocks. As per him, one of the most important factors to make money in the stock market is buying assets at a discount rather than earnings! 

Well, in a world loaded with PE investors and sophisticated DCF calculations, here is a super successful investor who is actually recommending valuing companies based on assets rather than earnings. Thus, it's important that some light be shed on this anomaly. As per Schloss, earnings can change dramatically in a short time but assets change slowly. Also, one has to know much more about a company if one buys earnings, he further added. 

What this tells us is that Schloss had an absolutely first rate understanding about his circle of competence. And although its size would have been small, he knew exactly where its boundaries lay. You see, Schloss never tried to understand a company's operations intimately. Infact, he stayed totally away from managements too. Consequently, he did not invest in stocks under the assumptions that its earnings would rise. 

Buying assets however does not require one to know which way earnings would go. The idea here is to buy at a significant discount to market value of assets and then to hope that over time, the gap between price and value is filled up. Earnings just don't come into the picture here. If they go up, well and good, but the entry price is not based on the same. 

What investors can learn from people like Schloss and for that matter even Buffett is the art of knowing one's circle of competence extremely well. There are companies out there that lend themselves to both kinds of valuation i.e. asset based and earnings based. However what matters is how well do we know them so that we can arrive at a proper intrinsic value calculation of the stock. Understanding this one crucial factor can make a world of difference to one's investing track record we believe. 

Source:
Equity Master

Increase in FDI Limits

Government has taken a step ahead to catch the rising Current Account Deficit(CAD). It has increased the FDI limit in sectors of telecom and defence. No we have to see whether this effort of the government will prove successful or not.

Benefit for the Economy :
It will reduce the rising CAD and bolster the economy(though its not the permanent solution), but govt have to ensure that same thing does not happen like in the case of FDI in multibrand Retail where even though after allowing FDI in multibrand retail not enough investor came to India because of the stringent restrictions put in by the govt.They have to keep the norms as easy and friendly as possible.

Also FDI in Defence can pose some danger to national security if some loopholes are left in the FDI policy. So stringent control should be imposed on the foreign companies like it is imposed on domestic countries

Benefit for the Companies :
The telecom companies are going to cherish this decision of the cabinet to increase the cap of FDI to 100%. It will allow the companies to reduce their ever increasing debt by selling some stake to the foreign companies.Also those companies who have parked their investments in telcos are likely to get double digit returns on their investments when they sell their stake to the parent co like in case of Piramal group who took 11% stake in vodafone for Rs 5900 crore and now can sell this stake to vodafone and get the double digit returns.

Financial Repression

What is the meaning of Financial Repression ?

A term that describes measures by which governments channel funds to themselves as a form of debt reduction. This concept was introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon. Financial repression can include such measures as directed lending to the government, caps on interest rates, regulation of capital movement between countries and a tighter association between government and banks. The term was initially used in response to the emerging market financial systems during the 1960s, '70s and '80s.

PFC-Technical buy

Current price is Rs 145

As per the MACD and Stochastic indicators its going to move upward. Its also near its 30 day moving average and will cross it in next session. 

This tip is purely based on technical analysis. 

The Rising Current Account Deficiet

Every day we are listening in news that the the CAD is rising due to the outflow of the foreign currency due to selling of bonds and equities of the FII's. This leaves the effect on our share market and the economy. Even the FDI which was done earlier is diluted now as the foreign investors are taking their money back to their country as they are not finding india attractive place to invest anymore. 

FDI is like taking a loan for a long term, we have to repay at some time in future(taking back of money by the companies). Its not a bold method to currect our CAD, if it was a good method then from the last 65 years why is the govt not able to eliminate it. 

FDI is like borrowing the blood of someone to provide energy to our body, but still howfar ?? At the end, only our blood comes to the use of providing strength to our body. 

Similarly, to come out of this vicious circle of CAD our govt should focus on increasing exports and reducing the imports instead of focusing on bringing the FDI to india. 

Exports will work like our own blood in the body. In the long term, only this can take india out of this viscious circle of CAD. 

We are the worlds largest agricultual economy even then we are short of foodgrains , why ? The foodgrains are getting rotten at the warehouses, they are wasted, all this due to the faulty policies of the govt. If we put in correct policies we can export theses agricultural produce after fullfilling the needs of our people. 

We have the power to become self sufficient and export oriented country. 

Sakthi Finance-Fundamental Buy

Sakthi Finance

CMP(as on 10/7/13) : 11.75
Market Capital : Rs 59 crore
Promoter holding : 64.23%
Industry : Finance leasing & hire purchase
Highest Price : 35.90 on Jan 4, 2008
P/E : 4.11 as compared to industry P/E of 16.76( This means its still undervalued)
Dividend : It pays Rs 1 per share on your investment of Rs 11.75,ie, 8.50 % return on your amount. This is at par with the interest rate of FD and that too its tax free income. This is not the end. The appreciation which it will give in 5 years is excluded.
Total return in 5 years : 10%(approx) dividend each year( 50% in 5 years)+appreciation( target is rs 30 but it can vary in these 5 years. EX: it can go rs 20 in one year and again come to rs 10 again). Total Return is 250% on your invest.
Book Value : 26.80
Return on Capital Employed : 12.33%
Operating Profit Margin : 73.93%
Net Profit Margin: 10%

Note: Recently it declared dividend of RS 1 per share when price was Rs 10(approx), this means a return of 10% is already enjoyed by the holder of these stocks.

UTI ULIP

UTI ULIP is a good investment option which give its buyer the insurance cover in addition to the returns on the amount invested. Further the amount invested here is also available as deduction u/s 80C of the Income Tax Act. The plan has two terms: 10 years or 15 years. So if you choose to invest 10 lakh ( called Target Amount) for 10 years then you have to pay a premium of 1 lakh each year for 10 years and this premium is allowed as deduction u/s 80C (subject to the upper limit of 1 lakh). Now this target amount will also be your Life Insurance Cover. The UTI will pay the premium for this life cover to LIC under the group insurance plan. After deducting the premium paid to LIC from the annual amount contributed by you, you will be allotted the ULIP units at the current NAV. Ex: If you deposit 1 lakh each year and the UTI paid the insurance premium of say Rs 500 to LIC and the NAV of one unit of ULIP is say Rs 20 then you will be allotted (100000-500)/20=4975 units.

You can opt from two types of insurance cover:
• Declining Term Insurance
• Fixed Life Insurance

Declining Term Insurance : In our example, since your target amount is Rs. 10 lakhs, that’s your insurance cover and you pay Rs. 1 lakh every year for 10 years.
Your insurance amount is what you haven’t paid to them yet. So, if you paid one year worth of instalment which equal Rs. 1 lakh then your insurance cover is Rs. 9 lakhs. Now in the second year you paid another 1 lakh ( Total 2 lakhs), now your insurance cover will be 8 lakhs and so on.
Nothing is payable on death within 6 months of buying the policy.
You only get half of what’s due if death occurs between 6 and 12 months of taking the policy.

Fixed Term Insurance : This insurance plan works like the normal term insurance plan where the target amount becomes your insurance cover and is paid upon death. The conditions of 6 months and 1 year is applied here also.


Investment Criteria: The UTI will invest this corpus in debt oriented scheme. It can also invest in equity market but upto 40% of the amount of corpus.

Returns: The fund page shows that it has returned 10.87% since inception, 3.88% in 2011-12, 8.81% in 2010-11 and 35.87% in 2009-10, which are fairly good numbers. The plan doesn’t pay out any dividend as they re-invest the amount back in the fund.

Maturity bonus: There is a maturity bonus where you get 5% of the target amount on the maturity of a 10 year plan, and 7.5% of the target amount on the maturity of a 15 year plan.


Expert View : As per our view this is a good investment plan that will also cater to your insurance needs in addition to the returns it will generate over the period and you don’t have to buy an insurance plan separately .

Food Inflation

Hi Friends
Have you ever wondered why the food inflation is going up day by day and year on year. Is it because of the  RBI not going for the rate cut or the because of the government's faulty policies or because of the rainfall unequal distribution. For this food inflation partly the governments's policies are responsible and partly the MIDDLEMEN. These middle men are at the edge of getting the food items directly from the farmers because of the Licence they hold. In India farmers can sold their produce only to the Licensed Middlemen. These middle men hoard the farm produce and create an artificial shortage which leads to shooting up of the prices. This all can be stopped if the Government bring some change in its policies and allow the farmers to sell their produce directly to the consumer. This will eliminate the need and hardships of the middlemen and the prices of the farm produce will be back to their normal prices.

Regards
Pankaj Nayyar
Chartered Accountant

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