October 24, 2006


Books That Will Make You a Better Investor

Adventure Capitalist by Jim Rogers
Jim Rogers has logged more miles searching for investment opportunities than anyone alive. Adventure Capitalist is the story of his three-year trip across the world, looking for adventure and investments.

Investment Biker by Jim Rogers
The legendary Jim Rogers’ first book. International finance, wild travel stories, and investment 101 through South America, Europe, Asia, Australia, and Africa. All on motorcycles.

Eat the Rich by P. J.O'Rourket
Force your children to read this book and learn how the world really works. It’s the best explanation of economics available... and hilarious.

Reminiscences of a Stock Operator Edwin Lefèvre and Roger Lowenstein
At his height in the 1920s, Jesse Livermore was one of the biggest traders in the world. This account of Livermore making and losing huge fortunes contains the commandments of speculation. One of our favorite quotes from the book:

“There is nothing new in Wall street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

Winning on Wall Street by Marty Zweig
Marty Zweig
is one of the greatest market analysts ever. Learn how he does it.

Liar’s Poker by Michael Lewis
Michael Lewis’ classic story of rising through the Solomon Brothers’ system.

Hedgehogging by Barton Biggs
Great collection of stories by famed hedge fund manager/analyst Barton Biggs.

Wall Street Meat by Andy Kessler
Andy Kessler’s first-hand account of the late 90s tech boom.

Market Wizards by Jack D. Schwager
Interviews with the best traders and investors in the world. The Jim Rogers interview might be the most important 40 pages you’ll ever read about investing.

The New Market Wizards by Jack D Schwager
More interviews with the best traders and investors in the world.

Stock Market Wizards by Jack D Schwager
More of the first two.

Trade Your Way to Financial Freedom by Van K Tharp
The two major lessons to learn from this book: How to exit an investment, and how much to bet on it.

The Mind of Wall Street Leon Levy, Eugene Linden, and Alan Abelson
The late Leon Levy made a fortune on Wall Street. This book is full of real stories explaining how he did it.

Devil Take the Hindmost by Edward Chancellor
The best book on financial bubbles… a much easier read than Extraordinary Delusions and the Madness of Crowds.

Fooled by Randomness by Nassim Nicholas Taleb
With stories about the huge role randomness plays in life, Nassim Nicholas Taleb takes the wind out of Wall Street’s sails.

Practical Speculation by Victor Niederhoffer, Laurel Kenner
Vic Niederhoffer’s chapter on technical analysis alone is worth the price of the book.

Hot Commodities by Jim Rogers
The master, Jim Rogers, on the basics of commodity investing… and his favorite ways to play the commodity boom.

Tomorrow's Gold by Marc Faber
The investment outlook for the next fifty years by the brilliant Dr. Marc Faber. Hint: it’s about Asia.

Pit Bull by Martin Schwartz
Few people can make a dime by independently trading short-term market movements. Marty Schwartz made millions doing it. Pit Bull is his book. The story about his wife’s mink coat is hilarious.

October 23, 2006

Markets begin new year on low note

Thin volumes, profit booking affect share prices

Samvat 2063 commenced on Monday on a weak note with the BSE Sensex and NSE S&P CNX Nifty toting up losses. Thin volumes and profit booking, ahead of festive holidays, impacted share prices. BSE Sensex closed 113.54 points or 0.89 per cent down at 12,623.28 points. NSE Nifty index closed lower 0.71 per cent at 3657.30 points.

On Moorat trading day, the Sensex ended higher by 27 points to close at 12,737 points.

Weak volumes

"Holidays have been the reason for weak volumes. Markets are consolidating from their record high and this correction is expected to continue for a while. Also, the roll-over trading for Wednesday was carried today," said Mr Kunj Bansal, CIO, Religare Securities.

Stocks worth Rs 2,430.89 crore were traded on the BSE.

All indices ended in the red with the BSE consumer durables index being the biggest loser, down 1.88 per cent at 3,356.69 points. "Even FII interest has been very weak. Only sugar stocks gained at the end of trading on reports that the Government may lift the ban on sugar exports," said Mr Shailesh Shah, broker, Rapid Capital Services. FIIs were net buyers for Rs 58.04 crore as per provisional figures on the NSE.

The markets will remain closed on Tuesday and Wednesday.


October 22, 2006

Books Every Investor Should Read

These are classic books on investing that make for great reading. This will set you on the path to investing enlightenment.

"The Intelligent Investor" (1949) by Benjamin Graham Published in 1949,
"The Intelligent Investor" won't tell you how to pick stocks, but it does teach sound, time-tested principles that every investor can use. Plus, it's worth a read based solely on Warren Buffett's testimonial: "By far the best book on investing ever written."

"The Warren Buffett Way" by Robert Hagstrom
This book describes the investment ideas & philosophy of Warren Buffett

"The Scam" by Sucheta Dalal & Debashis Basu
This book gives you an insight of the who won, who lost, who got away from the scams which took place in the Indian capital market.

"Common Stocks And Uncommon Profits" (1958) by Philip Fisher Fisher.
"Common Stocks And Uncommon Profits" teaches investors to analyze the quality of a business and its ability to produce profits. Lessons are just as applicable half a century later.

"How To Make Money In Stocks" (1988) by William J. O'Neil
This is a great book to start with. Reading this book will provide you with a tangible system that you can implement right away in your research.

"Learn To Earn" (1995), "One Up On Wall Street" (1989) or "Beating The Street" (1994) by Peter Lynch
All three of Lynch's books follow his common sense approach, which insists that individual investors, if they take the time to do their homework, can perform just as well or even better than the experts.

"Stocks For The Long Run" (1994) by Jeremy Siegel
The book draws on extensive research over the past two centuries to argue not only that equities surpass all other financial assets when it comes to returns, but also that stock returns are safer and more predictable in the face of the effects of inflation.

"The Essays Of Warren Buffett: Lessons For Corporate America" (2001) by Warren Buffett and Lawrence Cunningham
This book is a collection of letters that Buffett wrote to shareholders over the past few decades. It's the definitive work summarizing the techniques of the world's greatest investor.

"Rich Dad Poor Dad" (1997) by Robert T. Kiyosaki
This book is all about the lessons the rich teach their kids about money, which, according to the author, poor and middle-class parents neglect. It holds an important financial lesson that may motivate you to start investing: the poor make money by working for it, while the rich make money by having their assets work for them.

"Common Sense On Mutual Funds" (1999) by John Bogle
If you own mutual funds, you should read this book.


October 21, 2006

Trading Rules

These are some of the trading rules which are universally valid for stock trading.

  • Never risk more than 10% of your trading capital in a single trade.

  • Always use stop loss orders.( Here you should know your loss you can give in a situation where the trade starts going against you.)

  • Never do overtrading.

  • Never let a profit run into a loss.

  • Don't enter a trade if you are unsure of the trend.

  • When in doubt, get out, and don't get in when in doubt.

  • Only trade active markets.

  • Distribute your risks equally among different markets.

  • Never limit your orders. Trade at the markets.

  • Extra monies from successful trades should be placed in a separate account.

  • Never trade to scalp a profit.

  • Never average a loss.

  • Never get out of the market because you have lost patience, or get in because you are anxiously waiting.

  • Avoid taking small profits and large losses.

  • Never cancel a stop loss after you have placed it.

  • Avoid getting in and out of the market too soon.

  • Be willing to make money from both sides of the market.

  • Never buy or sell just because the price is low or high.

  • Never hedge a losing position.

  • Never change your position without a good reason.

  • Avoid trading after long periods of success or failure.

  • Don't try to guess tops or bottoms.

  • Don't follow a blind man's advice.

  • Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.

  • When you lose don't blame it on luck.

  • Source

    Snapshot of Tata group's takeovers abroad

    NEW DELHI: Tata Steel's successful move to acquire its much bigger rival Corus Group is the latest in a series of takeovers abroad executed by India's largest and one of the oldest corporate groups. The acquisitions have meant that 30 per cent of the gro up's revenues today come from overseas operations.

    Following are the major acquisitions by Tata Group companies in the past few years:

    * Tata Tea acquires 30 per cent in US' Glaceau (Energy Brands) in August 2006 for $677 million

    * Tata Tea buys 33 per cent in South African tea company Joekels through its subsidiary Tetley group

    * Tata Tea acquires US-based Eight'O clock coffee company for $220 million (Rs 1,050 cr) in June 2006

    * Tata Chemicals picks 63.5 per cent in UK's Brunner Mond Group for Rs 508 crore in December 2005

    * Tata Steel acquires Millennium Steel of Thailand in December 2005 for $404 million (Rs 1,800 crore)

    * TCS buys out Chilean BPO firm Comicorn for $23 million (Rs 107.02 crore) in November 2005

    * TCS acquires Sydney-based FNS in October 2005

    * Tata Technologies purchases INCAT International, UK in October 2005 for $91 million (Rs 411 crore)

    * Tata Tea acquires Good Earth Corp in October 2005 for around $32 million

    * Tata Auto Comp (TACO) takes over German auto components maker Wundsch Weidinger

    * VSNL acquires Teleglobe International in July 2005 for $239 million

    * Tata Steel buys Singapore's NatSteel in August 2004 for over Rs 1,300 crore. - PTI


    Stock markets may light up, post-Diwali

    Traditionally strong third quarter to aid rally.
    Three events that have an undeniable influence on the stock markets are the Union Budget, Infosys' earnings announcement and Diwali. It is a belief in the stock markets that markets rally before Diwali. Such is the unshakeable faith that investors have in this tradition that one common phrase that was repeatedly uttered during June and July 2006 was - "Markets will be at a new high by Diwali".

    And Diwali has lived up to its reputation this year too. However, our study of the gains made by the Sensex one month prior to Diwali and one month after reveals that the probability of a post-Diwali rally is higher than that of a pre-Diwali rally. But, in the years in which the Sensex plunged prior to Diwali, an intermediate term reversal happened around the Moorat trading session that took the Sensex up by more than 10 per cent.
    Post-Diwali rally
    In the period from 1999 to 2006, the markets have recorded negative returns thrice prior to Diwali, in 1999, in 2000 and in 2005. In all these three years, the prevailing downtrend reversed on the Diwali day. In 1999, the post-Diwali rise saw the Sensex gaining 32 per cent in the months following Diwali. In 2000, the Sensex gained 19 per cent and in 2005, the gain in the months after Diwali was 65 per cent.

    The gains made in stock prices in one month following Diwali show that the festive cheer generated by this festival lasts long after the actual celebration ends. The maximum monthly gain of 12.6 per cent was made in 2005. But we all know that this rally went all the way to a high of 12,671.
    Strong quarter
    This post-Diwali rally in prices can be partly attributed to the fact that the third quarter is typically a strong quarter for equity markets around the world. Prior to 2000, domestic stockbrokers would build positions in fundamentally strong stocks in anticipation of FIIs making fresh purchases from January of the following year. Fund managers like to report a healthy return on their funds/portfolios on December 31 and hence keep the prices buoyant in this period.

    The Sensex is currently perched at a new all-time high. Easing of global liquidity concerns, cooling off of crude oil prices and fresh re-rating of corporate India after the second quarter results will keep the markets from sliding sharply in near future.
    It is difficult to see how the Diwali magic will fail to work this time around too

    23 Indian cos in Forbes Asia list of `best under a billion'

    There are 23 Indian companies figuring in the Forbes Asia 2006 list of 200 leading publicly quoted companies in the region with sales of less than $1 billion.

    The companies are Asian Paints, Bajaj Hindustan, Balakrishna Industries, Balrampur Chini mills, Bharat Forge, Cadila Healthcare, Carborundum Universal, Cipla, Dabur India, Essel Propack, FDC, GE Shipping, Grindwell Norton, I_Flex Solutions, JB Chemicals. Kirloskar Oil Engines, Maharashtra Seamless, Mastek, Pantaloon Retail, Punjab Tractors, Rolta India, Sesa goa, Thermax.

    The criteria for entry into the list included not just sales of less than $1 billion but also "solid top and bottomline gains and potential for more success" says a press release from Forbes.

    Taiwan had the highest entries at 31 while 29 small and midsize enterprises from China, 27 from Australia and 19 each from Singapore and Japan made it to the list.

    The list has a strong representation from the manufacturing sector and businesses providing basic material that go into manufactured goods and into factories, housing and office towers.

    `Weird and wonderful'
    There are also some "weird and wonderful" companies on the list, says the press release. There is a Taiwanese company that makes slot machines that speak Chinese, Singapore snack maker Want Want Holdings, which sells rice crackers and gummy sweets, and Tong Ren Tang's Chinese medicine shops that have been concocting remedies out of cicada skins and jujubes since 1669.

    The 2006 Best Under a Billion list appears in the October 30 issue of Forbes Asia.

    October 20, 2006

    Britain's Corus Agrees to $8B Takeover Offer From India's Tata Steel

    Britain's Corus Group PLC agreed to an $8 billion takeover offer Friday from India's Tata Steel in a deal that extends the consolidation of the world's steelmaking industry.

    The bid of 4.3 billion pounds for Europe's second-largest steel producer would be the largest takeover ever by an Indian company.

    Tata, currently ranked as the world's 56th largest steelmaker, bid 455 pence ($8.51) per share for Corus which ranks as the world's eighth largest steel producer.
    A combined Tata-Corus would have annual steel production of 25 million tons, making it the world's fifth- or sixth-largest steel producer.
    Consolidation of the steel industry has been a hot topic since Mittal Steel Co. NV won its battle to take over Arcelor SA earlier this year in a deal that will create a titan with control of close to 10 percent of global production.
    Corus shares fell 1.5 percent to 471.25 pence ($8.82) in early trading on the London Stock Exchange. Tata Steel shares rose 1.2 percent to close at 508 rupees ($11) on the Bombay Stock Exchange.
    "This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion," Ratan Tata, chairman of Tata Steel, said in a statement released by the two companies to the London Stock Exchange. "We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread."
    Corus has previously said it would make sense for the company to team up with a partner with assets in countries such as Brazil, India and Russia.
    "This combination with Tata, for Corus shareholders and employees alike, represents the right partner at the right time at the right price and on the right terms," said Jim Leng, chairman of Corus.
    Corus Chief Executive Philippe Varin said in a conference call that there would be no job cuts because of the deal.
    "This deal is not about job losses. This is about bringing together global companies with outstanding position," Varin said. "With this (deal) Corus will become a globally competitive company."

    Tata Steel's Managing Director B. Muthuraman said the two companies will run as parallel entities until they are integrated over the next year.
    Tata agreed to inject 126 million pounds ($235.7 million) into Corus' pension fund.
    Tata Steel, a part of the sprawling Tata Group that has interest spanning from hotel and automobiles to steel and software, plans to raise its capacity to 30 million tons by 2015 through a mix of acquisitions and greenfield projects in India and overseas.
    The company currently produces 9 million tons of steel annually and is among the lowest cost producers of steel in the world.
    Last December, it bought Thailand's Millennium Steel PCL that has a capacity of 1.7 million tons. In February 2005, Tata Steel acquired the steel-making operations of Singapore's NatSteel Ltd., winning access to its operations in seven countries, including two steel processing plants in China.
    AP Business Writer Rajesh Mahapatra in New Delhi contributed to this report.

    October 13, 2006

    Impact of Inflation

    Running to Stand Still (or, the Impact of Inflation and Taxes)

    Everyone knows that inflation eats into savings and increases costs. But what a lot of people grapple with is how does one insure oneself against inflation? In this article we discuss why it is important to invest wisely particularly if you do not want to keep running (working hard) just so that you can stand still (maintain your current standard of living).

    Consider the post-tax, real rate of return

    Whenever you consider an investment option, remember to evaluate the expected rate of return in real terms. In other words, deduct your expected compound annual rate of inflation for the investment period from the compound annual rate of return that you expect from your investment.
    For example, say you are considering a bank fixed deposit that promises you an 11% annual rate of return over the next five years and your expectation of inflation during this period is 7% (compound annual). For this investment, your real compound annual rate of return is only 4%. If your income from this investment attracts a 30% tax rate, then your post-tax real rate of return diminishes further to 0.7% only! A number nowhere near the 11% that you might be using to evaluate this investment option!!
    An investment with such characteristics is a classical example of running to stand still. Let’s look at how you could improve your 0.7% return. If you are willing to take on a slightly higher level of risk, you could invest this money into an income mutual fund with a dividend investment plan option. Such an investment is likely to yield around 11% post-tax return (since dividend income from mutual funds is non-taxable). This would effectively result in a post-tax, real rate of return of 4%, far higher than the 0.7% that the bank fixed deposit would earn for you. On a 10-year perspective, Rs10,000 invested today in bank deposits (yielding 0.4% post-tax, real rate of return) would be worth Rs10,722 whereas the same amount invested in an income mutual fund is likely to be 38% higher at Rs14,802. Presumably, this should compensate you for the slightly higher risk to which your investment is exposed.

    The above example highlights that inflation and taxes are important factors to consider while evaluating investment returns and how a little more attention to your investment decisions can result in a significant improvement in your financial health.


    Power of Compounding

    First Principle: There is no such thing as simple interest

    Simply put, compounding refers to the re-investment of income at the same rate of return to constantly grow the principal amount, year after year. Cumulative fixed deposits are a prime example of compounding at work, wherein the total interest that you get paid for the period is in excess of the rate of interest multiplied by the period of the deposit.You often see advertisements taken by borrowers of money (e.g., banks, finance companies, manufacturing companies, etc) who promise you rates of return that seem to be far in excess of prevailing interest rates. These advertisements are very often misleading because what the borrower is referring to is the simple interest that you will earn during the period of your investment. And not the `rate of interest' that is being compounded each year. Which brings us to the first principle of compounding. `There is no such thing as simple interest'.And it would help your financial cause a great deal if you applied this principle when you invest or lend money. Because anyone who lends you money is sure to apply it!!

    Second Principle: The smallest rate differential has a BIG impact over time

    Would you care too much whether your rate of return is 12% or 14%? The fact is that if you did, it would make a big difference to your wealth as time progresses. The benefit from compounding arises primarily from the fact that income keeps growing the principal to generate higher absolute returns each year. Higher rates of return or longer investment time periods increase the principal amount in geometric proportions. The table below shows you how a single investment of Rs100 will grow at various rates of return. 5% is what you might get by leaving your money in a savings bank account, 10% is typically the rate of return you could expect from a one-year bank fixed deposit, 15% is what you could expect by investing in relatively riskier company fixed deposits and 20% or more is what you might get if you prudently invest in equity shares.

    The Impact of Power of Compounding

    Use the table below, to see the impact of the power of compounding with different rates of return and different time periods.
    One time Investment : Rs. 10,000/-

    Year - 5% - 10% - 15% - 20%
    Year 1 - Rs.10,500 - Rs.11,000 - Rs.11,500 - Rs.12,000
    Year 5 - Rs.12,800 - Rs.16,100 - Rs.20,100 - Rs.24,900

    Year 10 - Rs.16,300 - Rs.25,900 - Rs.40,500 - Rs.61,900
    Year 15 - Rs.20,800 - Rs.41,800 - Rs.81,400 - Rs.1,54,100

    Year 25 - Rs.33,900 - Rs.108,300 - Rs.3,29,200 - Rs.9,54,000
    By now, you've probably figured out the obvious conclusion from the above table. It is literally 'a waste of time and money' to let your wealth lie in low-income investments for prolonged periods of time. You’ve obviously also realised that TIME is the magic wand for compounding!! For shorter periods of time, although different rates of return do result in different wealth levels, the impact is not earth shattering. However, the longer the period for which the investment is made (say over 10 years in our above example) the difference just cannot be ignored! And yes, the next time you plan to borrow money, remember that compounding is busy working against you. Make sure you are conscious about the cost of your borrowing. Every time your credit card payment is running overdue, you are not paying just 2% per month in interest cost, you are actually paying 26.8% per annum!!!
    It makes a lot of sense for you to start investing right now.

    October 11, 2006

    General Market Advice

    1. Never chase a stock.

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

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

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

    5. Invest in companies with proven management.

    6. Avoid loss-making companies.

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

    8. Look for the dividend paying record.

    9. Invest in stocks for sure returns.

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

    11. Stocks are an asset class.

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

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

    14. Invest a fixed amount each month


    Tips - For Intra Day Trading

    • If index is in positive from yesterday and the share you are holding is in minus then it should be cut and if intraday trend of index is in buy then one should buy a stock in which is in plus.
    • If index is in minus then one should look to short stocks which are minus and not stocks which are in plus.
    • It is not necessary that a stock which is weak today during intraday trading might be weak tomorrow also, simultaneously if a stock is strong today might not be strong tomorrow
    • If US Markets have gone up overnight, the markets here in all probability will open strong, so one should be quite careful when buying stocks as the general psychology of public is to buy when good news is there.
    • Being a contrarians is very important while trading intraday.
    • Stop loss is a must while trading intraday.
    • Always trade in very liquid stocks i.e. which have very high volume because as entry and exit can be very fast in such stocks.
    • Do paper trading before you actually start trading so that when you start making paper profits, then shift to actual trading.
    • Keep your volume constant e.g.: if you trade in five lots of nifty future then trade in five lots only. This position can be increased only when you are satisfied with your trading for a month. It should not be that one day you buy five lots and next day you trade in ten lots and third day you get a loss and stop trading for two days.
    • Fear and Greed are at maximum levels while trading intraday so always have less position when you are new to intraday trading as otherwise you will be mostly under tension.


    October 10, 2006

    Stock Recomendations

    Motherson Sumi

    Enam Securities in its report on Motherson Sumi, upgrades the stock to "outperformer" relative to the sector. The company enjoys a 65 per cent market share in wiring harnesses business which currently accounts for 69 per cent of consolidated sales and remains the cash cow in the overall business portfolio.

    In the past two three years the company has forayed into areas like polymers and rubber/metal components, which now account for 31 per cent of sales. The company is transitioning from being a supplier of components to modules/sub-assemblies.

    Motherson Sumi has built capabilities in design, tooling, testing and logistics to leverage this trend and now offers one-stop solutions to OEMs' requirements.

    The company enjoys clients like Maruti, Hyundai, Daimler Chrysler, Bajaj and Tata motors. It is also supplying Instrument panel modules and bumpers to Ford and has recently commenced supplies to Honda for its Civic model.

    Sumitomo has identified India as a "focused frontier" where they expect growth and will invest further. India is likely to emerge as a significant sourcing base over the coming years.

    Kesoram Industries

    Pioneer Intermediaries recommends a Buy on Kesoram Industries with a one year target of Rs 540. The company wil incur a capex of Rs 490 crore in its cement and tyres division, of which Rs 425 crore will go to fund cement capacity expansion and balance towards de-bottelenecking tyre capacity by 15 to 20 per cent.

    Uptrend in cement cycle coinciding with the expansion of capacity at an opportune time, positive outlook for tyre division and improving is likely to result in high visibility and robust earnings going forward.

    Kesoram Industries is focusing on cement and tyre segments, which contribute around 85 per cent to topline and almost 100 per cent to bottomline. The company plans to sell its heavy chemical business. Management's intention to focus only on cement and tyres is an added positive.

    In June 06 quarter, the revenues increased 24 per cent y-o-y to Rs 480 crore and net profits jumped by a stunning 437 per cent to Rs 63.4 crore. At the market price of Rs 481, the stock trades at 10.9 times its FY07 earnings.

    Kesoram Industries, a member of B K Birla group, is a diversified company having presence in cement, tyres/tubes, rayon, heavy chemicals and spun pipes. It started manufacturing rayon in 1959, cement in 1969 and tyres in 1992. It has established brands like Birla Shakti Cement and Birla Tyres, respectively.

    Bharat Electronics

    Sharekhan recommends a Buy on Bharat Electronics (BEL) with a price target of Rs 1525. The healthy increase in the capital outlay of the defence budget and the government's efforts to reduce dependence on imports for critical equipment and security systems has increased the size of the addressable market for the defence equipment manufacturers.

    With its wide range of product portfolio, R&D capabilities and a proven track record, BEL is well poised to capitalise effectively tap the same. BEL has taken steps to improve its market share in the civilian market, specially the fast-growing broadband access equipment and telecom segments.

    It has bagged some prestigious large civilian contracts recently including the Rs 500-crore order from MTNL. It is expanding its reach also in export markets and has set an aggressive revenue target of $ 24 million in FY07 against $ 13.7 million in FY06.

    With the recent modernisation and expansion of its manufacturing facilities as well as its technical capabilities, BEL is actively looking at tapping the huge opportunity in the contract manufacturing service space.

    The revenues and earnings are estimated to grow at a CAGR of 16.4 per cent and 14.1 per cent respectively over FY06-08

    Source: Click Here

    Pvt equity firms invest $5.4 billion

    Private equity firms made $5.4 billion worth investments in the country during the first nine months of 2006 and could infuse capital worth $ 7 billion by year-end, according to a research by Venture Intelligence, a PE tracking firm.

    Highlights of the July-September quarter include Olympus Capital’s $100 million investment into Quatrro BPO Solutions, followed by Bank of Muscat and ICICI Ventures’ $90.7 million investment in Centurion Bank of Punjab.

    Among other major deals were ChrysCapital’s $66 million investment in UTI Bank, Warburg Pincus’ $66 million infusion into Aryan Coal Benefications and 3i’s $65 million PE investment in Gujarat Pipavav Port.

    Last quarter also saw venture capital investments against conventional fund raising instruments, getting prominence. A press release by Venture Intelligence said July-September quarter witnessed 100 venture capitalist deals amounting nearly to $ 1,894 million.

    “The amount invested during the July-September quarter was 2.8 times than the same period last year and marginally higher than that during the April-June 2006 quarter,” Venture Intelligence CEO Arun Natarajan said.

    The study predicts that with opening of real estate sector, country could see higher venture capitalist investment this year.

    “With the October-December quarter being a traditionally strong quarter for PE investments in India and with Real Estate investments being opened up further, we can expect to close the year with over $7 billion in investments,” he added.

    Information technology firms were on priority list of venture investors with this sector witnessing 32 deals worth $317 million, followed by manufacturing sector with 14 deals worth $ 289 million.

    The investors also preferred to invest at early stage companies as these investments grew to 20 per cent against last quarter’s 17 per cent.

    The share of PE investments in late-stage (35 per cent ), growth-stage (15per cent), PIPEs (14per cent ) and buyouts (4 per cent) was similar against immediate quarter, the study showed.

    Stock Investment - Mantra

    Once upon a time, some villagers took shelter in a cave at night, and saw what looked like a heap of rocks. Their king said, "Those who take the rocks will live to regret it, and those who won't, will regret it too!". While the inquisitive ones picked up some, the more practical ones didn't, thinking of the weight it would add to their luggage. The next morning, it was discovered that the rocks were in fact precious stones. The regret, of course was inevitable. Those who didn't take any, regretted their decision and those who did, wished they had picked some more. This tale is probably the best analogy that comes closest to explaining stock market! Those who are in it have certain regrets, and those who aren't regret it too. But if you believe in your instincts and are comfortable enough to make a living, then why not take a dip into the 'big, bad world' of the stock markets?

    Golden Nuggets
    1. One should, as far as possible trade in active stocks only. Resist tempting rumours about penny stocks.
    2. Do not put all your eggs in one basket. Try to spead risk across sectors and scrips.
    3. Remember in Stock Markets, no price is too low and no price is too high!
    4. Use stop loss or other hedging techniques to avoid excessive losses in trading.
    5. Remember the golden words of Warren Buffet - 'Do not invest in businesses you do not understand'


    Venture Capitalist's wishlist

    From 1992 to 2000, Srini Raju was the Chief Operating Officer of Satyam Computers. He was the first CEO of Cognizant Technology Solutions. In 2000, he turned Venture Capitalist and founded iLabs Capital to help start new ventures. iLabs now funds 13 companies.

    He is also one of the founding members of the International Institute of Information Technology (IIIT).

    What does he look for in a venture?

    "I will look for two things," says Raju. "One is the quality of the team. Second is the business plan. My question to an entrepreneur will be -- are you looking to be one among many or unique? If someone comes to me without doing proper homework on competitors, I won't even look at the person. When someone comes with an idea, I ask -- are you the first one, the second or the hundredth? Most of the time, they don't know."

    Advice to budding entrepreneurs

    1. "First," says Raju, "I will tell them to go and work with another start-up company. All my life, I have struggled working at start-up companies. I never worked with big names; we created brands later on. It is very tough because you always have to identify yourself. We had to sell ourselves because we didn't have brands. My brand was my idea. So, budding entrepreneurs should first work at a start-up company ?where the management is good.

    2. The next thing is to identify whom you want to start the company with. Don't ever start one all alone. You should have a minimum of three and a maximum of five buddies, because it is very difficult to get good talent. When big companies find it difficult, how can a start-up attract good people?

    3. Many businesses are very local today. Look at Reliance -- everything is local for them, and they are doing big business. So, people now know that you can build big businesses by looking at local markets alone. Investors are also okay with that outlook. You don't have to have an international market to succeed. We look at the global market only in the case of services."

    The booming areas

    "Opportunities today are plenty," says Raju. "You have to decide where you want to play the game." His recommendations:

    1. "Infrastructure is a booming area. Housing is awfully short in India, so we have to build houses for millions of people. Housing will continue to be a big area for some time.

    2. Retail and distribution are booming.

    3. I would call media and entertainment the most exciting sector. What was India-centric will go global, like Hollywood has.

    4. The Life Sciences space is very interesting; both in terms of medical care and medicine."

    Source: http://www.rediff.com///getahead/2006/oct/05entre.htm

    Indian Stocks - October, 2006 Strategy - ENAM

    Enam has come out with its October strategy.
    It has said that while the near term prospects are priced in, investors should be careful of year end momentum trap. It has also categorised sectors and companies that may surprise in the coming quarters.
    Nandan Chakraborty, Head of Research at Enam Financial gives the details.

    Nandan Chakraborty believes that India is insulated even in case of a 50 basis points rate hike. He feels that higher oil prices is a greater fear for India than rate hikes.
    Chakraborty does not expect any mispricing at current valuations. He informs that the FY07 Sensex EPS is seen at Rs 685, while that of FY08 is seen at Rs 803.
    Chakraborty also adds that Enam is bullish on banking.
    Excerpts from CNBC - TV18’s exclusive interview with Nandan Chakraborty:

    Q: What do you expect from Q2 earnings, this time around? Do you feel that most of the good news, earnings wise is in the price?
    A: In the secular sectors, such as FMCG and pharma, which are normally thought of as defensive sectors, the growth is not very high. The valuations are pretty high too. But in terms of cyclical sectors, the rest of the sectors show extremely strong earnings. So while there is some execution risk in the long term, there is no issue in terms of earnings in the short term, that we can see right now.
    Q: How are valuations compared to earnings now? Has the main line run up quite a bit and factored all of this in?
    A: Before that, I would like to take a step back and talk about what has been happening for the last few decades. The politics of this country has not been in a challenged environment, which is why we have had an economic path or the reform path, which has been one step forward and two steps backward.
    India operates best in a challenged environment. Whenever there is a strong opposition within the government, or on the opposition benches, that is when the nature of our economic process changes to one step back and two steps forward. So I don’t think one should pay complete attention to valuations because there are fundamental changes, which are happening in the Indian economy.
    Secondly, India now has a universe of investible stocks, which it didn’t have 2-3 years earlier. So there are newer funds, which are coming in and India is an investible basket in its own right. For example, India’s valuation premium goes up, if something happens in an emerging market, which is negative, which is far away from India.
    So at these valuations, one should not expect any mispricing. So one should not expect that a stock or a sector is undervalued, without a reason. There will be execution risk but one should not search for mispricing, Hence, the strategy is to look at where there could be a surprise in terms of EPS or PE re-rating upgrade or downgrade. One should look at the risk profile of each stock. This is not the time to take a huge market call or a sectoral call, in terms of mispricing and valuations.
    Q: Will you go a sector up or are you going stock up?
    A: As I said before, I don’t think this is the time to look at mispricing of the market, or the sectors or stocks. One will not find anything substantial, which is mispriced. One should look at one's portfolio, in terms of what can happen on a 3-year horizon and check out what can surprise on the way down or the way up, in terms of PE as well as EPS. That is the main point.

    In terms of the market as a whole, a lot of people are focussing on interest rate fears, whereas I have a difference in view. I don’t think interest rate is a real fear in India because India is now at a stage, where even if interest rates move up by 50 bps or so, our demand-supply situation is such that it will not hit the demand of any particular sector. A part of the fear is really in the oil prices.
    Q: Going by the very parameters that you mentioned that one should look for companies or sectors that can deliver, give us some ideas?
    A: This is not the time to be defensive. FMCG and pharma, which are traditionally known as defensive sectors, are fairly valued and their growth is actually fairly lackluster. So one actually looks at two factors in the secular sector; one is in some of the smaller companies, which are taking on the giants.

    Especially in the FMCG space, there could be a severe PE re-rating considering the way they are tied up with foreign players and the way they are eating into the bigger players. The other is in areas of telecom, media and retail, which are sectors where there could be severe EPS upgrades over the next three years because that's where corporate ambition is playing a huge part.
    Coming to the cyclical sectors, the only fear there is actually a market fear. There could be a problem, if oil prices really rebound, if China really starts buying, and if oil prices dip too much.
    On a domestic scenario, I do not really see much of a negative. The negative is basically only in terms of execution risk, which one has to figure out stock-by-stock.
    Q: What is the earnings per share that you have got for the Sensex?
    A: On FY07, we have got Rs 685 and on FY08, we have a little above Rs 800. One should remember that our EPS targets are always on a consolidated basis. One will find a little difference from others, who take it from a standalone basis.

    Q: You have mentioned in your report that from the IT sector, you expect Infosys to deliver positive surprise. What do you expect to hear in terms of earnings tomorrow?
    A: We don’t mention earnings upgrade to the media; that is for our clients. Our calls have been a 3-year call. The concern on Infosys has been one of whether they can continue to scale up and manage processes and we believe that it can. The grid that we have drawn for each stock, in terms of EPS and PE for Infosys, has been positive on a 3-year horizon.

    Q: A lot of people have been very bullish on banks and the financial sector. According to your report, you don’t see much surprises left in banks?
    A: In the banking sector, in those grids, we have not taken a sectoral approach in the strategy report at all. So the way this strategy report is to be interpreted is that we have selected one or two stocks from the sectors, where there could be a severe upgrade or downgrade. We are bullish on banking. Banking in India is one of the most undervalued across the world and that is where maximum fears of interest rate increase arises. And that is where the valuation actually discounts most of the fear.

    Q: You spoke about management ambition; so does that mean that you are not bullish on public sector, where the management is not traditionally ambitious? You also spoke about reforms getting its leg up because of the internal conflict, which you say, will lead to more reforms. On the other hand, does it mean that you see some valuations being unlocked because of some aggressive PSU divestment, so how would you look at PSUs?
    A: In general, I don’t think a PSU call is one of PSU divestment alone. There are excellent PSUs in this country, which have very high secular growth.

    But there are sector dynamics, which prevent them from flowering. I cannot mention stock names to the media. But in general, what I am saying is that where there is secular story, the earnings will usually be lumpy. Hence, there are secular earnings in a particular PSU, and when the earnings are lumpy, even if it does badly, that is the time to load up on one's stocks. But I don’t think PSU should be looked at, as a divestment story per se, it should be looked at, in an investment thesis.
    Q: With the EPS, that you have set out, what is the year-end target for the Sensex now?
    A: We don’t give Sensex targets for the year-end.

    Q: But would you say that valuation wise, most of the good news is in the price for the market, at these levels?
    A: The main risk is execution risk on a stock-specific basis. The main fear is in terms of oil rebound. So I don’t think there is any need to worry. I don’t think one can take a three-month window from October to December. It is meaningless to take a three-month window in a market like this.

    Q: The automobiles sector could be adversely affected by an oil rebound. Where do you see the opportunity; do you see it in the smaller midcaps or larger auto component players or do you see it more in the four-wheelers and two-wheelers?
    A: There will be a lot of corporate ambition in the larger companies; not just auto ancillaries. Hence, while an interest rate rise or oil price rise might hurt the EPS slightly, they could really be more than offset by a PE upgrade. In the smaller auto companies obviously, there is a lot of corporate ambition. So the entire auto sector looks optimistic.

    Investment Mantras for the Uninitiated

    All of us are not born with a silver spoon in our mouth. But each one of us wish to strike gold and has a desire to be rich. There is a constant urge in us to make our money grow at a pace that not only provides for our financial goals but also helps us to improve our standard of living from good to better.
    This makes it really essential for all of us to plan the allocation of our available finanacial resources in such a way that we can generate the maximum possible return. The term 'allocation of resources' means putting your money in the various asset classes such as debt, equity and cash.
    However, this cannot be done by following an ad-hoc approach to investments.

    One is required to plan investments in a systematic manner so that he gets maximum returns with minimum risk. Also, the allocation should be regularly reviewed at periodic intervals.
    For this, one can either plan investments oneself, or refer to an expert(a Financial Planner) who not only helps you invest appropriately but also monitors the performance of your portfolio so that you do not miss on the best opportunities available in terms of investing and also do not take undue risk on your portfolio.
    A financial planner will give meaning to your investments by linking the same to your financial goals. This way one would know where one is going and it will become easier to chart out an appropriate path way towards the relevant destination point.
    An investment decision is a trade off between the risk & return. Howvever, the investment avenue will definitely depend upon certain factors.
    Some of the questions you need to answer are:
    • What is your age?
    • How many dependents do you have?
    • What are your financial goals?
    • How much money would you need to fund each goal?
    • What is the time horizon of your goals?
    • How much are you concerned about liquidity?
    • What is yor risk profile?

    All these questions will help your advisors to chalk out a plan which can match the suitable products with your goals.

    Your need could be:

    • Investment Planning
    • Tax Planning
    • Children's Future Planning
    • Cash flow Planning
    • Insurance Planning
    • Retirement Planning
    Cashflow Planning: Cashflow Planning takes care of the timing of cash inflows and outflows. It basically helps in analysing the income and expenses and intends to maintain a regular flow of income in the family.It is a holisitc appraoch to meet the life goals.

    Insurance Planning: Insuance is not the person who passes away but for those who survive.It takes care of the fianancial loss which may arise on the happening or non happening of an event. Insurance Planning relates to Two fields of insurance.

    Life Insurance: It takes care of the finanacial needs of the dependants of the deceased bread earner of the family. General Insurance: It takes care of the risk of financing of property.

    Retirement Planning: It takes care of the cashflows during retirement when the person is not working. Usually people are not concerned about retirement at an early age. But planning for retirement at an early stage is necessary inorder to maintain the same standard of living.

    Investment Planning: Investment Planning takes care of investment decisions ie to say this decision relates to appropriateness of an investment, inflation factor, etc.
    Tax Planning: it implies arrangement of the person's financial affairs in such a way that it reduces the tax liability.

    Children's Future Planning: Children's Future Planning takes care of regular expenses on your child's education and higher education. It also help you to make arrangements for the your children marriage.

    October 06, 2006

    Potential Multi Baggers - Stock Tips - Trading Secrets


    I would like to post information regarding the stocks which can be potential multi baggers, stock tips, successful trading secrets, and any other information regarding the Indian stock market.

    I will also post interesting information I read or obtain.

    There are links to various sites, on the the blog. Have a look at them and mail me your suggestions.


    Rajesh Pai