Union Budget 2010

Auto

* Increase in excise duty by 2%-4%.

* Increased allocation under National Urban Renewal Mission for buses

* No increase in excise duties for large cars

Banking and financial services

* Interest subventions for pre-shipment credit and short-term crop loans expected to be withdrawn.

* To qualify for tax benefits under Sec.80C on Fixed deposits lock in period to be reduced from five to three years.

* Raising the ceiling of TDS on interest income from fixed deposits.

* Allowing banks to raise tax-free infrastructure funds.

* Tax breaks to housing finance and infrastructure-lending companies.

* Housing loans below 30 Lakh rupees to be considered as "priority sector" lending.

* Refinancing from India Infrastructure Finance Co Ltd (IIFCL) for up to 60% of commercial bank loans for PPP (public private partnership) projects in critical sectors is expected to continue.

* Increase FDI in insurance sector from 26% to 49%.

* Recapitalisation of PSU banks with lower tier-1 capital.

Cement

* Roll back of excise duty cuts of around 2%-4%.

• Reduction in import duty on coal

Construction

* An increased outlay in government spending in infrastructure, especially for roads and urban projects

* Details of refinancing for India Infrastructure Finance Company Ltd (IIFCL) funding

* Clarity on minimum alternate tax provisions under a new Direct Tax code, to be implemented in FY12

* More financial availability for infrastructure projects

* National project status for state government projects

Engineering and capital goods

* Increase in import duty on foreign power equipments like turbines, boilers and generators.

* Rollback of excise duty concession given in the stimulus package to manufacturers by minimum 2%.

FMCG

* Raise excise duty on cigarettes by 5%-8%

* Excise duty cuts on products except food items may be reversed by 2-3%

* Rural initiatives for income generation are expected to continue

* MAT (Minimum Alternative Tax) rates can be increased, as a step forward towards the Direct tax Code.


.

Real estate
* Hotels to be included under Sec 80 IA (Infrastructure status) for all hotels across India and across all categories

* Greater thrust on PPP projects in housing.

* Increase in allotment to the Rajiv Gandhi Awas Yojana (slum rehabilitation programme)

* Increasing tax breaks provided to housing finance and infrastructure lending companies.

* Re-introduction of tax holiday for housing projects under Sec 80 IB (10)

* Increase in income tax deduction under Sec 80 C on home loan principal re-payment from Rs 0.1 million to Rs 0.2-0.3 million.

Information technology

* Extension of tax benefits for units in Software Technology Parks of India beyond March 2011.

* Spending on education through Sarv Shiksha Abhiyan to be increased.

* Abolishing MAT in STPI units

* Reduction in excise duty on electronic and IT goods from 10% to 8%.

Media

* Increase in foreign investment limits in direct-to-home (DTH), cable, FM radio and news broadcasting services.

* Raise the rate of service tax to 10%.

* Customs duty to be levied on newsprint.

* Tax holiday for the capital intensive business such as Gaming, Animation, VFX.

* Removal of custom duty on set-up boxes.

Pharmaceuticals

* The 150% weighted deduction enjoyed by in-house R&D expenses should be extended to expenses on outsourced studies such as clinical trials and specific laboratory studies. The weighted deduction should also be raised to 200%.

* State excise duty on certain formulations should be cut to 8% from 16%.

* Central excise duty on drugs to be restored to 8% from 4%.

* Allocation for the National Rural Health Mission should be increased significantly.

* Eliminating excise duties on all essential drugs.

* Extension of tax exemption for export oriented units and clarity on the new direct tax code on special economic zones.

Power

* Continuation of income tax exemption for mega power generation projects.

* Increasing the allocation towards the government-led electrical infrastructure augmentation schemes namely Rajeev Gandhi Grameen Viyuktikaran Yojana and Restructured Acclerated Power Development and Reforms Programme.

* Reduction of import duty on thermal coal.

Retail

* Allowing foreign investment in multi-brand retail.

* Industry status to retail.

Metals and mining

* Increase in excise duty cut to 10% from 8%

* No change in customs duty structure

* Increase in iron ore exports duty by 5%

* Removing the 5% import duty on stainless steel and alloy steel scraps

Chemicals & fertilisers

* Increase the price DAP between 8%-10%

* Tax holiday for a period of 10 years should be extended to all new fertiliser projects

* Excise duty on fuel oil used for fertiliser manufacturing should be abolished.

Oil & gas

* Infrastructure status for Oil and Gas to promote investments with tax sops.

* Tax benefits for city gas distribution and extension in tax holiday for new refineries

* Declared goods status to be given to natural gas.

* Abolishing service tax on exploration and production activities.

Telecom

* Unification of tax regime from current differential taxation methods

* Reduction in license fee to 6%

* Tax holiday for mergers and acquisition activities of telecom companies to be extended till April 2010

* Clarity on 3G Auction timeline

* Increase in service tax by 200 basis points

* Government to use Universal Service Obligation funds for rural and broadband penetration

* Increase in Minimum Alternate Tax from the present 16.5%.

Read the complete analysis of the Union Budget 2010-2011 at www.stockinvest.in

5 Signs of Stock Market Bottom

Since the beginning of the bear market since late 2007, the BSE index SENSEX has been falling with small breathers of trading in a range sometimes and still smaller bump up which did not sustain. Most mini rallies the stock market has witnessed have quickly dissipated in the face of bear hammering.

In the last couple of trading sessions the Indian stock market is yet again making another attempt at a rally. This rally has come at the back of remarks from bank CEOs and economic data that has led investors to believe they'd gotten too pessimistic.

The BSE is following global cues as the Dow Jones industrial average rallied for four straight days from nearly 12-year lows, and gained 597 points, or 9 percent — its best week since November. That followed a two-and-a-half month drop in the Dow of nearly 25 percent

According to Tobias Levkovich, chief U.S. equity strategist for Citigroup "People have been worried that we're heading into this abyss ‘but’ there are signs that that's not the case, and there is some floor somewhere — that we may have overreacted."

The question top most on the mind of stock market investors is that if the worst really over?

There's no formula to find out if this latest rally will sustain. But market analysts are watching closely for signs that the worst might be behind us, and they say some good signs are starting to pop up.

"There are little subtle things that have happened that are good — good enough to see that market is trying to establish a near-term bottom," said John Kosar, market technician and president of Asbury Research in Chicago. "But it's way, way, way too premature to try to make an argument that this is 'The Bottom.' "

So what are the signs a prudent investor would look for to find out if the stock markets have bottomed out and what would indicate that there might be more down side yet?

FIVE SIGNS INDICATING THAT STOCK MARKET MAY HAVE BOTTOMED OUT:click here

FIVE SIGNS THAT THE STOCK MARKET BOTTOM IS YET TO BE MADE:click here


Read the complete Article and much more about stock picks, stock tips, stock market analysis and basics of stock market at Stockinvest.in

Full text of Satyam Chairman's Letter

Read below the text of the letter of Satyam Chairman written to the board members describing the fraud.

Satyam Computers Services Ltd.

From B. Ramalinga Raju
Chairman, Satyam Computer Services Ltd

Dear Board Members,

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The balance sheet carries as of September 30, 2008

a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore reflected in the books)

b) An accrued interest of Rs 376 crore which is non-existent

c) An understated liability of Rs 1,230 crore on account of funds arranged by me

d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)


Continue reading the full text. Click here>>>>

Read more news about Satyams fraud. Click here>>>>

SEBI to probe Satyam transactions.>>>>>

For more Indian Stock Market News and views Visit http://www.stockinvest.in

Value stock picks of the week

The Indian stock market is following the global trend and is down in the dumps. Stock market investors are too afraid to invest their hard earned money at the current levels amidst the global financial turmoil.

According to the tried and tested wisdom of stock market history such times offer great opportunities to long term investors. Many stocks of fundamentally sound companies are trading at attractive values. These stock picks make a great value buy at current levels.

The stock market is throwing up many value buying opportunities for long term stock investors. We regularly update you on stock picks where you can begin investing your money in small amounts. There is no guarantee that the stock market will not test its bottom again and you might find even cheaper valuations for these stocks. No one can predict and time the stock market bottom and these are a once in life time stock investing opportunities

Some of the stocks discussed are Hind Lever, Tata Power, Bharat Electronics, Allcargo Global, amongst other stocks.

To read the detailed analysis>>>>> click here

To read about more hot stock picks >>>>> click here

Stocks to watch

From time to time Stockinvest.in team makes an effort to track stocks which are in news for various reason. These stocks are usually not an immediate investment opportunity as their full potential will be realized later on.

The idea of mentioning these stocks is to keep track of them and invest in such stocks when the time is right.

The following stocks were in news in August 2008. How the stock market movement and later day developments in the share market effect such stocks is visible to everyone who tracks the Indian stock markets.

Stocks in news:

Bajaj Auto:

French auto major Renault has opened a second front with ultra-low-cost car partner Bajaj Auto by inviting the Pune-based two-wheeler maker to pick up stake in Renault Nissan Automotive India, which is setting up a $1-billion greenfield plant in Chennai. The company is also negotiating with Bajaj to extend the ultra-low-cost car partnership to include marketing, sales and distribution of Renault vehicles to be made in Chennai.

M&M:

Mahindra & Mahindra is going to foray into the two-wheeler segment by agreeing to buy the assets of Kinetic Motor Company for Rs 110 crore. M&M will buy the assets through a new company called Mahindra Kinetic Scooters and Motorcycles, which will own the assets of the Pune-based Kinetic Motor. M&M will own 80 per cent of the new company. Kinetic Motor, which makes two-wheelers, will own 20% in the new joint venture firm.

Ranbaxy:

The stock of Ranbaxy made some handsome gains from the beginning of 2008 but was hammered down lately on the news flow of investigation by US Justice Department in company’s affairs.

The US Department of Justice intends to withdraw its motion to enforce subpoenas on Ranbaxy Laboratories after the Indian major submits the entire audit documents sought by the federal authorities.

Axis Bank:

The government is mulling a proposal to sell part of the equity holdings it controls in Axis Bank through qualified institutional placement to a wide base of investors. The plan envisages offering over 21 per cent of Axis Bank’s equity held on behalf of the government by the Specified Undertaking of UTI to a broad-based set of investors.

UTV:

Minority shareholders of of Sony Entertainment Television (SET), now called Multi Screen Media (MSM), who hold 32 per cent stake in MSM, had earlier reached an agreement to sell their stake to billionaire-industrialist B K Modi. However, the future of that agreement is now in some doubt. It is learnt that Indian entertainment company UTV, along with Disney, is in discussion with Sony Pictures Entertainment to see if they could buy the 32 per cent stake.

Torrent Pharma:

Japan’s pharma giant Takeda Pharmaceutical is keenly eyeing Ahmedabad-based Torrent Pharmaceuticals as a possible acquisition.

Videocon:

The Dhoots of Videocon group have offered to buy Mahendra Nahata’s 36 per cent stake in all-India mobile licence holder Datacom Solutions.

ITC:

FMCG major ITC is planning to acquire an US-based IT company through its subsidiary ITC Infotech India.

New offers on the cards:

The central government is planning to list at least three state-run hydropower companies, reports mint. Satluj Jal Vidyut Nigam, Thehri Hydroelectric Development Corporation and North Eastern Electric Power Corporation may soon enter capital market.

Keeping an eye on the news flow can help you make decisions about the stocks you might want to invest in. The future prospect of any company depends on its present status and future plans. The foray of these established players into new areas can add value to their stock and make them an attractive investment idea.

Always keep the basics of stock market investing in your mind when investing in stocks. The management of the company, past track record in project implementation and execution, cash flows, debt, product and product market, turn over, profits and the growth rate are some the factors you should consider while investing in a stock.

Stock Markets on All Fools Day

The stock market keeps jumping up sometimes giving false hope to investors of the golden days gone by when everything moved only one way-UP. Now is the time to be skeptical and cautious. It is also a time for picking up some good growth and value stocks for long term buys.

Here is an old post of mine from April 1st , 2008 when the stock markets and spcifially Wall Street had jumped up on all fools day.

Stock Market Surges

Is this the real thing or is the Wall Street playing an all fools day joke on everyone? During the dot com bust the stock market jumped 3 to 4 percent many times rekindling hopes only to shatter them once again. The tech stocks gained as much as 7 to 8 percent on those days. Is history repeating itself? Have the wise ones learnt their lessons from the past? Is the worst over? I don’t think so.

People are clinging to straws. Stock traders are buying because the news is not as bad as they thought it would be! This means less bad news is good news! Will the stock markets world over move up just on hope? Who can say, only time will tell. Stock markets seem to have a mind of their own and a knack for proving the experts wrong. ( and catching you and me on the wrong foot)

Banks are trying to clean up their books in a hurry and I sure hope they are able to. I do not think we are out of the woods as yet.

Why the Spurt?

* Investors rushed back into stocks, optimistic that the worst of the credit crisis has passed and that the economy is faring better than expected.

* Renewed enthusiasm that the credit crisis might be waning was also felt in the Treasury market, where government securities fell as investors withdrew money to take bets on stocks.

* In addition to hopes about the financial sector, Wall Street was relieved to see the feeble dollar regain some strength against the Euro.

* The stock rally was boosted by the announcements from UBS and Lehman Brothers that they are boosting capital by issuing new stock.

* The Institute for Supply Management said its index of national factory activity edged up in March, although it remained below the level that separates growth from contraction still, it beat expectations, which brought back the investors.

Encouraging economic data and strength in financial shares fueled Tuesday’s rally, with major indexes each up over 3%.The Dow Jones industrial average .DJI gained 391.47 points, or 3.19 percent, to end at 12,654.36. The Standard & Poor’s 500 Index .SPX rose 47.48 points, or 3.59 percent, to 1,370.18. The NASDAQ Composite Index .IXIC jumped 83.65 points, or 3.67 percent, to 2,362.75.

Other stock markets on all fools day :

Tokyo’s Nikkei closed up 1.04 percent. There were gains in Europe too, with London’s FTSE rising 2.64 percent, Frankfurt’s DAX gaining 2.84 percent and Paris’ CAC 40 advancing 3.38 percent.

My cautious suggestion to stock market investors will be to wait and watch. The stock markets are not going to run up in a hurry and your favorite stocks will give you many opportunities for stock picking. good luck from stockinvest.in team

FM's Statement on the Indian stock market and economy

The stock market melt down had once again forced the Indian Finance Minister to come out and make a statement to soothe the nerves of Indian Stock market investors.

I am reproducing below something the FM had said in March 2008

“Growth is imperative. Inclusive growth is our goal and we will make every effort to ensure that growth becomes more inclusive.

I mentioned the financial health of the country. World over, there are well-accepted parameters to measure financial health, not only in economic terms but also in terms of human development indicators. Some human development indicators have improved while some have not. Infant mortality rate and maternal mortality rate have not improved. But school enrollment, retention in school and life expectancy has improved. In many diseases, there has been significant improvement. We have still a long way to go in human development indicators.

The subprime mortgage market crisis did not directly affect us. Except for one private sector bank, which has made a disclosure, none of our public sector banks have any exposure to the subprime mortgage market.

When the crisis moved from the subprime mortgage market to the housing market and from the housing market to the credit market, there is some impact upon India. There is an impact in terms of the credit flows and financial flows. But all our assessment, as well as the assessment of many impartial observers, indicates that the impact upon India will be a second order impact not a first order impact.”

Chidambaram said that Indian stock markets have been moderately impacted by the US subprime crisis. This was while he was debating the Budget in the Rajya Sabha.

Only time will tell if the Indian stock markets and the economy will bounce back from the current turmoil without hurting the investors too much.

Read more about Indian stock market and share bazar ideas and tips on stockinvest.in

12 expert opinions on Indian stocks and share market

The Indian stock markets are crumbling in the face of global economic melt down. For the stock market investors who still have the courage to invest in stocks this could be the greatest opportunity to pick stocks which have fallen way below their true value.

This is what experts have to say about where the Indian stock market is headed and which stocks to buy in this stock market crash.

1. E Mathew, Director, Mathew Easow Fiscal Services, says that the move below 3,800 has certainly created tremendous amount of panic. “A lot of fundamental analysts are now following technicals. As one level breaks after the other, a sense of panic is creeping in, which in the long run may be good for the market and could lead to capitulation.”

He sees major support for the Nifty below 3,800 at 3,570-3,600. “It has to be said that important levels one after the other are getting violated. Nevertheless, I do feel the capitulation levels could take us somewhere close 3,570-3,600. In a way if a total sell-off takes place, it could be good for markets, so that the poison is totally cleaned out from the system.”

Read the complete article at Stockinvest.in >>>>>>>

Stock Market investing for beginners

Investing in stock markets is not rocket science. Most would be investors do not succeed because they do not take that first step. They do not take the money out of the bank and invest it into stocks. For most first time investors it is the fear of the unknown . The excuses for not investing are “The markets are too high now” or ” The markets are down ” or simply ” I don’t know anything about the Stock Market“. You can’t make money in the stock market if you don’t buy some stocks.

We will deal with the basics of stock market investing and give you an introduction to investing in stock market. You will find all the help and guidance that you need if you are a first time investor in stocks or you want to sharpen your skills and get more in depth knowledge stock picking and investing

Read the complete article>>>>

Rakesh Jhunjhunwala on Investing

The question bothering the Stock Market Investors still remains - is there more downside left and what is the future of Indian stock market? Most investors are wary of investing in the stock markets at this juncture as they are not sure if the stock markets will crash further. The global scenario is not very positive with the recession in the US looming large.

To following are the questions, CNBC-TV18’s Stocks Editor, Udayan Mukherjee asked the ace investor and market expert Rakesh Jhunjhunwala in a special series called ‘Hunt for the Bottom’.His answers will give you some idea as to where Indian stock markets are headed in the future.

Jhunjhunwala feels that the markets have seen a bull-run since April 2003 and one cannot have a bull market without corrections. The corrections would be testing the investors’ patience and their sheer belief in the markets, he said. ”All the corrections we have had in the last four years have had been deep but they have not been deep time-wise. I think the real patience and the real belief in the equity and in the market comes when the market tests you time-wise. So I think this is going to be one of the deepest and the longest corrections that we are going to have, in what I believe is going to be a very long bull market,” Jhunjhunwala said.

Q: Is the worst over, have we seen most of the pain or do you fear that there could be much more pain this time around?

A: We have not four but four-and-a half-years of bull market, which started in April 2003. Whatever be the quality and depth in the length of the bull market, you are not going to have a bull market without corrections, which are not going to test our patience and sheer belief in the market. All the corrections we have had in the last four years have been deep. They have not been deep timewise. The real patience and belief in equity markets comes when the market tests you timewise. This is going to be one of the deepest and longest corrections that we are going to have. However, this is going to be a very long bull market.

Q: In the middle of this phase, you expect to see some rallies which will get sold into as well?

A: Yes. You will surely see rallies and we are in the midst of one. Suppose the markets doesn’t exceed and the index doesn’t go 21,000 and Nifty doesn’t go above 6,200 for the next 18 months, I as an investors won’t bother it at all. I would happily rest with the kind of gain we have had for the last four-and-a half-years.

Q: It could be an 18 months rest you think?

A: Why not.

Q: Six quarters of market not going above the old high?

A: Why not.

Q: Is it a possibility or a probability according to you?

A: It’s both.

Q: You think it’s a highly likely event?

A: I believe in the long-term story. I am going to profit as an equity investor. As an investor, I don’t see a greater rate of return for my capital at any place other than the equity market. I watch the market everyday but I won’t be surprised. I am prepared for it.

Q: But you look at the screen very carefully as well and trade a bit? Is the screen reflecting any strength over the last few days?

A: A good part of the market has already bottomed. It may take time for the market to gain. In the midcap space, a lot of stocks have bottomed. But the price movement tells me that as of now, not much of the market is going to renew those.

Q: Which sectors are still vulnerable to downside? Some sectors had seen massive excesses, but stocks have also fallen 40-50-60%. Do you think enough correction has happened in those sectors or pockets or they may unwind further?

A: That’s a very difficult call to take. We have to play it scrip to scrip. It is difficult to take it sector to sector.

Q: You had concerns about spaces like real estate etc. Do you think they have corrected enough?

A: I have been a real estate stock bear and have been wrong earlier. I still feel there is space to go there.

Q: Any other clear space where lots of excesses have happened?

A: In the infrastructure sector, there is lot of excess valuations. Stocks will take time. It will take time for the excesses to wear off.

Q: You have been a big bull of that space and have had big holdings like Praj, and Punj Lloyd? Do you think there were excesses at the top in those kinds of areas as well?

A: Suddenly the valuations were quite high.

Q: But have they corrected enough after this big fall?

A: They have corrected. But for them to really gain their old highs it will take time.

Q: India has been one of the biggest underperformers in the last three months. Do you think there are local problems as well, which we need to content with over the next one year?

A: The way to tackle inflation is to increase supply. To keep interest rate high in the face of low interest rate worldwide, is a local problem. A friend of mine told me sometime back that the true bottom of this market will be made the day the election is announced, but that has been the history of our markets.



Q: Does politics present a threat to this market?

A: We have seen the worst of whatever the threat could be. I don’t think they are going to impose price controls anywhere. Also, India has grown a lot without the politicians. So, I am not afraid if Mayawati becomes Prime Minister, but I hope she will not. I think politics has done no good. If god were to grant me one wish, I would ask him to let anybody be the Prime Minister of this country, but let not that government be supported by Communists, because if you were to listen to the Communists we were to get everything free and don’t have to work for anything.

Q: Does government policy worry you? We have seen quite a bit of price control etc in the last one-month? Does it worry you significantly?

A: Not at all, because we have been hearing all this for so many years but India has trudged along. Do you think anything has changed in the last 12 years?

Q: What about steel? If I remember correctly, you bought some steel stocks earlier, didn’t you own Tata Steel?

A: Yes. I bought some steel stocks even lately. They are not going to impose any price controls. SAIL and Tata Steel are placed very well as far as government rules are concerned. If steel prices go up, they benefit because they have captive commodities.

Q: What is essentially different about what is going on now in the market and what you saw in 2001 and 1992?

A: Valuations in these times never got to 1992 levels. In 1992, we were trading at 65 times earnings, 2001 at 35-32 times earnings, and this year we peaked at 21 times maybe 2009 earnings.

Q: In some pockets like infrastructure etc we did go to 30-40 kind of P/E multiples?

A: Yes, maybe but that was not a very large part of the market. After all, the largest part of the market is the Sensex and Nifty. The bull market that started in 2003 cannot end at less than 30-35 earnings or at least 25-30 times for the index.



Q: Let me paint a bearish scenario. The bears say that interest rates go up even from here, which may not be justified. But in our country sometimes we do things which are not justified. GDP growth slows to sub-7%, earnings growth slows to 10-12%, could we have then in that kind of situation a compressed one-two year kind of a bear phase? Is that a likely scenario or even a possible scenario in your eyes?

A: 4,100-4,200 which corresponds to 12,500-13,000 on the Index is a level which we are not going to penetrate on the downward side very easily. 5,300-5,400 upside on the Nifty is a level that we will not penetrate easily. So, we could be in a 4,200 range. The range could be 4,500-5,300 instead of 4,200-5,300. We could pass a year or 18 months.



Q: Is it a good time for investors to buy stocks or do you think they won’t be rewarded in the next one-year or so?

A: I don’t think we as investors should be worried about what rewards we can get in a year. I have made the biggest money by understanding that I get the reward within a time period which is reasonable and one-year is never reasonable. If one gets good stocks at valuations which one thinks are good and feel the ultimate value of the stock will be far higher, one should buy it.

Q: How much damage has been done this time around because in our country because a very narrow section of the population invest in stocks?

A: Everybody’s portfolio is damaged, but my portfolio doubled in one-year. You went from 100-200 then, came back to 140-150 and right now are at 130-135. The increase was very severe and the fall was equally severe. I don’t think the damage has take place with those Charlie’s who came to make a fast buck. The serous investors who invested through the last four-five years have been getting very good returns.

Q: Do you think they will hold the faith, which has been seen so far in the mutual fund portfolio with no major redemptions? Do you think this whole phase will pass without significant mutual fund redemptions?

A: Why do you think these redemptions are not taking place? It’s not an act of defiance according to me. It is because may be it is supports. The amount of money that has to come to India for investing locally is far greater than what we have had. So, some people are withdrawing but every other money is going up. Prosperity is also going up. People who are running businesses are feeling the prosperity. So, may be the redemptions may not take place. It could also be that the kind of money which has come is good genuine money and not some short-term scam money.

Q: Having seen five-years of bull run and then a sharp three-month correction, do you think it is time to re-orient your investment strategy somewhat because a few things have fallen off the cliff? - Is it time to change your horses?

A: I have followed one investment strategy all my life. Good investing gives you good returns. It depends on your investment strategy. My investment methodology and strategies don’t change as markets keep changing. If I have a good stock, then it is going to give returns. One thing which supports the market is the bodyweight of solid liquidity. With these kind of high oil prices, where is all this surplus money with West Asian countries going to go?

Q: But you trade as well, do you sense that different sectors are coming back? IT has had a nice rally after a long time, They were two years out in the cold. Is it possible that some of these losers of the last couple of years could stage a comeback?

A: I am not personally so bullish on IT.

Q: You have not been for a while?

A: Yes, because they are a mature industry, all institutions own them. I think growth is going to be limited there. There are uncertainties in the principal markets. Although I have true respect and true regard for the Infosys management, I think meeting their guidance is going to be a challenge.

Q: Do you think there is a risk out there?

A: I think there is a challenge, because conditions in the US are going to get worse by the day. They are saying they expect the second quarter in the US to be better .

Q: Which is when you think the problems will start dropping in?

A: I think there will be three stages of the problem in America. First is the realisation of the subprime problem. Second, the economy will slowdown as a result. I think defaults would creep into prime housing, into credit cards and auto loans and maybe commercial real estate. I think that will be the second stage. The third stage is going to be a depression.

Q: Have you ever bought an FMCG stock in your life?

A: Yes, I have.

Q: Not Tata Tea?

A: No, not Tata Tea. I have another FMCG stock in which I own more than 5%.

Q: So, a largecap FMCG stock?

A: I won’t say largecap but fairly good company called Agro Tech Foods.

Q: But none of the ones we know like Colgate, Dabur, Marico, and Lever. You have never bought them in your life?

A: I may have bought some stocks like Colgate and sold it. I bought some shares in Lever in 2004 and sold it in 2005. I have made good money there.

Q: Have you ever been a big pharmaceutical investor?

A: I have a large investment in Lupin and made good money in Matrix. I made some small investments in Ranbaxy.

Q: Do you subscribe to the theory that capital goods or power is a sector, which was such a big leader, is on the wane and will not lead to the next rally?

A: Wane is about P/Es. Pharma P/Es are set to go up. That’s one sector which will not dip if we get a prolonged correction. If you look at some of the P/E e ratios of pharma companies, they are certainly attractive. Everybody has been so ebullient about capital goods and that’s why P/E’s are high. It will take time for earnings to catch up.

Q: What are your thoughts on oil and gas as a space? You just spoke about crude; do you think there is an oil and gas play in India from a stock market perspective?

A: Well I would Reliance is a big oil and gas play. There could be some interesting plays in the smallcaps and the midcaps.

Q: Exploration?

A: Yes, exploration.

Q: You were once a bull on Indian Oil Corporation. You lost your hope in them?

A: I will never buy them, I promise. Wherever government is involved I am going to be very careful.

Q: That's surprising coming from you because you made a lot of money from PSU companies like BEML and Bharat Electronics?

A: But at what valuations? I started buying Bharat Electronics at Rs 32, BEML at Rs 30. Also what I realized and why I sold this is that for companies to really gain at these valuations, one has got have that plus-plus. The investor has to have faith that these companies are innovative, they are going to do something new. They are going to do something different. I don't find that in the public sector. They are constrained. Indian Oil--I read Rs 450 crore is what we are losing on fuel everyday. But there are interesting opportunities in exploration. I have some investment in that sector.

Q: But they are small and midcap companies?

A: Yes.

Q: What are the chances that in 2009 you go to something much beyond the old high that you saw on the index? Do you think it is conceivable? What needs to fall into place for that to pan out?

A: America needs to go for present tense. It is important that Infosys achieves this guidance it has given. What is important to the Indian economy is the value-add that software brings. If Infosys adds 25,000 employees, it translates into 25,000 cars and 25,000 homes. Then, that in turn leads to cement and steel. It is not any small value-add. If the US grows at 4%, Indian software will grow at 40%. The sentiment of investors worldwide will be extremely bullish. If you achieve earnings of say 1,030-1,040 in March 2009, then you go to 1,200 by March 2010. So, maybe in May 2009 you are going to see a very good rise.

Q: Are you looking at 25-30 P/E multiples?

A: For that we are still 4-5 years away. We will get there.

Q: We didn’t pass it in December last year?

A: That is why the top of the bull market was not made. The top of the bull market will be made when the value of the Indian Embassy in Japan is greater than the land in Delhi. If we had continued with the real estate led bull market in December 2007 we would have reached those levels.

Q: Do you sometimes feel apprehensive with your view today that 4,200 is a bottom worst case scenario can be violated and you may be surprised?

A: If it is violated, I would surely be surprised. But welcome this correction. I don’t think it is a bear market. It is a correction because had we continued at that pace we might have reached a level where we would have damaged that market beyond repair. It will still go much further. For that to happen, we have got to have this correction.

Q: How will you approach this phase if it pans out like you expected, one year of essentially rangebound movements. From your trading and investment perspective, how will you approach it?

A: I will limit my trading extremely. My trading levels will come to 10-20% of that level. We need a rangebound markets. I don’t buy anything at one price but buy at stages.

Q: What will you trade more in the next one year the Nifty or individual stocks? Where will the opportunities be?

A: Nowadays,, I tend to trade in the Nifty more because I find it very liquid.

Q: From an investment perspective?

A: I will see whatever opportunity comes. I am making investments. I made some investments in April, March, and February.

Q: Will you consider paring down some money and moving to cash in the next one-year?

A: I essentially have no debt or very little debt. So, I can always take debt if I find investments to be adequate. If I feel that I have such a great opportunity that I must invest and I don’t have the capital, I may sell some of my investments and interchange.

Q: So, your convinced that this is just a long painful correction in a bull market. It is not a bear market that you are seeing for the last three-months?

A: That’s what I think.

Q: Convinced?

A: Yes, 100%. Once America bottoms because the greater surprise is going to come from the World Cup markets. There is so much to come from India once this gas comes. More the power, more investment is needed. This will itself be such a big trigger. I cannot believe that the bull story, which is linked to India’s economy with 5-6% of Indian’s savings coming into equity and with the kind of Indian sprit and entrepreneurship, can die. If this is the end of the bull market then India really has incurred god’s wrath. But it may be long and painful.

Complex Derivatives

Old wine in new bottle

Why the Global credit crisis?
I met with the experts (you know the ones who do not make any sense to you and me) after a round of golf. The back drop was the informal setting of the club bar lounge. This is one place where all the loose talk takes place. After downing a couple of vodkas people start talking emotionally about stocks and investments.
First thing I discovered that the so called experts had no clue about the impending doom in the financial markets. The top management of various financial institutions had no clue what was happening around them. The reason for this is the new recruits they hire from worlds’ premier business schools like Harvard, Wharton etc. These brilliant young men (boys) from the top business schools are so bright that the top honchos do not understand how they function or what they are doing.
These young men come up with complex new derivatives. They are repackaging and selling such complex and attractive derivatives that both the selling and buying instituions were not aware of the complete underlying risks. Sub prime mortgage is the prime example of this. Risky loans given to people with bad or no credit ratings were repackaged and sold to top financial institutions the world over. The world stock markets are going through the hangover from that party.
You must have read something about young executive making a British bank bankrupt causing a loss of billions of pounds. The top management of the bank said the executive acted on his own without their knowledge or authorization. What were they doing? Playing golf!! I have a hunch this is not true. The management knew the executive was doing something only they could not understand what he was doing. They just hoped that it would make the bank a pile of money till their dreams came crashing and so did the bank.
I have been around the stock markets for a while now and honestly I can not comprehend more than half of the derivative products that are floating around in the stock markets. The old school managements need to wake up and be aware what is happening in the financial markets. The new boys may be brilliant, but just as you and I will not put our money in something we do not comprehend so should the big financial institutions. There is need for more transparent and easily understandable derivatives.

Repackaging and selling the old wine in a new bottle is all fine but remember the wine bottle will be opened sooner or later and the stink will reveal it all. The new bottle and its label might look very attractive and help sell it but the bad taste will make others throw it down the drain. Back in the club lounge the wine was fine but the mood was negative with the experts talking about further slide in the stock markets. The gloom was not lifted with the best of wines around.

indian stock picks

This is the place for those people who like to invest in Indian stocks for short (1-2 months) medium ( one year)and long term. Stock ideas are given here after certain amount of research and followed up by me. Stock queries and their follow up from you is welcome and desirable.
Indian stock market is the place to be in these days and times for those who want to make money as the economy of the country is on the roll. This is the place to get together to identify and select sectors and companies which have bright future. More than that this is the place to be to stock pick before the rest of the market grasps the idea and takes the price of the stock through the roof. Most ideas in news and periodicals are thrown up after the idea has unfolded and the price already risen for retail/small investors to get in. The focus here is to identify ( with sound logic and information) stocks to make some profit.
If you really want a safe heaven for your investments then Fixed deposits in the banks are the place for you. Stock market investments are risky but at the same time there in no place where one can make as much profit. For anyone who has some sense of adventure and seeks a little gaming thrill with a fantastic opportunity to make money this is the place to be.
Small guys ( read retail investors) usually end up burning their hard earned money in the stock market. Two primary reasons for that are 1. They enter/buy the stock too late when its price has already shot up. 2. They never sell when the price has risen a bit and also keep clinging to the stock when it slides down. In other words they are governed by greed and fear like most of mortal beings in the stock market.
So keep track and you will find some bright ideas in this blog in times to come. Also check out the link at Stockinvest.in and indian-stock-picks-subscribe@yahoogroups.co.in