DIWALI STOCK CRACKER

DIWALI SPECIAL ....! 5th NOVEMBER 2010
To all my readers at Wealth Mills , I wish you all a prosperous Diwali , festival of lights . I observe a clear difference for this Diwali as I pass through the roads as this Diwali is brighter than the previous ones. What makes this Diwali So special ! Is the positive confidence is back to billion spenders and investors in India . With the Mahurat trading markets are just at a kissing distance to the new highs and I can sense if the same rally continues for some time Investors can look their name on Forbes without working hard any more !. What the major change happened in the global arena if you analyse is past 2 years is except the confidence “ Nothing has Changed” Indian Markets were at All time high in Jan 10th 2008 at 21208 came down to rock bottom of 7697 in Oct 27th 2008 and Now stands at 21000 levels . If you bought a Index fund in Jan 2008 means after all the carnage and bull run with gush of liquidity, Congratulations !! you would have got back your capital or any thing + ve or -ve 5% , because of trail and error.

Today onwards the so called Fund Managers and Equity Analysts starts projecting their Lucky & favorite numbers on idiot boxes!, I mean Televisions sets! about New highs of the market with the sweet India's Domestic growth stories which entices the investor fraternity . In this saga of last 2 years we need to observe Indian stock nature which was so extreme, It just discounted first 3 years performance of UPA led government victory in first 3 minutes of trade on 18th May 2009 . Every one boast about the resilience of Indian Economy shown during the period of global credit crises , the Great advantage for Indian Economy was General Election in 2009 considered to be one of the biggest event across the globe & especially in India where all the unaccounted money flown into the economy without any restrictions. Just for simple math for 545 parliamentary constituencies for each Loksabha seat the average expenditure by the contesting candidates was minimum 25 crores which translates to more than 2 billion US Dollars which flown into the economy without any record . sixth pay commission's fat pay revision helped the Indian economy as a major stimulus besides to the govt actual stimulus package has helped the economy at greater extent .
Without mentioning the Top Financial regulators my Article is incomplete the Chieftains of RBI, SEBI & IRDA , Every one tried their level best to show their sincerity in their task they are assigned .First and foremost the chieftain of RBI the well educated Mr RAO he is an expert in 2 things either tighten or loose interest rates . He did't see any thing !! If food inflation is high increase rates or its low decrease interest rates . He should know a simple law people won't eat 7 times a day since interest rates are Low or High .But I appreciate him for keeping interest rates at high when compared with global markets at least investor will get something back on their savings in fixed deposits. The second one is our SEBI chief C.B.Bhave , He is advanced and visionary !,He want to change the whole financial market systems over night . A Few significant changes he enforced were ban on entry loads for MF and ban on all unit linked life insurance products. Because of ban on entry load on Mutual Fund products from 1st August 2009 nobody is there to advise & service for M.F . Banks & Financial institutions stopped prescribing MF to their investors as they don't derive any revenue by advising the same . To overcome this problem fund houses and financial advisors resurrected sick product in India i.e Portfolio Management services to the Investors as they can charge with various fees left , right and center with Entry load & brokerage while churning the fund. I observed financial advisors advise only PMS and financial steroids like structured products with different combination of Equity , Debt & derivatives for their survival and also key cause for global financial crises . With the Inspiration of RBI & SEBI chiefs IRDA Chairman J Harinarayna gone one step ahead !, with number of sleepless nights completely revamped the unit linked policies and with this effect financial advisors started advising traditional endowment products where liquidity for Investors is less and the agents can earn double of their commission when compared to ULIP . Ultimately every one the regulators and financial advisors making their efforts at full throat to make investors more confused to take financial decisions about savings & Investments .
My sincere advise to all the investors in India is please do your homework before you take any single financial decision . As per stock markets are concern we are at 21000 levels of market, At price to earning ratio of at 18 times of forward earnings which is high value territory of course financial analysts mislead this number as fairly valued . As GDP to market capitalisation we are at more than 1 time which indicates high value for India .But because of unprecedented gush of liquidity markets might rally forward in the days to come . 10 to 15 % correction is healthy for market at this level . This is the time for retail investors to become vigilant and cautious before coming to market and please if you want to invest now don't waste your gun powder in a single shot. Take route of SIP or MIP and start Investing . Remember stock market investing is not T20 cricket or one day nor a test market cricket ITS A MARATHON stay invested wait for the opportunity don't rush. Investment decision is not a Diwali cracker its a nuclear bomb which change the Financial Fortunes of your life.

Lets Start Calling the Spade As SPADE

Nobody has a clue whether we are in the middle or at the end of crises But the most optimistic people say we are in the beginning of new growth cycle. I am not here to determine you all what kind of recovery we are going to face V type, U type, or W shape of recovery of global economy. But definitely explain to you all the process. Last decade was quite an unusual decade in the last 200 years history of the world, the key reason is there was a global synchronised growth around the world, if you travel to any corner of the world there was growth, its a decade of prosperity & excellency, INDIAN incomes are multiplied more number of times, so everyone went on shopping....! the caveat is whether the same kind of economic growth will sustain or not is the million rupees question. ..... I am not using $ because by the end of this decade Dollar position as a global imperial currency will be questionable ??. At the beginning of the decade most of the folks were not aware of Google, SMS, credit cards and EMIs now they have become a part of their life, the present decade will not be an easy-going, we need to be very cautious about everything in life, things will change at a very fast pace, Investment avenues what looks good today will be turned as bad and bad will be darlings. Countries not heard like Vietnam, Cambodia, Srilanka, etc., will be the dream destinations to earn money.
After the burst of TMT bubble ( Technology -Media- Telecom) and 1980 economic crises to maintain the growth momentum, policymakers in United states identified a new formula that was pumping money into the economy from the Federal Reserve by ultra expansionary monetary policies, Federal Reserve reduced its Fed Rate in baby steps from 23 % in 1983 to today at 0.25% which maintained growth momentum in the past 2 decades. Federal Reserve 's interest rate known as Fed Rate is considered to be a benchmark rate to the European Central bank and creates a major impact on the monetary policy decision making of Central Banks around the globe. If Interest rates are low! what will happen? we can't save money in banks!! ,one thing We will do is spend which in turn increase the corporate profits. So Invest in stock markets and Real estate, But the terrible problem is since interest rates are low if we borrow money and leverage our finances and spend and buy homes that create systemic collapse that's what happened in USA and major parts of Europe. With excess liquidity in the system financial institutions innovated frenzy products like subprime bonds and policymakers realised lately total America was subprime, With the availability of Cheap capital in global markets Indian Corporation went for shopping Tatas Bought Corus for $ 13 billion and Hindalco bought Novelis for $ 8 billion, like this most of the corporations increased their debt on the balance sheets. By pursuing Ultra expansionary monetary policies, Politicians & policy advisors created consumer demand and increased the gap between income and savings, as a result finally corporate profits are up by many folds. During this period policymakers focused on only Technology, service sectors, and Military expansion and American corporates with WTO implications expanded their footprints around the globe outsource their business operations & manufacturing units to low-cost destinations like China for manufacturing and India and Philippines, etc for services. If your carrying APPLE I PHONE just turn it back you can understand this story better ! Designed in USA and manufactured in China!!. When Economy witness an unprecedented growth the first sector to expand is the financial sector, The largest 5 broking companies in the world in 2007 Goldman Sachs, Lehman, Morgan Stanley, Merill Lynch, and Bear sterns paid 36 billion dollars as bonuses to their key employees, this was more than GDPs of some developing and middle east nations. From these numbers, you can understand the heightened activities of these brokers which created the Economic imbalances around the World . But the Administrators and policymakers in USA and across the globe least bothered about these imbalances. Their main focus was on "catching the Monarch of Iraq only"?. With excess liquidity in the banking and financial system people started investing in Real estate and banks leveraged its books by lending to the same sector. During 2007 in so-called emerging markets Foreign investment has grown $ 200 billion to $ 900 billion, commercial bank lending up from $ 12 billion to $ 269 billion with this excess flood of liquidity stock market capitalisation in low and middle-income economies in increased eightfold from $ 2 trillion in 2000 to $ 15 Trillion in 2007 or from 35 % of GDP to 144%. Stock Markets in BRIC Countries accounted for $ 11 Trillion. If the consumption-led by excess credit goes up the key beneficiaries were the resource-producing nations China and Canada in turn create demand for raw materials like Oil, Iron ore, copper, nickel, aluminum, etc. With these commodities, demand countries like Australia, the Middle East, OPEC, and African nations got benefited.
Noble laureate Mr. PaulKrugman recently said, “To be honest a new bubble now would help us out a lot even if we paid for it later, This is a really good time for a bubble”. Over a period of time, Wall Street started influencing the Capitol Hill White House and American policy-making decisions and the same thing will happen in India the Dalal Street will dominate Indian policymaking over a period of time in the days to come. Every one boasting we achieved a lot in last ten years in India , Yes We did , but policymakers should relise this wouldn't had happened without taking the advantage of this credit bubble but not by our own capabilities!, If We again rely on the next bubble the Growth story of India will be dampened. This is time for Indian policymakers and corporates to start and plan for sustained domestic growth models to maintain the growth momentum in INDIA.

Power of Micro Finance

If some one says Villages are there in India ! I disagree , But I strongly believe INDIA is in villages . SKS Micro finance successfully completed its IPO process subscribed 14 times . Micro finance will be a new investment theme in India in the days to come . Since 70% of Indians are from rural India and don't know read and write and these guys can be charged with high interest rate left right and center. The key reason is low penetration of rural finance and access to credit market. Micro finance business have taken advantage from bureaucracy and political backup as the concept of financial inclusion.Till date there is no proper regulatory frame work to control and monitor the activities of these institutions unlike banks. With easy credit available in the overseas market at low rates these, institutions can lend money to under privileged folks at a stupendous interest rate around 28% to 30 % to increase their net interest margins.

Father of Micro finance and noble prize winner Mohammed Yunus said recently the concept of Micro finance is not a business for profit making but it is for a Social Cause ! I hope these institutions should not be a organised pawn brokers in villages with money and muscle power.
SKS Micro finance recently moved their corporate office to Satyam's old corporate office building satyam city center in the heart of Hyderabad .With listing of SKS Micro finance, the chieftain of SKS will be a part of Forbes list from Hyderabad. The prevailing problem with primary market is every one want to sell their IPO allotment immediately after listing which creates over supply of stock and eventually disastrous issue, if the company fundamentals are strong that will be the time for serious investors to use this as potential opportunity to create wealth as value investor .For every sector there will be different stages, nascent stage , growth stage and bubble stage ,as investor we should learn the art when to pluck the fruit from the tree. Organised Micro finance is at a very nascent stage in India , one should take the advantage before it becomes one more sub prime bubble in India. For risk taking Investors this is a place you can make some handsome money in the medium term.

Beware of Biggies!!

 During our investment journey we also come across ostentatious company managements who boast about their company's stock market performance and also charitable work they do for the society. As a investor we tend to fall into their trap by witnessing their good work . To day I have to introduce a person by name SIR ALLEN STANFORD , most of the Americans they don't require any introduction . Robert Allen Stanford born on March 24,1950 was a prominent financier, philanthropist ,celebrity for Americans and Chairman for wholly owned Stanford financial group of companies based at Houston , USA . He was sponsor of number of sporting teams across the globe including T20 world cup teams. He was recipient of 2006 Excellence in Leadership Award from American Economic council . Former United States President Mr.George Bush praised him as Inspiring personality for future generations .Why I am explaining about this is , once a company starts growing at a faster pace in a irrational way and the entire media focuses on such developments. One need to look into the true colours of the Managements and company operations . Allen Stanford started his own bank in a country by name Antigua and Barbuda, a Island nation with a population less than one lac , this nation is a tax heaven and starting  bank in this Island is very easy . With the tax treaties Antigua and Barbuda enjoys with USA, Allen Stanford got offshore banking license to start his Stanford international bank branches across USA and started accepting well known Certificate of Deposits (C.DS) from public offering very attractive interest rates ranging from 6 % to up to 15% when others were offering at less than 3 % ,with the help of media and from his ostentatious life style he mobilised nearly 50 billion US Dollar from public by offering unusual interest rates. To sustain to pay the interest rate he started inflating his book of accounts and tarnished the balance sheets. He diverted money from banks to buy mansions ,costly cruises and private jets and to gain the fame, some portion to charity works to the land of Antigua where he got the dual citizenship. Allen Stanford donated millions of dollars to university of Stanford just it is on his name .
For every investment there will be rational returns in correlation to the fundamentals of the respective investment avenue , including so called safe heaven GOLD . If you come across any such opportunity which gives unusual returns without a fundamental shift , you need to consider as unsystematic risk and look for the immediate exit ways without any further delay, you need to be vigilant and cautious about such unusual returns . Thanks to Securities Exchange Commission (SEC) which controls the financial activities of financial institutions in USA at least realising after 8 billions dollars flown from the books of Stanford international bank.
At WealthMills my sincere appeal to the investors is beware of such unusual returns, it can be in USA or in India. In our investment journey we will come across these sort of illusive investment avenues, One need to be aware of this kind of hypes , to be successful in your investment journey. People like Allen Stanford are there every corner of the country, we can't stop them , but we can avoid them.

Multi Baggers !!

Investing has a lot to do with common sense and personal observations. The man on the street frequently knows far more about the state of the economy than politicians, university professors and financial analysts who seldom travel, or if they do so, only from one first class hotel to another first class hotel and from one golf course to another. The pulse and vibrancy of an economy is, however, nowhere more visible than in a country's entertainment venues such as Multiplexes , Restaurants shopping centers ,vegetable markets and in country side fairs.
The problem with fund managers and financial analysts is they knew more about the subjects which creates very much apprehension for their portfolio investment , But the reality is where there is no apprehension there is no room for multi bagger returns . The more risks you take the probability of returns you derive from the investment is considerably high. Fund mangers always work within the frame work of fund objectives and compliance as limitations , if they like some interesting themes as investment avenues because of these limitations they may not be able to take part in those stock's growth stories as a part of their portfolio . But it might be in their personnel portfolio in the wife's account . Below table contains the largest wealth creators in the last 2 decades , if we would have invested in the following stocks our financial fortunes would have changed.

But how many Fund managers would have had these stocks in their portfolios they are managing when these companies were at nascent stage , these fund managers would have taken these stocks in their portfolio when companies after monitoring the companies performance at matured level !! By the time the earnings would have factored in the stock price . So when you want to Create WEALTH and leave a estate to your family with multi bagger investment returns !! ..... If you rely on your MF,PMS you don't land up any where probably you will upbeat the SO called inflation. Unless the fund manager was versatile like Jim Roggers or George Soros who given 4200% returns over the 10 years span of the Quantum fund while S&P 500 returned just 47% from 1973 to83. If you want to create wealth you need to develop the strategy of stock picking .

If someone says I invests in stocks , in my opinion they are wrong , I invests in businesses rather than stocks , Investing in stocks involves identifying companies and shop for Quality , Value and Growth. I would like to analyse what are core ideas and analysis one required to be successful investor.
Management : Management is the life blood to the company , one needs to analyse the dynamism and quality of the Management , just observe the transition in the companies products and services , an edible oil processing company transformed as India's software services giant as WIPRO, A nylon polyester manufacturing company transformed as one of the worlds largest oil refining company with interest in various diversified businesses as RIL. we can observe a clear sheer Management brilliance in the both the companies . How effective is the management ,taking the advantage of changing economic environment and taking the company ahead with a great vision to capitalise the opportunities coming in the way is very important . ITC is the company transforming their outlook from a pure tobacco based company to a FMCG company. If the management is dynamic means it doesn't matter what type of industry and sector they operate , these managements excel in the art of creating value to the investors. Mr Laxmi Mittal known in the art resurrecting the sick steel plants to transform high margin yielding and profitable houses. where as steel as a sector cyclical in nature and bears less valuations in the market because of high gestation period , highly fragmented nature of industry throughout the world, and shortage of iron ore reserves and govt regulations on ore. But Mr Mittal succeeded in the process of consolidating the industry and creating value to the share holders. The prime duty of the fund manager 's and investor is to figure out these kind of Managements vying to transform to cash the opportunities and desperate to create the value to share holders. In the past 5 years equity market from 2005 to 2010 markets are run up from 6,000 to the current levels , most of this happened because of unlocking value from the companies and de mergers . Some times internal disputes also surprises the share holders , tussle between Mr Ambani brothers given birth to R-com, RNRL , R-capital ventures . These are the times to the corporate India's managements to start creating value rather than unlocking values. While investing in a company one should look at the management traits how effectively manages the systematic and unsystematic risks is very important .
Price to Earnings ratio : A ratio everybody speaks and try to understand ,Price to earnings ratio is the key ratio to know How a stock is trading in the market in comparison with its earnings , we can derive this ratio by dividing current market price by number of outstanding share. figuring out PE ratio is very easy by simple calculation but the crux and confusing portion to the investors is weather the current PE ratio justifies it price or not is vital. WIPRO which was trading in the band of 500 PE ratio during 2000. Capital goods as sector always enjoys high PE multiples . Historically Steel as a sector trades in low PE ratio. While tracking PE ratio one should keep in mind PE is more relating to the Earnings i.e P&L account , the current earnings growth will sustains or not one should keep in mind while assessing the PE ratio. Another way to get a peek into the future prospects of a company is by looking at its PEG or price-to-earnings-to-growth ratio. Anything under 1 is great, although staring at a 1.1 or 1.2 isn’t going to steer me away from a company. How does PEG work? Let’s say a company has a P/E of 12. And that company has projected annual earnings over the next five years of 12%per year. It would then have a 12:12 PEG ratio or a ratio of 1. If its projected growth rate is 15% per year instead of 12%, its PEG ratio would be less than 1. Fund Managers would die for such a ratio.
Price to Book value: A ratio used to compare a stock's market value to its book value , price-to-book (P/B). The “book” refers to net assets or assets minus liabilities. A P/B less than 1 either means you’re getting a great buy on the company or its assets are worth as much as shares Think about it. At a P/B of 1, the price per share you’re paying is the same as the value of the net assets per share. That means everything else you’re getting with the company is free. The business – and the profits it generates – IS FREE. The future growth of the company? Free too. A P/B of 1 or less is a phenomenal ratio. But anything less than 2 is still considered good. I like EBITDA (Earnings before Interest, Taxes,Depreciation, and Amortization) much better – and I believe EV (enterprise value) to EBITDA is a much better ratio than P/E.EV is simply the market capitalization of a company plus its cash minus its debt. It’s called “enterprise value” because that’s what you would pay for the company if it were up for sale. Investing in company is all about buying a growth at cheaper rate , there is no specific acid test to measure as we are buying at cheap or not . One more point i like from the thesis of Mr Warren buffet is Moats let me just brief about Wide Moats : How much distance can a company put between it and its competitors by being a technology, brand, or marketing leader? This is an easy concept to understand but a hard one to put it into practice .Ford and GM probably once thought their brand recognition gave them a wide and deep moat over their obscure Japanese competition like Honda (more known for motorcycles or lawnmowers than cars at that time).Wide moats creates the efficiencies and high margin variation when compare with its peer group companies . Don't invest in a company for longterm where you can't understand their business model.
Ace fund manager Mr Peter Lynch rightly said " its futile to predict the economy and interest rates " .While investing there's always something to worry about in the market, one should shut out market noise and concentrate on company fundamentals, using a bottom - up approach. Invest for long run and pay little attention to short term market fluctuations. Equity science is not a rocket science to understand , One should develop a clear idea to understand Equity science to invest in stocks without scaring the market fads.

Learn the Art ?? Farming

Learn the Art of Farming

Are you relentlessly working & saving towards your  Children's future education and Welfare ... you are rest assured , they need not have to worry for admissions in Delhi Public Schools or IIMs.The Key reason gradual decrease in farm land cultivation & lack of high skilled professional in farming and agriculture across the world . In my research with NHK GLOBAL NEWS Reports , I came to know the dire fact that the average Japanese agriculture farmer age is now above 60 years , given the kind of state of affairs continues to prevails in next 20 years , we won't see a farmer in Japan , It might be the same case with INDIA also over a period of time .Growing demand for food items will lead to higher food grain prices and the demand for food articles always on rising front. Except a few states in India, farm land under cultivation is gradually coming down which is threat to the country's economic prosperity. There are numerous advantages by owning a farm land , your farm land value won't fluctuate in accordance with what happens to credit and mortgage market in Manhattan and around the Financial Globe . As per War Cycle theory if the next world war comes ! it is going to be a dirty war with biological weapons . But nobody throw a bomb on your farm land on country side which is middle of no where , last 200 years war history shows , during war times cities will be attacked but not the farms. If the same trend of reduction in farm land cultivation continues , there will be hyperinflation in food grains stocks where demand is growing or inelastic.

Just ask your self ! How many want to opt farming as profession !!. I strongly believe this area throws ample opportunities for Investor !!


http://asia.nikkei.com/Politics-Economy/Economy/Japan-desperate-for-foreign-farmers

Is STOCK Markets Always Go UP in long Term....Myth

IS Stocks Markets always go up in the long term. This is a myth. Far more companies have failed than succeeded. Far more countries' stock markets went to zero than markets, which have survived. Just think of Russia in 1918, all the Eastern European stock markets after 1945, Shanghai after 1949, and Egypt in 1954. Just see the graph Japanese stock Index NIKKEI have fallen to 14000 level from 40000 in last 20 years !! You need to be Vigilant or else?? Investing stock market should be based on the study of macro fundamental of the Economy ,it should not based on some vague principals .Economies performance always based on economic cycles ,horison of these cycles pretty long , U need to learn exit strategies from these markets at appropriate TIME.

The MOst Bearish & Pessimistic People On India.

The MOst Bearish & Pessimistic People On India.

These folk are called Stock Market Veterans ! and Always discuss about India's Great & strong domestic story , But If we look into their own company balance sheets and number of employees they employed ??, They have been reducing their employee count from last 2 years !! and These chaps boust about India's Domestic Growth Story !!.

Panacea For INFLATION

When ever the Food inflation on raising front, Our RBI Governer thinks about fisical tightening!.

He should know a simple law , No body in the world eats 8 times in a day , when people have extra money in their pocket !!.

“Have a Eye on the Speed o Meter ...., ” ...10th November ,2007

“Have a Eye on the Speed o Meter ...., ” ...10th November ,2007
We are witnessing fabulous run up in the equity market in last few days. All of a sudden every body started discussing about Chinese markets and its valuations , I just want to share few insights of Chinese valuation vs India. China an economy known for its manufacturing capabilities , a country aspiring to dominate the G7 countries and very important fact an economy recording a double digit growth consistently from last few years. Through my eyes of stock market , a market always enjoys the premium valuation , not because of tasty Chinese grilled chicken but for its strong manufacturing capabilities. China's economy maintains sustained and rapid development in the past 20 years . It has actually achieved a new stage which use meet the needs of the people as main content big industry as means and large scale change of production mode as life stage .
China which opened its doors to the foreign direct investments in the year 1980. and is a country where the foreign insurance companies can increase their share holdings up to 51 % in insurance and banking industry . If we compare the size of the economy , the GDP size of china is 13 trillion , where as India 1 trillion economy .
The main reason why iam taking through all these facts because when ever there is a bullish trend in the Indian stock market the so called analysts in India looks at china`s premium valuation, which always trades in the range of 35 to 40 times to price earning multiples and the give comments " This is the time for India to enjoy such type of multiple valuation and try to lure and keep in the trance of Gung-ho..", I questioned my self it is necessarily very important to Indian equities to have such high valuation. In 1980 a year before I was born Japanese market was trading in the 100 times range . In 1992 Indian markets were trading in above 50 PE multiples, It was the time there was no significant growth in GDP and industrial production. Every economy has to go through the different economic business cycles , but in rapid growing phase also these kind of extreme valuation won't sustain for long-term , These kind of moves are short lived in nature. In the current contest when comparing the valuations of various equity markets like India and China , the demography s are different, geo , political situations ,economic systems and practices are quite contrary. finally the size and pace of GDP is different. Compare Indian equities with India`s corporate earnings and growth story but not with other equity markets which questions the health of the equity universe and creates the bubbles in the market. I want see the higher levels in the market and reaching new highs , but always valuations should justify the levels to enhance the margin of safety .
Don't concern for the sensex but give importance to the earnings growth. In a fast pace economy business dynamics could change any time, fifteen years ago the main problem of the economy was inadequate foreign exchange reserves but today the concern is excess liquidity , to days bullish sectors might turnout to be unflavored sectors tomorrow , which fund house dares to start a technology fund today ?.Themes will change . No doubt India is in prospective trajectory but over exuberance and discounting future growth immediately in the market might disturbs the ongoing party any time, every body want to see the growing and emerging markets but the quality of growth is vital , Always maintain ratio of price to earnings growth .For smooth and safe Investment journey Speed o meter should be under control.

“Real Estate ..Yet to be Hassle free Investment “ 20th November,2007

“Real Estate ..Yet to be Hassle free Investment “ 20th November,2007
Real estate a word which fascinates everyone and treated to be known as one of the best investment avenue . Since from 2000 there is a significant run up in the real estate prices in India , Investors looking at real estate as one of the best investment avenue .But there are other best Hassle free investment avenues are available in today's sophisticated financial markets. Value creation no longer happens only in the exclusive realm of so called blue chips and real estates . There are some stocks and funds given far superior returns when compared with real estate . Rupees one lakh invested in 2002 in a company called unitech would have been worth of 5.84 crores by April 2007 or 1.52 crores if it had been invested in Aban offshore. This is not only far superior returns and also hassle free return. when compared to your plot or flat in NCR area (National capital region ) where we witnessed tremendous price increase in real estate prices.
As Investors we should have to maintain a balanced and diversified portfolio when your investments are concerned among all the investment avenues. I want to quickly take you through the variations between real estate and financial instruments and securities . One can't really give the absolute variations but slight variations.
Since from Independence real estate sector known as unorganised sector , but from last couple of years real estate is emerging as a organised sector ,now also 90 % of real estate sector is in unorganised sector only .But still it lacks the basic features of the best investment avenues 1). Liquidity 2) Transparency 3) Pricing Mechanism 4) Security 5) Hassle free Operations 6) Regulatory.
Liquidity: When compared to financial instruments , real estate carries less liquidity factor. Until and unless you are a person deals in the real estate society only , you will get a immediate buyer to liquidate your asset . But in financial instruments you can liquidate your financial assets immediately after it matures or getting your anticipated price . Pledging or hypothigating the real estate assets take more time when compared to the financial securities or funds because of various reasons .
Financial assets are highly transparent in terms of pricing and in terms and conditions. you can actually asses and determine the value of any equity or any other financial instrument with much greater transparency. Procedures and evaluation of value of the financial assets more transparent when compared to real estate properties .
Pricing Mechanism : From last couple of years onwards after the debut of private equity funds , venture capitalist and big corporate players entering the real estate field there is slight improvement in the pricing mechanism in metros and tier II cities but majority of the real estate sector market lacks the true pricing mechanism .un like in west and America in India the pricing mechanism is poor ,assessing or pricing the real estate price is very much complicated in absolute terms, measuring and evaluating the intrinsic value of the real estate is not fairly valued when compared with the absolute government prices are also one of the concern. There is big gap between the market price and its intrinsic value . How one could assess his own flat value ? because some of his neighbor sold his property taking that deal value into consideration will try to assess your property value , there is clear cut price discrimination factor is there .where as in financial assets the pricing mechanism is sound and fair.
Security : If you owns a big and costly real estate assets , until if you have the courage to protect your asset only you are advised to hold the asset in most of the cases protecting the valuable real estate properties from land grabbing and trespassing one of the concerns but in the case of financial assets we have depository and custodian services are there to protect your financial instruments and securities holding the financial asset carries negligible risk and financial assets gives the clear title of ownership.
Hassle free operations: If you want to own a financial asset you need not have to ask your boss permission for leave you need not have to postponed your engagements. it is a complete hassle free operation more because of the improved technology and widen intermediaries in the financial markets as a matter of fact when u want a buy a real estate property directly or indirectly you have to follow more than 28 procedures from Ec to registration.
Regulators: unlike in European countries there is no regulatory body is not there in India to regulate the practices and operations of the companies and the persons deals in the real estate market is a concern there is no ombudsman man or any other consumer forum is not available to consider the constraints and concerns of the real estate investors,.but in financial asset such as equity and other instruments like insurance, fixed deposits and mutual fund etc., there are different stringent regulatory bodies are available in India to regulate the practices of the financial intuitions.
considering above facts, it will take some more time in India for real estate market to emerge as the best hassle free investment avenue.

"Shopping Time" ...22nd Jan ,2008

"Shopping Time" ...22nd Jan ,2008

Jan 21st always a special day in my life not because of Black Monday but for the reason of my Birth day . I consider JAN 21st 2008 is a significant day in the history of Bull run which started couple of years back . If we analyse the entire trading day it teaches number of lessons to the investors and trades for the future investment course of action. Equity guru Mark Faber rightly stated when you are investing in equities better be prepared for 30 % down fall risk. that statement got manifested in Last two trading sessions . If we retrospect from August 2007 sensex was hovering at 14000 levels , just a small statement from Mr Ben Bernake , US Federal Reserve chairman's Fed rate cut opened the flood gates of Foreign fund flows to India and emerging economies , within span of two months we were at 20,000.Large cap, Mid caps, small cap and penny cap hitted their lifetime highs .. From last two months trading days and all there is retail mania was prevailing in the market . Retail investors and short term punters were chasing small and mid cap companies . Companies without balance sheet like RPL and companies without fundamentals, earning track like RNRL produced handsome returns to the investors during the last three months. But the darlings of last three months scrips have turned as dare devils to the traders and short term punters within a single day
Jan 21st 2008 recorded a highest number of points fall in the history of sensex , 8% shave off of market cap irrespective of sectors and industries . with market breadth 1:50 advance and decline ratio and finally the day changed the price to earning multiple ratio nearly 2 to 3 times of the sensex companies. All the technical support levels and moving averages were broken. What led the market to fall like in this kind of ferocity is important , for a simple reason is markets were run up from 14000 to 20700 levels with in a span of three months , along with Indian markets , the entire spectrum of equity universe was in the mode of uptrend in the last couple of months . So any destruction at any of these equity markets clearly impacted Indian market as well . Even though the the third quarter results are good but not helped the markets to sustain at the high levels. But time and again Indian markets are proven resilient and resurgent markets. There is no change in the macro economic factors of the economy and the consumption story of India is intact . Earning growth of the corporates are in the right pace . Till today we can't figure out any dent to the fundamentals.
These kind of rational falls gives the opportunities to the fresh retail investors and FII waiting with thirst to invest in Indian markets from a long while .Clearly todays move shows the strength of the Indian markets . Going ahead the liquidity flows from the domestic institutions mutual funds especially insurance companies and retail flows will help the markets to sustain . In 2006 May ,trading mood was like today but people invested at the May 2006 bottoms reaped tremondus harvest. Invest when others are in fear , sell when others in gungho this principle will assist us in this kind of market times.
I suggest the investors don't get carried away by this kind of moves as the market reaches new highs and the layers of participants increases in the market these kind of swings and dips will be a regular course of unprecedented bull run . Stay invested in companies which are fundamentally strong , fundamentals reflects in strong earning track record and clear visibility of future earnings. Equity market is place where every body knows the price but not the value .Let us hope the shopping time has come to buy quality companies at fair prices with good value.

“Don't Fall in Love at 18,.... 000” 12 th October ,2007

“Don't Fall in Love at 18,.... 000” 12 th October ,2007
Indian economy is in teenage , as sensex crossed the teenage figure of 18000 couple of days back , my firm belief is that economy and the equity markets are just entered the teenage. If we look back exactly a year back in the month of October 2006 , markets were just recovering from the May crash the prognosis to the market was trivial . Sensex got corrected nearly 30% from 12800 to a level of 8000 , where as mid cap and small cap got battered nearly 40 and 60 percent respectively .It took four months to the market to come out from the bearish lull mode. People were skeptic about the equity market in India exactly one year back , but October 2007 is complete reversal for October 2006. Indian economy is growing @ 9% , when any economy is growing at this pace you will witness transformation from unorganized sector to the organized sector,this organized sectors are increasing the opportunities in the economy .which also enhances the corporate governance practices .Thanks to RBI for curbing the inflation to the historical lows. In a growing economy like India always there will be the best opportunities well managed companies to invest , we need not have to repent. Time and again Indian markets were proven resilient and resurgent markets . So what ahead of 18000 is every one's question " I still believe the best times in the market yet to come.
In the short term liquidity is taking away the market , valuation are looking stretched in the Indian contest and the sentiment is neutral . Euphoria and over exuberance in the market are leading the sensex. As the equity market runs on complex of factors any negative news trigger in these factors will have a immediate impact on the market .Liquidity is coming from the different pockets , if any one from these pockets desires to take the advantage of this situation take some profit from table also impacts the prevailing trend. Stock markets are human institutions they will respond to the greed and fear in the market .Be stock specific if u believe valuation are stretched right now the best way is to reap the abundant harvest. Currently i suggest the investors to be on cash for a while, i love to see sesex at above 18000 but the pace market is moving is not convincing to me , the last one week move in the market is irrational only 6 scrips from the sensex are contributed more than 60% of the move . any sensitive jitters and information in the entire equity universe will have immediate impact on the market . at the current levels at least 10 to 12 percent correction in the market will be healthy to the market and some consolidation is required .Going ahead the 2nd quarter results , RBI `s move regarding the interest rates ,political situations plays the major role ,avoid technology prefer the stocks from banking , telecom , and auto sectors .

“American Burger “ 25th February ,2008"

“American Burger “ 25th February ,2008
United states a place most of the people around the world want to visit at least once in their life time ,and its a place they want to send their children for higher studies or for a job assignment , of course certain section of the people are crazy about united states. what makes united states such a crazy destination?. Last few days the print and electronic media were discussing about US slow down ! What is the impact on India if US economy turn into recession ?.
Keeping these questions in mind i analysed financial history of US economy, iam presenting a few insights from my analysis.

United states is the largest economy in the world with a GDP size of 34 Trillion Dollars , and a domestic consumption size of 8 Trillion Dollars . If we compare the size of the US economy with GDP size of other economies in the world , US economy is almost 12 times of China , 10 times of Japan and 34 times bigger than Indian economy. If we analyse the consumption patterns of US, and their consumption is 8 Trillion dollars where as entire Indian economy size is 1 trillion dollars. US consumption is is 20% of entire Europe consumption, 10 times of China's consumption , 17 times of Indian consumption., thats why US consumer is called a Dominant consumer in the world. American consumer is still driver of emerging markets. Worlds `s fastest growing economy china's exports 36 % of their GDP to US. The bilateral trade between India and US was around 5.6 billion dollars in 1990, it was increased to 22 billion dollars in 2007, 70% of exports to US from India consist of IT & IT enabled services and jewelery.
The Genesis of US slow down was trivial , people around the world are skeptic about the equity market because of US slow down and recession. Is US slow down really effect our Equity life in India? . last twelve months and all US dollar got depreciated over all the major currencies in the world , rupee appreciated 12 % over dollar in the last 12 months.
Slow down and recession is not a new phenomenon to the US economy , as a old and largest economy in the world , US economy went through different economic cycles in the last 100 years . If we analyse from January 1926 to December 2006 .
The first leg period from 1926 to 1947 includes both the great depression and the World war II . During the Depression, economy contracted and prices fell , but gradually the country got back on its feet , the war began the economy expanded and the inflation rose, at the end of the war , annual inflation rate was over 10 %. But interest rates trended generally down ward through out this period. So that at the end of the the period prevailing interest rates were well below the inflation, this means that the real yield on fixed income investments was negative. During this period Stocks returned 6.3 % CAGR basis ,compared to a inflation rate of 1.2 percent .
The second period from the end of world war II and through the the early 1960s was period of generally falling inflation .Inflation peaked to 20% immediately following the war and gradually worked its way below 2 % by the early 1960s. But interest rates drifted upward despite the decline in inflation , so that real interest rates i.e ( interest rates -inflation rates ) rise slightly over this period . stocks performed exceptionally well returning 15.7 % compared to an inflation rate of 1.7% during this period.
Between 1960 and 1980 inflation turned upward again this was due to partly government spending earmarked for the war in Vietnam and for broad variety of government sponsored social programs. And then came the energy crises of 1970, when oil prices and prices if gold and other hard assets shot up dramatically . In 1979 and 1980 inflation rate exceeded 10 % and interest rates are moved up with the inflation rate . But remarkably interest rates never delivered any premium over inflation rate. Even when inflation seemed to be totally under control in early 1980, investor in fixed income instruments did not receive any real yield. Moreover the earning yields on equities rose steadily. stocks returned 6.7% during this period slightly below the inflation rate of 6.9 percent.
And so we came to the most recent period from 1981 to 2001 when the general trend in inflation has been down ward not surprisingly the general interest rates has also been down ward. The period from 1981 through 2001 includes the extraordinary bull market that ran from late 1982 into the early part of 2000.During 1981 through the early part of 1989 the driving theme was end of inflation . The Federal Reserve moved decisively in late 1970s to attack on inflation . Inflation came down , interest rates fell and stock prices rose and the financial markets rejoiced even though there was a market crash in October 1987.
The recent environment that includes both tech wreck that began in early 2000 and the terrorist attack of September 2001. the technology euphoria cam unglued in march and April of 2000 .The NASDAQ fell 60.5 percent between April 2000 and August 2001. The stock market formed bottom on September 2001 and performed well into early 2002. Over all the period of 1926 to 2001 US stocks returned about 11 percent annually before inflation and about 7% after inflation.
For economy like United States of America ups and downs are quite natural ,the recent sub prime issue and slow down , recession will not have any great impact on the economy is concern over long term. But there are signs of slow down of growth in short term. Since the world has became a global financial village the impact will be there on the countries which are predominantly depend up on US. But Always good fund flows will chase good growth, which Indian economy is enjoying. we are less vulnerable to US slow down as the bilateral trade is concern with US economy . India's strong domestic consumption will create opportunities to Indian economy but not the growth or slow down of US. Every bearish indication or a dip in Indian equity market is a good opportunity to invest in sound fundamental companies irrespective of market fads.

"Equity- Rocket Science" June 20th 2008.

"Equity- Rocket Science" June 20th 2008.
We all enjoy stories in which extraordinary things happen to ordinary people. An unemployed auto worker wins a 100 million lottery jackpot. A 75 year old mother of five and grandmother of 15 finally goes back to college to complete her degree. We take pleasure in both the situations, but the second case is more satisfying since the good news is not the result of luck, but the result of hard work and courage. We love to see virtue rewarded. In the world of equities folk often says Investing in a particular stock was lucky !, one should aware very well before Investing that stocks performance is luck or any science working behind the performance of the stock !. What this Equity science? Is it a rocket science to understand ? .Everybody wants know and try to understand the jargons and formulas of equity science to create multi bagger stories in their portfolios. In my regular interactions with investors , I found that Investors are curious to know more about the Fund Managers & Equity Strategist 's educational back ground , experience , AUM and earlier funds they were managed etc ., Some people asks this fund manager was from which B-School ?...IIMs , Harward or wharton ..? Because Investor belief is that , these Fund Managers & Equity strategist are well versed with the Equity science to manage and enhance their wealth more efficiently. And on other side of the coin i came across the investors who efficiently managing their funds with multi bagger stocks in their portfolio without having any professional qualification , to my surprise friends ! no other Fund Manager probably in the equity universe can match their returns generated over a period of time. If you are a firm believer investing in Equity is a science means you are RIGHT, but its more like common sense !.The top Fund Managers of 20th century Mr Warren Buffet from Berkshire Hathway ,Mr Peter Lynch - Fedelity , Mr John Templeton- Templeton Investments and my favorite Fund Manager Dr Mark Mobius are successful managing Billions of Dollars. Let me focus on few multi baggers , Rupees one lakh invested in 2002 in a company called Unitech would have been worth of 5.84 crores by April 2007 or 1.52 crores if it had been invested in Aban offshore. If somebody says I invests in stocks , in my opinion they are wrong , I invests in businesses rather than stocks , Investing in stocks involves identifying companies and shop for Quality , Value and Growth. I would like to analyse what are core ideas and analysis one required to be successful investor.
Management : Management is the life blood to the company , one needs to analyse the dynamism and quality of the Management , just observe the transition in the companies products and services , an edible oil processing company transformed as India's software services giant as WIPRO, A nylon polyester manufacturing company transformed as one of the worlds largest oil refining company with interest in various diversified businesses as RIL. we can observe a clear sheer Management brilliance in the both the companies . How effective is the management ,taking the advantage of changing economic environment and taking the company ahead with a great vision to capitalise the opportunities coming in the way is very important . ITC is the company transforming their outlook from a pure tobacco based company to a FMCG company. If the management is dynamic means it doesn't matter what type of industry and sector they operate , these managements excel in the art of creating value to the investors. Mr Laxmi Mittal known in the art resurrecting the sick steel plants to transform high margin yielding and profitable houses. where as steel as a sector cyclical in nature and bears less valuations in the market because of high gestation period , highly fragmented nature of industry throughout the world, and shortage of iron ore reserves . But Mr Mittal succeeded in the process of consolidating the industry and creating value to the share holders. The prime duty of the fund manager 's and investor is to feagure out these kind of Managements vying to transform to cash the opportunities and desperate to create the value to share holders. In the last three years of equity market from 2005 to 2008 markets are run up from 7,000 to the current levels , most of this happened because of unlocking value from the companies and de mergers . Some times internal disputes also surprises the share holders , tussle between Mr Ambani brothers given birth to R-com, RNRL , R-capital ventures . These are the times to the corporate India's managements to start creating value rather than unlocking values. While investing in a company one should look at the management traits how effectively manages the systematic and unsystematic risks is very important .
Price to Earnings ratio : A ratio everybody speaks and try to understand ,Price to earnings ratio is the key ratio to know How a stock is trading in the market in comparison with its earnings , we can derive this ratio by dividing current market price by number of outstanding share. feaguring out PE ratio is very easy by simple calculation but the crux and confusing portion to the investors is weather the current PE ratio justifies it price or not is vital. WIPRO which was trading in the band of 500 PE ratio during 2000. Capital goods as sector always enjoys high PE multiples . Historically Steel as a sector trades in low PE ratio. While tracking PE ratio one should keep in mind PE is more relating to the Earnings i.e P&L account , the current earnings growth will sustains or not one should keep in mind while assessing the PE ratio. Another way to get a peek into the future prospects of a company is by looking at its PEG or price-to-earnings-to-growth ratio. Anything under 1 is great, although staring at a 1.1 or 1.2 isn’t going to steer me away from a company. How does PEG work? Let’s say a company has a P/E of 12. And that company has projected annual earnings over the next five years of 12%per year. It would then have a 12:12 PEG ratio or a ratio of 1. If its projected growth rate is 15% per year instead of 12%, its PEG ratio would be less than 1. Fund Managers would die for such a ratio.
Price to Book value: A ratio used to compare a stock's market value to its book value , price-to-book (P/B). The “book” refers to net assets or assets minus liabilities. A P/B less than 1 either means you’re getting a great buy on the company or its assets are worth as much as shares Think about it. At a P/B of 1, the price per share you’re paying is the same as the value of the net assets per share. That means everything else you’re getting with the company is free. The business – and the profits it generates – IS FREE. The future growth of the company? Free too. A P/B of 1 or less is a phenomenal ratio. But anything less than 2 is still considered good. I like EBITDA (Earnings before Interest, Taxes,Depreciation, and Amortization) much better – and I believe EV (enterprise value) to EBITDA is a much better ratio than P/E.EV is simply the market capitalization of a company plus its cash minus its debt. It’s called “enterprise value” because that’s what you would pay for the company if it were up for sale. Investing in company is all about buying a growth at cheaper rate , there is no specific acid test to measure as we are buying at cheap or not . One more point i like from the thesis of Mr Warren buffet is Moats let me just brief about Wide Moats : How much distance can a company put between it and its competitors by being a technology, brand, or marketing leader? This is an easy concept to understand but a hard one to put it into practice .Ford and GM probably once thought their brand recognition gave them a wide and deep moat over their obscure Japanese competition like Honda (more known for motorcycles or lawnmowers than cars at that time).Wide moats creatse the efficiencies and high margin variation when compare with its peer group companies . Don't invest in a company for longterm where you can't understand their business model.
Ace fund manager Mr Peter Lynch rightly said " its futile to predict the economy and interest rates " .While investing there's always something to worry about in the market, one should shut out market noise and concentrate on company fundamentals, using a bottom - up approach. Invest for long run and pay little attention to short term market fluctuations. Equity science is not a rocket science to understand , One should develop a clear idea to understand Equity science to invest in stocks without scaring the market fads.

Equity Rainbow.. 22 May 2008.

Equity Rainbow.. 22 May 2008.

An arch of spectral colors appearing in the sky -An illusion hope . Rainbow which catches everybody's attention to look at those colors just for some time . We can compare the current trends in equity market exactly with Rainbow without a shadow of doubt . Rainbow adorn with seven colors which gives ostentatious feeling but illusive. The beautiful seven colors for Equity Market Rainbow are keep on changes every movement from Day and night.The seven economic indicators of Equity Rainbow are 1.Inflation , 2.Crude Oil Prices , 3.Dollar exchange rates 4. I.I.P numbers 5.GDP Growth , 6.US Economy , and 7.Market Valuations. These exuberant colors are keep on changes the outlook of the Equity Market always. I would like to analyse the impact of these indicators on the Equity Market in the current contest of Indian economy is concern..
Inflation : First of all Thank God , we don't have any storms of inflation from Zimbabwe where 1,00,000 percent of inflation rate prevailing now , which makes the currency virtually worthless. Whole sale price Index (WPI) , which is indicator of prices for 435 articles represents the inflationary situation in India. To figure out inflation one need not have to wait for WPI numbers released on every Friday 12 noon , If your a frequent visitor to the vegetable market or grocery store or if your constructing your dream home one can know more effectively how inflation is eating your valet. Inflation raised significantly in the recent past from level of 3 percent to 7.83 , which is 44 months high. last time inflation hit such a high was in September 2004 , when it touched 7.86 %. which over and above the tolerance level of RBI and govt of India. For a corporate rising inflation puts growth at risk as liquidity contracts, which ,in turn could put pressure on earnings growth of companies . That will bring stock prices under pressure. Iam sure inflation is nightmarish situation to the chieftains , last month Mr Chidambaram conveyed his press conference at 11.50 pm to announce the excise rate cuts on edible oil and impose ban on export of food grains . But one should aware CRR and excise rate cut measure are not like sari don or disprin to control a headache . These are the monetary policy measures to control the liquidity and to control the prices over a period of time .Inflationary environment is chronic and last for 3 months to more than year , it is inevitable to control inflation every week before Friday. This time Inflation story is in different trajectory , we are not only following the Global market cues everyday morning , but also the Inflation . India is not a exception in the world to escape from the inflation because of the burning global commodity prices. Commodities prices are cyclical in nature once the supply over flows , the prices will automatically ease. I don't think given the kind of sophisticated financial instruments like ECB etc ., are concern for corporates raising money for M& A activities and for capex plans funds flow is not big problem now.
Crude Oil.& Dollar exchange Rate :Oil is on burn again due to soaring crude prices ,70 % of India's foreign exchange reserves are spent for imports on oil , From October 2007 to Feb 2008 even though oil prices were on raising front , but it was not a hot topic because of appreciating rupee. NYMEX crude was trading at 127 Dollars per barrel, crude prices are up by more than 300 % from their 2003 levels it was at 28 $ per barrel . For the market Oil & Gas sector represents 15.8 % on Sensex and 21.80% on NIFTY . Stocks which commands the bourses are mainly RIL and ONGC. For RIL rising oil prices leads to its stock prices to soar to new highs , its ability to process highly sour crude (High Sulphur content) and sell the refined petro chemical products in the international markets prices will enable RIL to earn high refining margins and for ONGC given the subsidy burden it will be neutral on the earnings front. But for oil marketing companies like IOC,HPCL and BPCL it will be tough time.The impact of raising oil prices will certainly bring some companies into lime light in the oil exploration activities .On a negative side raising crude oil prices increases the pressure on current account deficit and on positive note the OPEC nations which are minting money will invest their surpluses in the emerging markets through sovereign funds.Dollar rate is concern last 6 months Rupee was appreciating and Dollar got depreciated , now from last one month there is complete reversal is reflecting rupee depreciated nearly 5%.Dollar is not only a reserved currency but also a investment currency to the central banks around the world , so after reaching certain equilibrium point , RBI supports Dollar. For the Sensex is concern crude price & Dollar exchange rate will have neutral effect,surge in crude oil prices lead to demand for dollar and rupee weakness which benefits IT industry having 15% weight age on the Sensex..
IIP & GDP. : Index of Industrial production which is monthly data released by govt of India on a monthly basis reflects Industrial production of companies in India is key indicator economic activities of the companies which slipped from 11.6% to 8% disappointed everybody .But if we analyse the IPP numbers this drop appears to be because of base effect .Industrial growth in March 2007 , the base for calculating growth in 2008, was unusually high, there is certainly a base effect .If we look at the numbers month -on -month March over February , you will find a 23 points increase in general index , which will translates to growth of nearly 8.5%.we are really seeing the base effect and there is really no slowing down if we look at it over the trend on M-O-M basis this is according to the Crisil report. A slowdown in growth to about 7.5 to 8 percent is still a very good growth rate .The investment rate in Indian economy is still going strong in the mid 30s, which should be the major driver of the economy. Don't forget India is second fastest growing economy in the world.
U.S.Economy & Market Valuations :Investors and analyst in India are more worried about the US economy than Indian economy , this is the time to differentiate the global equity market from emerging equity markets , from U.S equity to non US equity .where as 80 % Indian economy is complete domestic story which I explained in my earlier articles.The sensex 's current price -earings multiple is down from 28.5 in early Jan to 18, on its earning forecast (Rs1050), sensex PE multiple works out to about 15, which experts reckon is good value to the long term investors.
These are the right times to savvy investors, off late investing in equities has become a fashion talk and dealing rooms have become like casino tables which lead to the bubble situations in the market. We are not buying SENSEX or NIFTY ( Indices) , and we are not doing a basket trading . one should develop a habit of stocks specific investment approach and strategy. .
Investing in equities is a process not a transaction , one needs to experience the EQUITY RAINBOW to reap the harvest confidently.

"Time Machine" April 15th 2008.

"Time Machine" April 15th 2008.
An instruments every body want use at least once in their life time to go back to the past and one step ahead into the future to fascinate the life in the realm of fantasy. In my view of equity market most of the folk are started using their times machine to predict the sensex targets for the year. Let me refresh our senses about the markets what was happening in the market from last fourteen months . U.S. Federal Reserve FOMC was increasing the fed rate during June to Dec 2006 , in Jan 2007 monetary policy RBI was hawkish about the inflationary situation in Indian economy and started increasing the CRR and Repo rates . Immediately market tested lows because of the N carry trade in the month of March 2007 and after crossing all barriers like interest rates hikes , high inflationary environment from Jan 2007 to August 2007 , political uncertainty in September 2007 and sub prime scares from U.S economy, Market reached life time highlevel of 21,810 by Jan 2008. Indian retail inverters were obsessed in investing in equity , i knew some people left their jobs to test their luck as DAY TRADERS. Now things are moving against the uptrend in the market. Where are the view ...? Analysis..? Analysts ...? who were discussing about 25,000 and 30,000 levels of sensex in November and December 2007. what happened Mr Christopher wood of CLSA and Shankar Sharma of First Global for not appearing on the media to discuss the up trends in the market at the current levels. Who dares to talk about the rosy trends in the market and new highs ..? now ! .Clearly sentiment of over exuberance led the market to this situation .
I believe Time machine is the title to my article apt to the current situation . Within a single week Indian fundamentals are changed and we lost our shine over night ? these are usual question one should ask them self , if anybody want to participate the India's growth story , recently i was happened to address retail investor forum ! they were asking me about testing May 2006 lows of the sensex. Every body speaks about India's domestic story from a while , is the true domestic story reflecting in the markets ? or waking up in wee hours checking global cues and trying predict the Indian Markets !.like met department forecasting the monsoons and cyclones.
During the period 2001 to 2005 sensex was trading below 15 year Price to Earnings median .If we want to travel into this passed period we don't need a time machine, present periods in the markets permits you to travel into the past lows. " Equity market is a place where every body knows the price but not the value ".If we want to be a successful investor in life , but not a seasonal investor who always invests on the tops of the market and try to time the market one need to follow all the market parameters ,but for a savvy longterm investors following all the market parameters is not required but one theory weather the current market levels justify s the earnings growth or not is crucial , one need to identify the growth or froth is vital. ,If you are convinced that the stock Market is nothing but a crapshoot , that investing in it is a gamble or that it is manipulated by large institutions to the detriment of small individual investors you need better rethink your involvement , if you operate from any of those premises you are likely to come to grief . you will buy or sell on rumors tips and gossip you will attribute your success or failure to pure chance or to the unknown actions of others. The impact of sentiment on the market is ,when the market is in uptrend means everybody speaks about higher levels like 25 k , when it is down trend everybody look at far lower levels ignoring all the ground realities. Market tendency is when it is a bull trend , Market will digest the negative news flows and a small positive news also will fuel the bull run . When it is bear trend market will ignore all the positive news and move with negative bias. Market runs on liquidity , valuations ,interest rates and finally the sentiment as key drivers , we have to vigilant on these drivers always.
Berkshire Hathway , Warren Buffect's incredible company 10 year charts shows the dramatic increases of mid-1990s, the stock price had substantial gains and it went through the bear market phases .During the years 1994 -98 , the stock was a four bagger , increasing the original amount by four times .For the full 10 years it was a five bagger and nearly six from14,450$ to 91,900 $. Earnings per share (E.P.S) is purely determined by the company performance but not the FIIs activities, these are the times to accumulate the gems at fair price . Prices of the companies will change on daily basis but not the value of the companies .
Whats road ahead ! Traditionally fourth quarter results will be strong and in line with the expectations , but the scare and culprit to the market is high inflation which is above 6 % above the comfort zone . As a fastest growing economy , Indian economy is in revival stage of the business cycle, so inflation tend to spurt every year. if you observe exactly year back our inflation was around 6 %.when the inflation is high equity is the best avenue of investment to beat the inflation. In my view funds flow is not a problem , always money will chase the growth . Caveat is weather the growth will continue at this pace or not is vital !.If we observe the market trends ,leader ship is coming from different sectors in different phases of market times . For a matter fact about Rs 17.57 lakh crores of investment is required over the next five years in developing ports, frights corridors , power plants and airports .The engineering and construction sector presents another opportunity, Consumption story is in tact , Corporate India still have to exploit the rural India.
These are the testing times to the investor's confidence on the market with out confidence we don't get our berth to Travel in the Time Machine to create Wealth in the next level.

Prudent Investment Engineers!! 11th july 2009

Prudent Investment Engineers!! 11th july 2009
In centuries past , people hearing the rooster crow as the sun came up decided that the crowing caused the sun rise ! . Its silly now!!, but every day experts confuse cause and effect on Dalal & wall street in offering same new explanation for why market goes up or down . When I hear theories like these ,I always remembers the rooster.
If we retrospect , Last 18 Months has been a very turbulent time for economies around the Globe .., the word of recession became part of the life's , all the business tycoons around the world became skeptic about the fundamentals and deferred their business expansion plans with a pessimistic view. Sub prime frenzy derivate instruments finally burst ed the credit bubble .Gigantic monolithic organizations like Lehman Brothers filed for chapter 11 which created credit crunch in the money market which caused the global liquidity squeeze.
Back to home in India , September 2008 was a night mare to the analyst who tracks various domestic economic indicators where Oil was traded at 147 $ per barrel life time high , crazy bunch of folks viz Gold man Sachs was predicted price of crude 250 $ per barrel , Inflation was at 13 % which was 22 years high in India and again same crazy bunch and so called well respected financial Institution were predicted 20 % inflation by the end of Dec' 2008. Economy turned into high interest rate environment to curb the inflation which simultaneously dampens the growth prospects, Indian Economy went through fire in September 2008 , but very few felt the heat .
With in a span of 6 months things were reversed Oil came to south words and traded below of 40 $ , Inflation turned to deflation , and high interest rate environment turned to moderate and major sentimental boost to the economy and to Stock Markets is the victory of Congress led UPA government coming to helm of affairs given a irrational exuberance to the BULLS ..... Some investors and my family friends asked me you track ,sleep & drink stock markets why haven't told us to buy stocks in May so that we could have made some quick bucks ,china eggs , just for the info in the same period our neighboring countries viz Srilanka & Bangladesh markets also given very frenzy returns where the growth is virtually zero . My answer to them is I prefer to have a late delivery baby , rather than a baby in a incubator. If any body want to successful in equity market one should know the rules of the game, Investment in stocks is not a T20 cricket or a one day match , its a marathon , its a process . If you kick a tennis ball to the ground it will raise fast and falls fast , in the same way for Stock Markets also there is no excuse. Extream expectations on the budget led the market to woods but for a rational thinker it paved the way for the tremendous growth prospects for the coming years which will shift India to a fast growing trajectory top on the world growth radar this only single indicator gives a wake up call to the investors .
But if your despondency in mood or you repent having missed the opportunity to invest in Infosys Technologies when it was a small IT company or Unitech when it was struggling to find its feet in the real estate and construction sectors. Or do you lament failing to captalise on the recent rise of stocks don't lose heart. In a fast growing economy like ours, there's always an opportunity to catch small but well-managed companies when they are still cheap, the current down turn in the global economy will give a chance to us to catch such companies in our basket at very cheap valuations so lets ready our fishing nets to hunt future big fishes. Top international financial subsidiaries in India posted better results when their parent companies are reeling under pressure , these are indicative yields of India's domestic story .Rural India is not postponing their new expansion plans unlike the urban India , this is the unique stable growth driver for the economy and the reason to start investing now . If the western countries going into woods means simply feel happy this will reduce the demand for commodities like Crude since every body believes India is a domestic consumption led economy , for FII flows don't worry always good fund flows fallows the good growth this time Indian Investor should sell the stocks to FIIs at a premium wisely . when the global economy is raising at 1.5 % we are projecting a growth rate of 6.5 to 7 % for FY 2010 . I know a professor who teaches about 100 fold and thousand fold returns for prosperity in life which entices me always in the realm of investing the same teaching can be manifested in life if we be disciplined in investing and fallow basic principles rather than trying to catch the tops and bottoms of the market .
In early 1960 to buy a single share Berkshire Hathway Warren buffett's company it cost 7 $ to buy a single share today the same is 85125 $ , 12000 times return in last 49 years, don't think stock are not lottery ticket there is a company attached to every share .If you own good companies that continue to increase their earnings you will do well , U.S corporate profits are up by 55 fold since World war II and U.S stock market up by 60 fold with 4 wars ,10 recessions, 10 U.S Presidents and one impeachment in the same period.
There are 60,000 economists in the US only , many of them employed full time trying to forecast recessions and interest rates and if they could do it successfully twice in a row , they'd all be millionaires by now .Investing in stocks is not a get quick rich program its a process booms and glooms are shades of this process . If one want to make this process fruitful should be diligent doing their home work and prudent in taking investment advises & selecting in Investment Engineers.