BIRDINFO Stock Rx

The current economic policy implications

2011-12-17T16:21:00.001+05:30

The RBI's policy review has not changed any thing other than the perception that inflation is still weighing heavily on its mind and the plummeting growth also now has started to trouble it. The governor has been reluctant to commit with a time line for the reversal of interest rates hikes but has given enough indication that down the line it will have to be done. I see it as a meek approach, he could have well spoken with certainty that the next time it will be moderated.

There is no question that if the demand pull is there, the supply side should be strengthened too and the supply can come in plenty when you have incentivize the investment climate and reduced the costs of operations through availability of cheap finance. This is how the progress comes about. Its not that curbing demand by monetary measures over longer period is the only option , in fact is a wrong thing to do for extended period.

It is also to be understood that the present inflation pressure is due to dilution of currencies all over the world. The US mitigated its woes through printing dollars, the answer to EU's problem lies in diluting the Euro's value. The stronger economies of Europe will have to eventually provide for purchase of debts of weaker nations by creating supply of Euros. This kind of back-door taxation spread all over the economy of Europe can only help, however, it will be something like rewarding the irresponsible economies which are weaker too. We in India resort to this by measures aimed at helping the poorer of the population without being overly concerned but then we a single nation. The Europe now is single currency area but many nationalities. This leaves the scope for not digesting to help the weaker. Europe has to learn to be single entity also politically to be able to address issues having wider implications.

I think that the future for the financial markets and the economies may be fraught with damning possibilities but to let it translate only in terms of cheaper equity is not right. The debt related securities should be supposed to be more at risk if the currency supply shrinks but the equities will still be having value. Reversely if there is expansion of money supply the equities will be ever more desirable assets. The bullion will be a burden in first scenario and welcome the second scenario.

The recent loss of value of rupee viz-a-viz the other currencies tells that now a larger part of India can be bought against a smaller piece of other nations. Suppose there is further extension in this very direction, do you think it would be in any way possible to consider the equation balanced. I think not because India's assets are far more valuable than this equation suggests. So, over time, adjustments will happen and in the mean time Indian exporters will be making hay. India can profit out of exports as the labour is surplus here. If some part of products is imported costlier, the whole of it remains cheaper than earlier but allows Indians to have more work at hand. The govt should look at removing constraints in manufacturing and should amend the labour laws and improve the taxation structure without loss of time. VAT regime should be made universally applicable for freer movement of goods within the country and allow for producers to optimise the production levels and achieve economies of scale. Cheaper per unit production cost will make us still more competitive in international market. China's achievements in the past have been due solely to this situation ie cheaper Yuan, optimal production level and lesser legal compliance burden and no such corruption that hinders production...kbk

Reasons to remain in equity

2011-10-28T08:29:00.000+05:30

The economic scenario has remained fluid and no rational assessment was possible due to concerns having roots overseas. Only the basic strength of Indian economy and more particularly the bigger Indian corporates gives me courage to tell you once more that equity investment is a better option and hence you should be more inclined to keep your funds in equities in accordance with your age and risk profile. This means that the younger of you may remain in equity pocket as younger people have longer period for letting the investment fructify.

It may seem to you that right when the interest rate is going up I have been telling you what I told above. I need to explain to you the situation and the main points guiding me have been the following :

A) the RBI has been busy raising the Repo and Rverse Repo rate due mainly to address the inflationary situation. They have done it lastly today itself by 25 bps and the Repo and Reverse Repo stand at 8.5pc and 7.5pc while the CRR has been kept unchanged at 6 pc. In my vew the rate increases in medium term do not adversely affect the corporates. The possibility of readjustment right after the moderation of inflation leaves scope of good appreciation in equity prices. You may well appreciate that while rates have been going up the collective performance of corporates has still shown positive growth over the past quarters since the rate hikes have been taking place.

B) the market is flat since Oct 2007 ie it stays at the same level now as was the level in Oct 2007. But, the important point is that the sales have nearly doubled , the profits have also nearly doubled while the Price to Book Value ratio has come down under 2.9 from above 4 in Oct 2007. Typically the net-worth of companies acts as support for Indian corporates as the this counters inflation in a beautiful way. This should be understood against the back-drop of Indian economy's still nascent state which has an enormous room for growth given the demographic advantage and the ever increasing proportion of population actively participating in recountable economic activity. This ensures robust GDP growth for some more time to come besides making capital as more precious asset than bullion etc.

C) it has been observed that the Indian equities go up in geometric progression after a long period of lull (extending beyond four-five years). This is partly due to lack of depth and partly due to design by some market participants. In view of this those who miss the bus don't have any safe chance of boarding it later. So safety lies in remaining invested in equities at the moment and being prepared to see some temporary dilution of values which may happen due to some developments in world markets or some precipitate govt action. Being ready to forego the interest earning is another aspect but it gets neutralized due to the nominal returns on equities being the same as the bank interest (it means that since the PE ratio at present is under twelve the nominal return on investment remains at over eight percent)...kbk

4 Basic Elements of Stock Value

2011-09-03T06:02:00.002+05:30

The ancient Greeks proposed earth, fire, water and air as the main building blocks of all matter, and classified all things as a mixture of these elements. Investing has a similar set of four basic elements that investors use to break down a stock's value. In this article, we will look at the four ratios and what they can tell you about a stock.

Earth: The Price-to-Book Ratio (P/B) Made for glass-half-empty people, the price-to-book (P/B) ratio represents the value of the company if it is torn up and sold today. This is useful to know because many companies in mature industries falter in terms of growth but can still be a good value based on their assets. The book value usually includes equipment, buildings, land, and anything else that can be sold, including stock holdings and bonds. With purely financial firms, the book value can fluctuate with the market as these stocks tend to have a portfolio of assets that goes up and down in value. Industrial companies tend to have a book value based more in physical assets, which depreciate year after year according to accounting rules. In either case, a low P/B ratio can protect you - but only if it's accurate. This means an investor has to look deeper into the actual assets making up the ratio.

Fire: Price-to-Earnings Ratio (P/E) The price to earnings (P/E) ratio is possibly the most scrutinized of all the ratios. If sudden increases in a stock's price are the sizzle, then the P/E ratio is the steak. A stock can go up in value without significant earnings increases - this happened most recently in the tech bubble - but the P/E ratio is what decides if it can stay up. Without earnings to back up the price, a stock will eventually fall back down.The reason for this is simple: a P/E ratio can be thought of as how long a stock will take to pay back your investment if there is no change in the business. A stock trading at $20 per share with earning of $2 per share has a P/E ratio of 10, which is sometimes seen as meaning that you'll make your money back in 10 years if nothing changes. The reason stocks tend to have high P/E ratios is that investors try to predict which stocks will enjoy progressively larger earnings. An investor may buy a stock with a P/E ratio of 30 if he or she thinks it will double its earnings every year (shortening the payoff period significantly). If this fails to happen, then the stock will fall back down to a more reasonable P/E ratio. If the stock does manage to double earnings, then it will likely continue to trade at a high P/E ratio. You should only compare P/E ratios between companies in similar industries and markets.

Air: The PEG Ratio Because the P/E ratio isn't enough in and of itself, many investors use the price to earnings growth (PEG) ratio. Instead of merely looking at the price and earnings, the PEG ratio incorporates the historical growth rate of the company's earnings. This ratio also tells you how your stock stacks up against another stock. The PEG ratio is calculated by taking the P/E ratio of a company and dividing it by the year-over-year growth rate of its earnings. The lower the value of your PEG ratio, the better the deal you're getting for the stock's future estimated earnings.By comparing two stocks using the PEG, you can see how much you're paying for growth in each case. A PEG of 1 means you're breaking even if growth continues as it has in the past. A PEG of 2 means you're paying twice as much for projected growth when compared to a stock with a PEG of 1. This is speculative because there is no guarantee that growth will continue as it has in the past. The P/E ratio is a snap shot of where a company is and the PEG ratio is a graph plotting where it has been. Armed with this information, an investor has to decide whether it is likely to continue in that direction.

Water: Dividend Yield It's always nice to have a back-up when a stock's growth falters. This is why dividend-paying stocks are attractive to many investors - even when prices drop you get a paycheck. The dividend yield shows how much of a payday you're getting for your money. By dividing the stock's annual dividend by the stock's price, you get a percentage. You can think of that percentage as the interest on your money, with the additional chance at growth through the appreciation of the stock.Although simple on paper, there are some things to watch for with the dividend yield. Inconsistent dividends or suspended payments in the past mean that the dividend yield can't be counted on. Like the water element, dividends can ebb and flow, so knowing which way the tide is going - like whether dividend payments have increased year over year - is essential to making the decision to buy. Dividends also vary by industry, with utilities and some banks paying a lot whereas tech firms invest almost all their earnings back into the company to fuel growth.

No Element Stands Alone P/E, P/B, PEG, and dividend yields are too narrowly focused to stand alone as a single measure of a stock. By combining these methods of valuation, you can get a better view of a stock's worth. Any one of these can be influenced by creative accounting - as can more complex ratios like cash flow. As you add more tools to your valuation methods though, discrepancies get easier to spot. From the Greeks' four basic elements, we now have more than 100, some of which exist so briefly that we wonder if they count, and none of them are named water, earth, air, or fire. In investing, however, these four main ratios may be overshadowed by thousands of customized metrics, but they will always be useful stepping stones for finding out whether a stock's worth buying.

by Andrew Beattie

Andrew Beattie is a managing editor and contributor at Investopedia.com. He operates the Wandering Wordsmith blog. Courtesy: Investopedia

Salute to Anna

2011-08-31T16:59:00.001+05:30

Anna is second Marattha after Shivaji who shook Dilli. The satraps in Delhi wanted in every way to some how make the Anna move fail. The parliament has approved with support from all its quarters the demands of Anna which were so far anathema . His movement will be remembered through ages even in the next Yuga or Kalpa. The wily politicians have capacity to scuttle any public demand for clean administration but this time they have had no other choice. In the aftermath many are going to lose their stature like Sibal, Singhvi and Tewari . Salute to Anna and salute to Gandhi and most of all salute to the humble masses ...kbk

Stop misuse of state taxing power

2011-08-31T10:37:00.000+05:30

The world is in a sort of turmoil and it is purely man made. We know that the world's basic resources are limited and may remain sufficient to cater to need of humanity if there is right distribution and judicious exploitation. Here lies the need to look back at the socialistic philosophy that had a bad beating towards the end of last century.The crux of the matter is that the mechanisation and automation devised under the break-through in the shere of science and technology have rendered the world's resources very very short of the requirement of feeding the industry.

The technology is no more helping us, it is in fact pushing our world society in stressful times. Such times have come at juncture where some nations have still to taste the fruits of modern production and process and some find theopinionmselves incapable to go beyond the level achieved so far.The financial system adopted by the world's advanced nations have started to back-fire. The post retirement provisions in developed world have put too much pressure while the additional natural resource discoveries have fallen short. The mega machines can deliver any amount of good to consume but feeding such machines is not possible and hence economic order is going out gear.The required balance can be brought back if a thoughtful plan is made with clear conscience by the nations of world in consultation with each other.

The first step has to be that the govts stop accepting to provide any more than the life sustaining income to people in retirement or people out of employment. This level can be different for every country depending on the level of development achieved. The delivery of relief for such sections of population should be in most straight manner and with minimal expense entailed in distributive exercise. The rest of the people should be taxed enough to cover such expenses on the need based basis without any transfer of liability to future or to future generations . This will do away with issuance of public debt paper for this or that. Indebtedness of state will always unduly benefit some and punish some today and also later. The responsibility will also be difficult to fix as who distorted how much and when if the taxing power of the state will be mis-used in the it has been done.

The second step for the order in society is to have limits imposed on individual consumption irrespective of the income generated. This is a difficult area to be looked into but unless it is done the policies will be so manipulated that eventually stressful conditions arrive. It has never been the case the incomes have been earned in proportion to service rendered to society. Much of the incomes earned come due to being at right place at right time or being at the right side of a faulty policy or scheme or by purely conniving deceitfully.

The markets of the world have become positive after the Jackson Hole summit. Bernanke hasn't used the QE 3 tool but has indicated that it remains a tool in his hand if there is need for it later on . I told you earlier and I am telling you now also that the predicament that Europe and US find themselves in can only be tackled by use of quantitative expansion. The regain of health would come when there is no further mis-use of state's taxing power to back the borrowing programmes.I have talked at length in earlier posts about the need to have a world currency that will not be expanded at will and also the need to keep interest rates in line with the market without any overt influence .My basic ideas may not be liked by people as opinions differ but I can assure you that more you would reflect on them more value will be found by you. I say this because what I have been saying for last many years in respect of these matters have not been out of tune with the developments later on ...kbk

India shakes the conscience of world

2011-08-22T15:22:00.000+05:30

Today, we find our PM as prisoner of some commitment he may have made to someone. The situation after the second fast after April '11 by Anna leaves no scope for waiting for a moment but to move ahead without the minutest loss of time.

The doubts raised by some quarters about some undesirable provisions in Jan Lokpal are meaningless as the havens are not going to fall if this is passed as it is. The practicality may call for some amendments when this bill is tested on ground and then it may be taken care of.

The constitution, the shield the Congress is trying to buck under, has been amended umpteen times. The people have demonstrated that the corruption has eaten into the very fabric of Indian morality which, for times immemorial has seen nearly the whole population behave in an appropriate manner.

No doubt there have been some characters in medieval history who have yielded to pressure under foreign powers politically but who still kept a high personal moral character. Now, a nation, after a freedom gained through moral righteousness, finds it self mired in corruption at the first point of contact and upto the highest level of governance.

The corruption apart, the corrupt mentality of those in power has tied all and sundry in jacket of meaningless and pointless laws which are not enforceable on one hand and are used to punish some innocents through selective application on the other hand.

Why then the nation which has had some relief from only caring for just the needs of shelter, food and clothing, not rise up and take the next logical step of seeing India free of corruption. The phenomenon may seem to be urban but it voices the concerns of the villagers too who can not organise protests in a similar manner.

The agitation has put our nation on top of the world because such wide-spread protests without any untoward incident have proved the extent of our civility. So, in a way we may have been called a corrupt nation but the corruption stream emanated from the conduct of a few at the helm and it permeated extensively without affecting the core of Indian character.

Where one can find countless Annas? There could not have been countless Gandhis because he was born high and fully educated. In case of Anna, the background is generally common. He differentiated himself with simple tool of shedding personal comfort and keeping high goals. However, there is one common thing between Gandhi and that is being a devoted Hindu with unshakable faith who can see the same God in the hearts of everyone. This is the core strength of Sanatan Dharma which saves the true followers from any kind of confrontation with anybody else .

The leadership of Manmohan has naturally come to be questioned. He is the first prime minister who is not a politician and he has failed miserable in tackling the challenge thrown up by Anna which could have been converted into an opportunity of taking the nation on the highway of progress and prosperity. The attitude of confrontation has given impression as if a game of one-upmanship is being played by the anti-corrupt and the pro-corrupt. Isn't it a pity that he has allowed such a perception to be generally carried forward. The echo of the Anna's sigh has been heard all around the world as the Indians by and large feel uncomfortable on account of prevalence of corruption in India which has been responsible to some degree in making the sons and daughters of India leave the shores of the country>
The weakness displayed by Manmohan is so stark that I feel it to be good fortune that he has not had to lead a nation fighting a war. Such a PM could never have won it. Today I remember Nehru, Shastry, Indira and Bajpai who led the nation through the dark hour of a war in a wonderful manner .

Nehru may have lost the war but nobody questioned his ability to lead in war time. He lost war due to being very under prepared. Bajpai was a double hero who set economic wheels running faster as well as decisively won a war. Indira won a war but to the economic detriment. Shastry won the war but failed in post-war diplomacy.

Rajiv's case was of just filling a void after Indira but with a few small steps in right direction. Narsimha Rao was lucky himself and lucky for India for he saw a paradigm shift in policy. Manmohan's failures now weigh heavier than the successes. Certainly a politician at helm is better than a non-politician.

The nationalist slogan are reverberating the atmosphere today and fill the hearts craving for the change. Vande Matram, Vande Matram, Vande Matram...kbk

Excess of capital and no safe pocket to keep

2011-08-20T10:02:00.002+05:30

The markets have had a fall of serious kind and that too without the bear side having the opportunity of unloading enough on gullible bulls as there were none such bulls to be trapped. The turmoil has been far too extended geographically as well as in terms of the perceived afflictions the prime borrower's trouble at meeting obligations, the companies' abilities at keeping the profit graph intact, the taxing power of the raw-material resource crunch, the aging population, the infrastructure weaknesses, the political stand offs, the loosely united EU without political unity, the financial onetrusts, the delay in recognising that the economic nucleus has shifted, the absence of a world currency that would not be subjected to be influenced by the short term needs of accommodation of one nation or the other, the restricted trade practices, the speculative mafia, the oil market, the bullion as hedge, the fund flows, the currency parities, the rating changes and timing, interest rate scenario, the soft and hard money policies individually applied, the inflation effect, the ceiling on foreign capital investments, the tax treaties, the favoured nationalities, the corporate governance, the political systems, the plethora of set of rules, the removal of barriers in communication, the spread of -information, concealment of right information, the cartel formation the extremes of poverty and riches, technological break-through, the job market, labour supply, the lack of training/competence and the list is end less.

All things mentioned above have come to be having bearing on the minds of people without the real grasp of issues and effects. This is now a world where there are too many factors in a state of constant change by requirement and by design. The time is such that there is an excess of capital and there is no safe pocket to keep. This extra-purchasing power will have to evaporate to some extent and the game is see that it should not evaporate from out of own hands for everyone .Now, since we are trapped inside a phenomena that throws up no simple answers, we need to pay attention to only very material things which can out-weigh a lot of others. We have to consider as to what may be attempt of authorities to ward off the financial failure of the ones who have large obligations. The European weak nations for example are required to be bailed out. The mighty say that they can not provide for the irresponsible spending and borrowing of the weaker ones. Since currency is common, its dilution can not be an answer for EU unlike USA. USA had a simple formula to mitigate the trouble of the borrowers and it was to resort to quantitative easing. This will be tried for another time as it did not hurt the Americans as much as it hurt the other nationalities including ours. It helped the world's economic activity to continue albeit that the recession is looking in face of some.

The sub-prime crisis could be weathered because the remedy killed two birds with one stone it saved the banking entities and it reduced the real value of the debt obligation of USA. Similarly an answer can be found by the Europe's biggies by allowing currency dilution by quantitative easing and buying up the debt paper of the weaker nations. The servicing of this debt may be postponed till the time the weaker nations regain economic health by curbing expenditure. This way the banks would be less stressed and the trouble will pass over but it will have hurt the people living on pension. Their woes will have to be taken care by other possible means and this will call for sacrifice from one and all. The next step should be to politically unite all Europe and UK. The sub-continents have to convert in to single nation-hood. It happened in case of India and China and it should happen for rest of the world too. The faster means of transport and communication have thrown-up this requirement .

What I discussed above will bode well for India and its markets as quantitative easing in one place will not diminish asset values any where. The bullion may go up as well but at some point in time the productive assets will have to command value particularly when investments in capital assets are now at a reduced level. The world as a whole has still some scope for fresh investment as some old and obsolete facilities have to be closed some where and newer ones have to come up else where. This will improve overall efficiencies and see the world as a whole prosper. This is for the interim period, ultimately the industrial enterprises will have to suffer on account of falling supply of minerals and energy sources. But that will happen rather late in the day and not so early.Our high rate of interest is constantly inviting capital to come in. By very nature when the rates go up the marginal return on capital will have to keep pace ie the profitability of corporate sector will have to improve. If it does not improve the banks will have a lot of capital to lend but without healthy borrowers. In such case banks will reduce rates of deposits. Reduced rates will spur consumption. In all possible scenario the Indian corporate world will have relief coming. This process seems to have already started as the bond yields have come down from peak to under 8.30pc even when the RBI has so far maintained hawkish stance.The third positive for India is reflected in response to call by Anna recently. It shows masses of students and middle class with enlightened attitude. They come from even from quasi-urban areas. They reflect a potential of India's economic power.

The prophets of doom forget that the the perceived scenario never unfolds. The devil strikes when no body is ready for it. Otherwise why the impossible seeming situation came suddenly and why afterwards when hopes were lost the resurgence happened. For a lasting uneventful economic era, the return to gold standard or a version of it will have to be ensured. I have already in one of my previous posts have discussed what may it be like...kbk

Happy Independence Day

2011-08-15T07:34:00.003+05:30

Market Theory and Analysis : Nifty companies net worth now

2011-08-12T19:52:00.003+05:30

Our markets are down by about 5-6pc since last year. As we go ahead the fall over the year would become between 15-20pc as towards Dec10-Jan11 the Nifty had touched 6250. Now if we have some more points of Niffty still to lose than the fall will be over 20pc.

We now have confirmed figures of PAT moving up by over 10pc over last twelve months for broad spectrum of companies that have announced results so far. This has been achieved while the interest rates have been jacked up in many tranches. Simply seen it may be said that higher interest could still not adversely affect the corporate profitability in India. It may that the potential was higher and less was achieved. Now, when the interest rates should move down for no where else they are going up and when the crude is down the inflation would have to lose stream too, other things remaining the same, profitability should improve and sales should catch up in consumer durables market .

In one year the Nifty companies add Rs 340 to their net worth and roughly this much amount has been added for last four years every year ie a sum of more than Rs 1250 has been added to net worth of companies in just four years. Further the period prior to 2007 was a good period all through since 2003 so more less an amount of Rs 850 was added in this period represented by 2003-2007. Both periods together have added Rs 2100 to net worth of Nifty companies.

We know that a bulk of the above had gone into asset creation, in fact it may have been more than the gross sum itself as there may have been use of some borrwed funds. While the depreciation has been taken care of by pre-tax profits, the real value of assets should taken to be more than Rs 2100 as there has been a good inflationery run.

Now we go back to period since 1996 which saw companies performances not very stable but it was this period which saw weaker companies going down under and let only the stronger ones to remain operational, so the Indian corporate universe has become better managed and stronger. This reflected also in taking advantage of the goood times and also warding off the competition from around the world. It was this strength the mega mergers and foreign take-overs were successfully attempted by all leading houses.

Some of Nifty companies are into FMCG, Pharma and High Technology sectors where intangible assets like brand values, processes and technologies whose value are not covered in traditional assessment of book value. Besides there happens to be premium on licenses. Not to speak that establishment become more valuable than the sum of parts. The real assets like land have appreciated as much as by 1000 times in some cases and not less than 100 times for most.

No doubt, the circumstances do convert profitability into loss making scenario. I do not think that situation is about to arrive in India in foreseeable future. The interest rates cycle, inflation, crude price cycle, currency parities, political upheavals, restrictions on trade and other such matters have had to be taken in stride but the same have never left a permanent weakness that has to be taken care of.

The break-down of financial order and systems spanning the whole world may have its toll but when such scenario is in expectation generally, it never plays out because the instinct makes everybody to prepare for it. This instinct has seen the bullion prices go sky high already.

Why I have gone to assess every thing in light of history is due to the fact that the business take time to get established and can not be just written off for small winds of change which in fact may provide an opportunity as much as it may kill and opportunity.

The export performance has been stellar as it went up by 80pc for latest month. The IIP number was better at about 8pc too. The car sales had plummeted but only expectedly. The two-wheelers sales have however risen. All may not be well its not all bad too. The monsoon has caught up lately. The agricultural production may be higher this year. If the inflation in yet not under control than the fault lies in the strength of Indians having more to spend on food. This greater expenditure of food would be coming from the households which have been on margin in terms of enough calorific intake. Not a bad thing to happen which will be responsible for greater transfer for income to agriculturists.

In India therefore remaining half invested is OK today and also it calls for gradually increasing level of investment either when market drops or when it remains level for some length of time.

In the same breath that I told you above, I have to further tell you that QE III would be resorted to as it is the safest and the easiest thing to do for Uncle Sam. Why on earth pain be inflicted on the voters of the day, but further borrowing should be stopped. If it happens , India should have no problem as the QE I and QE II have not harmed it in last three years. Supposing there will be contraction in money supply for any reason, then of course the price damage will be seen in almost all asset classes and most of all in case of bullion, real estate more than else where.

There are very many voices, some say 4700 is possible and some say 6700 is possible in the next eight-ten months. So we have a range in sight to work upon.

Wish you happy times...kbk

11:Q1 Results analysed

2011-08-12T06:29:00.004+05:30

Yesbank @319 on 26/7/11 : you may accumulate this on dips for medium/long term...kbk (ref 975/5580:382/234).

Axisbank @1319 on 26/7/11 : you may retain/add this for long term...kbk (ref 980/5580:1609/1150).

Albk @196 on 26/7/11 : you may buy this for long term...kbk (ref 1202/5580:272/176).

Bankindia @388 on 26/7/11 : you may ignore this for time being...kbk (ref 107/5580:589/383).

Godrejcp @436 on 26/7/11 : you may buy this for long term...kbk (ref 1064/5580:485/325).

Hindzinc @144 on 26/7/11 : you may retain/add this for long term...kbk (ref 1311/5580:155/98).

JSWenergy @72 on 26/7/11 : you may retain this for long term...kbk (ref 883/5580:136/65).

NTPC @180 on 26/7/11 : you may retain/add this for long term...kbk (ref 937/5580:222/165).

Orientbank @367 on 26/7/11 : you may buy this for medium term...kbk (ref 1119/5580:546/302).

Reliance @871 on 26/7/11 : you may retain/add this for medium/long term...kbk (ref 957/5580:1125/828).

Sesagoa @279 on 26/7/11 : you may retain/add this for long term...kbk (ref 1311/5580:384/255).

Ster @168 on 26/7/11 : you may retain/add this for medium/lng term...kbk (ref 1297/5580:196/149).

Thermax @591 on 26/7/11 : you may ignore this for time being...kbk (ref 769/5580:930/537).

Unionbank @304 on 26/7/11 : you may remain out of this for time being...kbk (ref 1019/5580:427/281).

Please take advice to counter volatile times

2011-08-12T06:28:00.001+05:30

The markets are under pressure at the moment but shouldn't be too much a concern for you as you have to concentrate on the buying advice from us and weaker market will only enable you to enter at better prices and ensure higher gains. Our track record is laid out before you unlike any other site that is into business of stocks related advice. If you wish to have the advice on current basis please write to us.

11:Q1 Results analysed

2011-08-12T06:25:00.003+05:30

Lupin @449 on 28/7/11 : sell it on surges...kbk (ref 905/5490:520/348).

Marico @162 28/7/11 : sell it and wait till next advice...kbk (ref 860/5490:173/112).

MRF @7101 on 28/7/11 : sell it now...kbk (ref 893/5490:9824/5325).

PNB @1100 on 28/7/11 : retain/add for long term...kbk (ref 1129/5490:1400/970).

HCC @30 on 28/7/11 : accumulate on dips for long term...kbk (ref 940/5490:73/28).

IOB @136 on 28/7/11 : ratain/add for long term...kbk (ref 1147/5490:180/109).

Ambujacem @133 on 28/7/11 : retain/add for long term...kbk (ref 1218/5490:167/112).

Corpbank @514 on 28/7/11 : retain/add for long term...kbk (ref 1170/5490:814/475).

Vijayabank @63 on 28/7/11 : you may sell this on surges if not already done under last advice which was for medum term...kbk (ref 1085/5490:115/63).

MRPL @79 on 28/7/11 : sell this on surges...kbk (ref 904/5490:91/55).

ITC @206 on 28/7/11 : buy for long term...kbk (ref 1053/5490:209/149).

Hindunilvr @322 on 28/7/11 : accumulate this on dips for medium term...kbk (ref 911/5490:348/250).

11:Q1 Results analysed

2011-08-12T06:24:00.002+05:30

ABB @797 : you were advised on 12/5/11 @862 to sell and you may not yet buy it (ref 704/5150:976/595).

Apollotyre @70 : you may have booked profits in this since after 12/5/11 and you may now accumulate this for long term (ref 1015/5150:89/44).

Britannia @469 : you may ignore it for time being (ref 771/5150:525/295).

L T @1657 : you may sell this now and book profit (ref 724/5150:2213/1461).

M&M @729 : you now sell and book profit on this (ref 954/5150:826/525).

NHPC @25 : retain/add for long term (ref 1216/5150:34/22).

PTC @75 : you were told to sell @89 on 10/5/11 and you now accumulate this on dips (ref 941/5150:145/68).

Relinfra @ 471 : you may buy this for long term (ref 1056/5150:1195/453).

RECLTD @191 : you may buy this for long term (ref 1332/5150:410/179).

Satyamcomp @78 : you buy this for long term (ref 1020/5150:114/54).

11:Q1 Results analysed

2011-08-12T06:22:00.001+05:30

Tubeinvest @148 on 8/8/11 : you may retain/buy for medium term...kbk (ref 1105/5050:170/115).

Powergrid @102 on 8/8/11 : you may retain/buy for long term...kbk (ref 1242/5100:114/92).

Unitedbnk @85 on 8/8/11 : you may retain/buy this for long term...kbk (ref 1212/5100:1850/83).

KEC @70 on 8/8/11 : you may accumulate this for medium term...kbk (ref 980/5100:109/70).

Bhusanstl @344 on 8/8/11 : you may buy this for long term, after having booked profit as per last advice...kbk (ref 1150/5100:545/311)
Aloktext @21 : add/buy for long term (ref 1250/5100:35/18).

ACC @985 : retain/add for long term (ref 1166/5100:1144/824).

Arvind @75 : buy for medium term (ref 1177/5100:94/37).

Bhartiartl @408 : sell this on surges and buy back on correction...kbk (ref 942/5100:448/303).

Boschltd @6967 : sell this on surges (ref 968/5100:7580/5700).

Cipla @303 : accumulate on dips for medium term (ref 941/5100:381/286).

Centralbk @107 : buy for medium term (ref 1113/5100:212/101).

CESC @323 : buy for long term (ref 1104/5100:433/252).

DLF @195 : accumulate on dips for medium term (ref 935/5100:398/186).

Grasim @2094 : retain/add for long term (ref 1323/5100:2626/1861).

Godrejind @207 : ignore for time being (ref 696/5100:248/154).

ICICIBANK @952 : you may have sold it att above 1112/- as per last advice , now you may buy it for long term (ref 919/5100:1279/933).

Indianb @213 : buy for medium/long term (ref 1212/5100:316/196).

IDBI @149 : retain/add for long term (ref 1153/5100:202/114).

Idea @ 95 : accumulate on dips for medium term (ref 855/5100:100/52).

Jindalstel @ 523 : you may have been out of it as per stop-loss (as per the system ) and may not buy back yet (ref 931/5100:755/515).

Neyvelilig @ 88 : buy for long term (ref 1164/5100:181/87).

ONGC @ 282 : retain/add ffor long term (ref 1172/5100:368/248).

Ranbaxy @520 : retain/add for long term (ref 1036/5100:625/414).

Sail @108 : accumulate for long term (ref 874/5100:234/106).

Syndibank @114 : retain/add for long term (ref 1258/5100:164/98).

Titan @215 : sell this on surges (ref 846/5100:238/137).

TVSMotor @53 : buy for medium term (ref 1006/5100:87/44).

Torntpower @216 : retain/add for long term (ref 12117/5100:353/185).

Welcorp @141 : you may have booked profit, buy now for medium term (ref1140/5100:275/137).

Difficult to find safe haven for investment

2011-08-06T13:52:00.013+05:30

The world is in a state of flux and it is very difficult to find a safe and eventually rewarding pocket for investment and savings. Saving have become of paramount importance due to uncertainties of future. The problem that we are in fact facing today is itself due to the attempts by a few generations gone by to have devised the means of continuous supply of money for maintaining a life style that world's resources could not have sustained for a very large population in affluent nations. The design itself was based on making the instrument of Sovereign Debt do the trick. Here what is a Sovereign Debt should be understood. It is a commitment by the state for repayment obligation for the borrowing by itself or its arms for the monetary resources collected for incurring expenditure today for society. This obligation includes the interest also.

The capital and interest together later became a burden down the generation because the assets created were of no monetary value and were used up while the obligations kept increasing calling upon the present generation to keep footing bill by paying ever increasing taxes. When the proportions got distorted to the extreme or were nearing such situation, the trouble is being faced by the societies at large particularly in the developed nations. It has gone on for more time than otherwise possible due to the minimal consumption by a greater part of world's total population. With China, India and also others amongst the poorer nations caught up with the production and consumption practices the balance saturated to become fragile. The saving grace for the emerging economies is fact that the public debt has still not gone out of hands and neither the present debt happens to be for ensuring consumption by the retirees in general way because the savings were meagre and did not fill govt coffers unduly excessively.

The strained west found a solution by transferring resources or being serviced by the developing nations which was against sovereign guarantee of sorts by these economies. Neither this could go on for long nor there was an absolute comfort in shifting the bulk of saving into developing nations. It is for this reason that India finds it self a destination for the flow of funds and very quickly makes it less worthy. The assets base is not found to be large enough to absorb the flow. In the end every thing in the financial sphere has got distorted. The remedy is not easy to found. What will then happen may happen. Let's examine the facts,trends,views and possibility and assess impact on Indian stock markets going forward.

A) The US down grade as well as fragile condition prevailing with respect of Italy and a few others in EU will make the yield on bonds further go up as there would be clamour to sale bonds and investing in safety. While the interest rates have been kept low by the Central Banks in developed world, the fresh issue of debt paper will not be absorbed easily as the present bond holdings will be on offer at higher yields. If the funds are used for buying bullion, the risk element will not be avoided due to the prices are as such high level as may crash any time for reason or without reason. Similarly the equity stocks may be tried to be sold off but as buyer would be absent, these would only be sold at some good discount to fair value.

B) For India, it should not matter whether the US has higher rating or lower rating, the rating of India itself is in no danger. This would necessarily invite the capital to flow towards India which offers higher interest also. The big well-managed companies already have low leverage and would be tempted into borrowing at more favourable terms by the world's lenders. This will make the off take of loan funds offered by Indian banks. This will pressurise them into lending to consumers. The demand for consumer durable will be generated. Banks would simultaneously stop competing for the deposits further making case for higher consumption expenditure. The capacities that have stopped expanding for some due to higher interest rate regime will give back the pricing power to companies. This should prove to be a positive for the Indian stocks in medium term.

C) The debt crisis will be attempted to be resolved and there is no means to resolve it than through quantitative easing which simply means that the lenders are punished and borrowers are relieved. This would suit US and will help EU. Inflationary pressures will remain but should enable the assets with companies also to be valued higher in dollar denoted terms. The pressure on equities in the heat of the moment would give rise to renewed optimism.

D) The investors in US treasury bonds are already in a soup and China is one such entity. Its trade with US will diminish leaving scope for India to fill the gap.

E) The oil exporter who have been investing heavily in bullion will start to convert some of it in to money to take care of needs as the oil market would have to down in light of present conditions. This will help India in managing. Its own inflation and finance.

F) The Japan is already at pains to keep its currency low in value vis a vis other currencies. The competition in keeping the currency values low for the sake of international competitiveness will be some thing important to deal with. India should be able to balance it better due to inflows and appetite on one hand and huge market of its own and also being a low cost economy.

G) India will be less corrupt nation in times to come is apparent. Lesser corruption will enable it post higher GDP number. The flight of good or bad money from India would stop too, one for tighter policies and secondly for lesser scope outside. Tatas and Birlas did it just before the meltdown of 2008 and would not want to go for similar risks today. Home turf will be found to be more safe.

H) The fresh issues of capital has become a trickle and would not damage the stock prices. Also, the fresh take over code okayed by SEBI will be a shot in arm for companies with surplus cash like Reliance. Once a company in a particular becomes a target it will be raising the benchmark for all companies in the sector. Some of the sectors are attracting so less valuation that they already have given signals to the predators.

I) The bullion prices have already gone so high that a natural question comes to mind as how it is possible for the productive assets with companies be so lowly valued distorting the parity completely. If companies are selling for as low as at under 10 PE without threat of business becoming unprofitable, it means when the bullion prices stop moving any further up, the companies will be adding 10pc value to present value every year. When the cycle will reverse as it would have to, the bullion prices will nosedive too.

J) The infra--structure spending has started to pick up and the potential is huge in that area. Telecom companies are have started to find their feet. The auto-sector is under pressure and would remain so for some time to come. NREGA and high food prices have transferred some of the economic power to rural India. This will spur an all-round economic activity in the hinter land with all the overall good effect.

K) Stock indices have been in a narrow range for a considerable period. This can be supposed to be time wise correction. The ratios also have become more solid (the PE and P/BV). When the markets were in narrow range between 2000 and 2003 , the market had simply doubled in about six months and doubled further between 2004 to 2006 . So 5000 Nifty level obtaining in early 2007 makes it technically possible to repeat the history, if conditions keep improving on the front of reforms here and there are calmer overseas markets.

L) One more positive for India is that it has established as producer of quality products and has weathered the Chinese onslaught. This competitive edge will keep us in good stead.

Those who can stand firm inspite of wind blowing against need to be active, nobody can predict precisely as to what may happen particularly when policy formulators are busy finding solutions which may favour one way or harm the other. The short term and long term fall outs may also be entirely different. The prophets of doom may prove right also. Who can guarantee any thing when sovereign guarantees have come to the verge of failing. Lending for earning interest seems to be rightly disfavoured in Islam ...kbk

US facing default prospect

2011-07-31T16:25:00.001+05:30

The US govt is facing the prospects of defaulting if the Congressional approval for the raising the debt ceiling does not come about by Tuesday. What a pity that the world's super power more readily losing financial power than it seems to lose the military might. In any case, the exalted status in both cases is fast to become history in case of USA, is now the perception.

In case of financial status, it seems that USA has some unethical motives. It first consumed more than its share in world's available resources and that too against borrowed money. Than it wanted to ward off trouble by diluting dollar through monetary easing in more than one tranche. Now it is keeping the world on tenterhooks by driving the technical issues to the edge. The govt got sanctions for the spending by the same law-maker who now wish away the responsibility to take the next natural step.

It may turn out to be that the situation is save at the last hour. But this would be seen worse than not being actually in a position to take care of the payment obligation. This will make a case for change in world's financial order more urgently.

I notice that the financial markets have not behaved in the way they should have if the seriousness of the situation was to have its due effect. The bullion has not become suddenly as costly lately as it should have. Is that some big speculator (the type of George Soros) is privy to next moves and has taken position in that light. Is the calm signalling some storm. Is some thing unexpected on card or some ordinary development would have extra-ordinary impact. Every possibility should be kept in mind while the we witness the unfolding of events ahead.

Every economy and govt is coming under pressure under the programmes for justifying the welfare-state principle. We in India have not gone so far deep in it while we talked much but are slowing falling into the same situation every passing day. The welfare can never be ensured in the way it is undertaken by govt by first letting a section population suffer for the economic policies it maintains and then trying to mitigate the problems of this very section through governmental efforts. This exercise itself is faulty and mischievously conceived. The best is let not people go down in economic status by letting the natural resources owned by all equally. The ones who put in more effort in exploitation of the natural resources may have only slightly more to themselves than the rest. The passing on of the ownership right in extra proportion is the basic fault that has been allowed since ages. In earlier times only those who had more physical power controlled more assets and then after the organised states were created , the ones with better intellect also started controlling assets under laws.

Every thing will move around in the world on the above lines and the have and have-nots will remain till the basic right to natural resources is not understood and respected...kbk

New takeover guidelines to ward hostile bids

2011-07-29T09:26:00.000+05:30

SEBI has announced that the creeping acquisition may go on till 25pc level is achieved without going for open offer. Further there is provision for going for compulsorily going for another 26pc through open offer route. I think this sets at rest most of concerns of parties interested in take-overs.

This is also a logical practice and ensure change of guard in a natural manner and leaves the scope for the present managements to make attempts to ward of the hostile take-over moves. The share-holders will benefits in every scenario. The price discovery will be better.

The above will itself be a responsible factor see markets moving out of the present mood of despondency.

Along with a few other sensible announcement, the present SEBI Chairman Mr Sinha has clearly scored over Mr Bhave who was more of a bureaucrat than a market reformer...kbk

RBI should give a break on rate hike

2011-07-27T20:14:00.000+05:30

The RBI has gone ahead with the umpteenth attempt at curbing inflation by raising policy rates by 50bps . This has upset the market men as the it exceeds the expectation. The Nifty is now under 5550 mark losing more than 125 points since the announcement.

Looking at the rationale of the RBI's action one thing comes to mind is that the interest itself is an input in the production process of every type of economic activity. Since the inflation is due to demand pressure it can only be eased by either shrinking demand or increasing supply. Shrinking demand is fraught with concerns about the employment generation capacity of the economy which will be hurt. Alternatively, the supply surge at cheaper cost can only come when the finance also cheaply available. So the situation puts us in a situation like being between the devil and deep see.

The choice in light of above should be on the side off being wrong on the side of not raising the interest rates. This is also due to the fact that incremental consumption demand is coming more from the section of population who are now joining the consumption club and enter it on strength of saving and not on bank finance.

If the foreign money is attracted due to high rates here , it will make rupee strong and will make a case for exports falling exports and higher local consumption. This is not a likable scenario in any case. If the restrictions are place in foreign capital inflows , it will be not in line with the present financial order of the world.

Our rate of saving is good by world's standard and if a part of it getting in to demand for goods , it shouldn't be made a point to curb the demand . The question remains how else the economy grow if not by higher demand and higher supply.

I am not against raising of bench-mark rates when the inflation rate rises but when after reasonable effort the inflation still remains high then the interest rate tool should be given a break.

Further the food inflation should not matter as it makes the majority in India gain economic might , only thing that the poors having fixed or no income should get direct relief. We have such capacity which is mostly not invoked due to apathy of the political class. The political class is only for those who have some organised voting clubs and not for the lowliest of the people on the economic ladder.

Lastly, the high interest rates at the behest of govt would not make the interest rate in economy go up ie the demand for fund will diminish and the increased liquidity will be absorbed by industry at only a reasonable rate. This will put pressure on bank's spread and will be good thing to happen. In today's times the cost of inter-mediation should be minimal unlike the manner in which the banks of all hues have started to milch the customer.

I think the basics of economy will get adjusted sooner that expected and the interest rate scene will be irrelevant for the markets...kbk

ASHOKLEY, CADILAHC, DRREDDY, EXCIDEIND, HEROHONDA, KOTAK BANK, LICHSGFIN, WIPRO

2011-07-22T10:35:00.001+05:30

Stocks advice available on 22 Jul 2011

Nifty at cross roads

2011-07-17T20:33:00.001+05:30

We are at cross roads at the moment in respect of the markets and its hard to judge which way the market may go.Nifty closed the previous week at 5581 which also happens to be a level in the vicinity of long term and also near term averages.

The lack of conviction therefore is apparently to the fact that many people/institutions made exits and entry at around the prevailing level over the past many years and may well be looking at the prospect of re-entry or making an exit at profit when the market moves down or up. With this kind of line up which is at local as well as international level, the market would naturally show the tendency to get support at lower level and some selling pressure at higher level.

The confusion may end once there is any specific event of serious importance which may tilt the balance in favour or against the bulls. However, every passing day brings the markets in a developing economy closer to next big boom. This also happens to be case in respect of India as it is without doubt a developing economy with many other positives like demographic advantage, large local markets, a good and trust worthy place to get investment etc from around the world.

The banks that were subjected to stress test in EU, many have passed it and some have failed and make no case for any precipitous action.

Our inflation is keeping high because the fuel prices were recently raised. There is a silver lining here and that is the mechanism of pricing for petrol has become less skewed due to lowering of duties and raising of prices and making the subsidy element diminish to some extent if not fully.

The cabinet reshuffle in the past week is more or less of negligible impact.

The recent bill requiring mining companies to spend 26pc of profits for the benefit of affected people may pose some burden initially but would become part of cost which even otherwise would have had to be borne in one way or other.

So, while keeping the fingers crossed, please keep also an eye on the stock specific recommendations that have started flowing for the current result season…kbk

TCS @ 1147 on 15/07/11

2011-07-16T20:37:00.001+05:30

You may ****** this for medium term, we previously adivsed on 21/4/11 @1185 to sell on surges and you may have already booked profits.(ref 1043:5580/124/765:469/224).
* Advice available for paid customers now and shall be posted on site after result season.

Bajaj-Auto @ 1430 on 14/7/2011

2011-07-15T20:49:00.000+05:30

You may ********* now and wait till next recommendation, we advised on 8 May 11 @ 1284 to buy this for long term…kbk (ref 1001/5580:-/1165:242/236).
* Advice available for paid customers now and shall be posted on site after result season.

INFOSYSTCH @ 2787 0n 12/7/2011

2011-07-14T10:45:00.002+05:30

**** for medium/long term...kbk (ref 1000/5520:3499/2510). Previous advice on 12/4/11 @2980 was also for retaining for medium/long term.
* Advice available for paid customers now and shall be posted on site after result season.

Importance of emerging markets

2011-06-08T12:22:00.000+05:30

The emerging markets have gained in importance over the last decade and the same perception has statistics to back it. The share of emerging market economies is now at 30pc of world’s GDP as against 20pc in 2002.

Interestingly, the top companies of US have revenues of over 40pc coming from outside the US.

The US companies still account for 55pc of world’s total market capitalisation which has shrunk from 55pc in last ten years. The total world wide assets in MFs are as much as ₨ 1,117 ($25) trillion while the emerging markets have ₨ 183 ($4.1) trillion (this equals 11pc of world’s total) total market capitalisation.

Now what are the inferences that may drawn from above statistical information. It tells us that the developed world is losing importance and would keep doing so as the demographics favour the emerging markets. The technology transfers have enabled EMs to expand the manufacturing base while the markets locally are growing too.

The capital formation takes time but the EMs have greater saving to GDP ratio and the immediate needs are being fulfilled by the developed world itself. This suggests that there is an attempt at putting the capital to more efficient use rather than subject it to remain in less rewarding pockets. The world is co-operating like never before. No place is now unworthy of investment if the returns are better.

In light of above, the EMs which have large representation from China and India will have greater attention of the fund managers but the hick-up is that there is not enough expansion in the investible and tradable securities. In India, this is restricted because of too much of regulatory needs and conflicting statutes which the govt has failed to streamline. But this is not going to take away the edge that India has as an investment destination and it would keep attracting foreign money.

The above explains as why Indian market is not reacting any more to bad news and it is showing some stability inspite of political atmosphere getting vitiated by the developments related to anti-black money crusade drawing battle line between the political parties.

The Nifty closed a bit higher yesterday at 5556 and today it can end either way…kbk

Enough to make the govt resign

2011-06-06T20:23:00.001+05:30

In the dark hours of night between 4th and 5th the govt came down heavily on the people resting in under the tents at Ramlila Ground in Delhi and bodily took away Baba while he was trying to flee from the dangerously inclined police people who were mercilessly beating up the unarmed people suspecting that there was a conspiracy to kill him.

This has been an act on the part of govt that can never be condoned because such attitude of the govt would be only to kill all kinds of public protests and all kind of congregations of people for the sake of political demonstrations under the pretext of threat to law and order. The real threat to law and order will be when all those who are opposed to govt will go under ground and become ‘maoists’ by another name. The govt has not paid heed to the fact that Baba at all times called for maintenance of peaceful atmosphere and none of the sympathisers who assembled were carrying any kind of weapon or objectionable substance. It was in fact glorious moment that Indians were so nicely and calmly behaving. Instead of appreciating the govt turned hostile and in fact turned the atmosphere ripe for a violent backlash.

This is enough to make the govt resign or the opposition MPs to resign enblock and demand mid-term poll. How on earth can a nationalist demand to curb corruption and declared wrongly earned wealth as national property. There would be need for redrafting many laws and streamlining the procedures but the basic demand can not be brushed aside which seems to be the effort of govt. It seems that those in govt have some secrets to hide from people and some wrong kind of fund stashed away here or abroad. The circumstantial evidence is wholly against them.

Not only the political class, the big business which becomes agitated for any change in statute affecting it has kept stoically mum and has not favoured the proposals of Baba. They were very worried when the Mumbai was attacked by Pakistani terrorists, they do not consider the black money transactions to be an attack on India of the same seriousness. Narrow mindedness and wrong means of making money have been the two main characteristics of India’s big-business people…kbk

Land acquisition in Uttar Pradesh

2011-06-03T10:43:00.000+05:30

Mayawati, the U.P. Chief Minister, has declared with some sense of urgency that state would not acquire land and this will have to be done by the parties themselves. The approval to the project itself will wait till 80pc of the affected farmers have given consent. There are more provisions for the benefit of farmers in broader policy which distinguishes between projects of public infrastructure development. Mayawati. Has demonstrated greater political maturity by addressing the concerns of farmers that the govt at centre has shown.

India has been saved from the policies which benefit a few and put the rest to dis-advantage on account of agitating attitude of the affected people like farmers. Land related policy have a far reaching implications and shake up society immeasurably. The centre too has woken up and has modified the new land bill which allows states a greater freedom to script own role.

The 2G scam has now taken another toll. It is Dayanidhi Maran now who has to explain some transactions of Sun TV while he was telecom minister in 2004.

Rangarajan has emphasised to have the free pricing for petrol. As otherwise the target of restricting fiscal deficit to 4.6pc of GDP will be difficult to achieve. The opinion is that GDP will grow between 8 to 8.5pc this year. For me the surprise remains that this kind of GDP growth is not able to take real care of underfed and under-clothed people. May be they are fated to be deprived under the ‘karma theory’.

The China’s western regions, which were left behind in march towards progress, have started to catch up. The growth happens to be almost double now at over 15pc. A similar phenomenon is noticeable here in India where the sates like Bihar and U.P. some improved rate of growth. When the developed world made China and India like nations to cover the gap, why wouldn’t the same thing happen within the confines of the countries too.

The bond yield has come down slightly and the bond prices have improved. May be lower food inflation for the latest week has had the impact. When the policy rates were announced by RBI lastly, the majority in the committee was for just 25bps raise and not 50bpd. So the next policy may not punish further and may be lowers the rate too. This is a positive indicator for the markets which saw some loss yesterday and Nifty closed 5550.

Around this time of year last, the markets had suddenly become bullish which saw them coming close to the all peak of 6320 in Jan 11. Since then the downward pressure has remained but without any big negative development besides the higher cost of money. May be now the market perceives that the cost of money will come down…kbk

Baba Ramdev on fast for causes needed in pure democracy

2011-06-03T10:36:00.001+05:30

Baba Ramdev, the Yoga Guru, has a large following all over the world. He has addressed more than a 10 million people directly all over the country during last 6 months. He has taught people as to why the corruption and black money be dealt with firmly. He has talked in no uncertain terms, his statistics about the quantum of black money may be way off the mark but its huge without doubt. He stands for bringing Indians’money stashed abroad and made national property. He rightly wants a black money hoarder to be declared a traitor.

Now, he has gone on War-path,right on the heels of Anna Hazare and would go on fast publicly on the Ramlila Ground in Delhi shortly for the expeditious steps in the direction he suggests on variety of issues.

The govt has become upset after this announcement . The Delhi Darbar is now bowing down before him to stop him from going ahead with the fast. The govt doesn’t want to be cornered in the fashion Anna did. So, they want to placate Baba. I know and you know that nothing concrete can be done on score of the black money or corruption in short time and without the govt’s full willingness and continued interest. The promises given will remain promises. The sole concern of the govt is to avoid any precipitous event taking place. This time BJP has come out in open support of the movement.

There are sections of people who are trying to malign the man without showing dis-regard for the issues. Some see it as an exercise in futility. In fact I see in it a great change of heart as far as the voters are.concerned. There would be huge surprise at the hustings in the next election and much more if the mid-term poll have to take place. If there had been a strong BJP leader like Bajpai was , there would have been every effort to call for a mid-term poll and anti-trust vote against the govt. This demand is missing just because there is lack of preparation and capability in both camps.

Bab Ramdev’s call is parallel to that of Jai Prakash Narayan in seventies. It brought Indira down and this has potential to bring today's govt down. The rise of Baba represents rise of the commoners in villages and towns alike. This is the change now. Those who had appeal with urban people were not the same who had appeal with rural people.

Why Ramadev has mass appeal is due to his simple living and interest of the nation in heart. He became relevant because of the Yoga initiative. The next step was just a logical culmination in exercise of power in right direction. You do not live only with taking care of health. The impediments in achieving the material welfare have to be removed too.

For an enlightened citizen it is a good thing to notice that a common thread now passes through the entire nation and the regionally desperate views are less to find. The Shiv Sena has been punished by people for trying to play up this tune.

I all for support to Ramdevji , Sri Sri Ravishanker supports him too. Anna is. Ready to. Go on fast once again with Ramdev is so required. It is.a national handicap that we don’t have an imaginative political leadership to turn this euphoria into some desirable laws.

Our nation is strong today because the leadership in early days went ahead with abolition of Jaminndari. Pakistan is weak today because it failed to do so. We will be stronger if we make an atmosphere that is less congenial to allow corruption to flourish and is able to curb black money. USA has flourished for having this kind of atmosphere.

We must all show due respect to one man army of Baba Ramdev. He has been relentless in his efforts. He works of eighteen hours a day and does not enjoy leaves . He has just two simple meals at 11am and 7pm in a day and sleeps on floor without an air-conditioner. For clothing he requires few yards of unstitched cloth.

His actions speak louder than words. He teaches yoga and maintains a body that is outcome of a strict yoga regime. He has support of people from all religions. He holds the cause of the mother land most dear to his heart. He comes from an humble back ground, even that he had a deprived childhood. Such a man is rare to find in long history. The world wastes more time is talking about Osamas and Obamas but has less time to appreciate the efforts of people like Baba where practice and preaching go hand in hand…kbk

Buy - post result Q4 - 2011

2011-06-01T09:34:00.004+05:30

NMDC @266( 30/05/11)

You may buy this for long term (Ref 1220/5480:305/227:1041/533). We advised on 3/8/10 @262 to buy for long term, on 28/10/10 @283 to retain and on 3/2/10 @269 to retain.

NHPC @24( 30/05/11)

You may buy this for long term and may not sell early at all (Ref 1198/5480:34/22:1041/533). We advised on 25/5/10@28 to buy for long term.

GSFC @354( 30/05/11)

You may buy this for long term (Ref 1443/5480:412/215:99/23). We advised on 2/8/10 @308 to buy for medium term.

Welcorp @177( 30/05/11)

You may buy for medium term (Ref 1178/5480:274/208:31/70). We advised on 28/7/10 @255 to buy for medium term, on 29/10/10 @249 sell on surges and on 24/1/11 @161 to buy.

Sunpharma @466( 30/05/11)

You may buy this for long term (Ref 1117/5480;-/393:16/19). We advised on 29/10/10 @2108 to buy for long term (this has split in to 5 shares of Re1 each).

RCOM @86( 30/05/11)

You may buy this for long term (Ref 1136/5480:207/79:-/-). We advised on 17/5/10 @141 to buy for long term, on 12/11/10 @169 to buy for long term.

Tatamotors @1086( 27/05/11)

You may buy it for medium term (Ref 1129/5480:1382/670:121/177). We advised. On 25/5/10 @747 to buy for long term, on 11/8/10 @966 to buy for medium term, on 10/11/10 @1301.

Tatasteel @573( 26/05/11)

You may buy this for long term (Ref 1198/5400:737/449:696/446). We advised on 12/8/10 @521 to buy for long term, on 12/11/10 @605 to retain and on 16/2/11 @640 also to retain.

Cairn @343( 26/05/10)

You may buy it for long term (Ref 1298/5400:372/266:-/-). We advised on 27/5/10 @284 to buy for long term and om 28/10/10 @319 to buy for long term.

Coalindia @388( 26/05/11)

You may buy it for long term (Ref 1040/5400:401/289:5595/4342). We advised on 14/2/11 @302 to buy for long term.

Powergrid @98( 24/05/11)

You may buy this for long term (Ref 1251/5400:113/91:248/88). We advised on 26/5/10 @105 to buy for long term, on 6/8/10 to buy for long term.

Tatachem @351( 24/05/11)

You may buy this for long term (Ref 1027/5380:416/295:274/209). We advised on 24/5/10 @300 to buy for long term, on 30/7/10 @337 to buy for long term.

Ashokley @51( 20/05/11)

You may buy this for long term (Ref 1178/5500:81/45:93/76). We advised on 30/4/10@60 to accumulate on dips, on 27/7/10 @71 to buy for medium term, on 21/10/10 @76 to sell.

Tatapower @1239( 20/05/11)

You may buy this medium/long term (Ref 985/5500:1498/1132:25/88). We advised on 24/5/10 @1246 to accumulate on dips for long term, on 12/8/10 @1326 to sell, on 12/11/10 @1375 to buy.

Bajaj-auto @1284( 17/05/11)

You mau buy this for long term (Ref 1203/5420:-/1165:56/203). We advised on 12/5/10 @2145 to buy on correction, on 22/7/10 to accumulate on dips for long term( it gave bonus also)

Videoind @190( 16/05/11)

You may buy it for medium term (Ref 1150/5500:295/178:70/60). We advised on 14/5/10 @212 to buy for medium term, on 8/11/10 @260 to accumulate on declines.

Kalpatpowr @120( 16/05/11)

Kalptaru Power may be bought for medium term (Ref 1001/5480:-/107:17/17). We advised on 31/5/10 @1018 to sell ( this has split into 5:1).

Grasim @2309( 12/05/11)

You amy buy this for long term (Ref 1172/5480:2688/1700:131/54). We advised on 20/5/10 @2515 to buy for long term(it separated its cement business afterwards), on 30/7/10 @1833 to buy.

Syndibank @115( 12/5/11)

You may buy it for medium term (Ref 1250/5480:164/84:29/121). We advised on 5/5/10 @92 to buy for medium term, on 30/7/10 @104 to buy for medium term, on 29/10/10 to sell.

Chamblfert @80( 12/05/11)

You may buy this for long term (Ref 1011/5480:104/52:44/35). We advised on 11/5/10 @60 to buy for long term,on 221/1/11 @76 to buy for long term.

Apollotyre @69( 12/05/11)

You may buy this for medium term (Ref 1100/5480:89/44:14/2). We advised on 25/5/10 @70 to buy for medium term,on 29/7/10 @69 to buy for medium term.

Ranbaxy @477( 10/05/11)

You may buy this for medium term (Ref 1011/5560:605/403:0/456).

NTPC @177( 10/05/11)

You may buy this for long term in good measure, this is going to be wonderful stock to give stability to your portfolio and also dividends (Ref 995/5560:2225/168:474/61).

Auropharma @194( 10/5/11)

You may buy this for long term (Ref 1103/5540:-/156:78/57). We advised on 3/11/10 @1269( split in to five later on) to buy for medium term.

HDFC @ 660( 10/05/11)

You may buy this for medium term (Ref 1168/5540:-/582:412/339). We advised on 3/5/10 @2800 to buy for long term, on 14/7/10 @3080 to buy for long term.

Bhusanstl @454( 09/05/11)

Bhusan Steel may be bought for long term (Ref 1121/5550:-/348:150/121). We advised on 2/8/10 @1557( split into five later) to buy for medium term, and on 7/2/11 @407 to buy.

Hindunilvr @ 288( 09/05/11)

You may buy Hindustan Unilever for long term, its a perfect defensive stock and these times you may be looking for on such stock (Ref 923/5550:329/226:161/187).

Canbk @560( 05/05/11)

Canara Bank may be bought for medium term (Ref 1173/5450:844/386:250/200). We advised on 28/4/10 @408 to buy for long term, on 22/7/10 @486 to buy for medium term and on 21/10/10...

Torntpower @248( 05/05/11)

You may buy it for long term (Ref 1102/5450:375/184:51/123). Previous advice on 30/7/10 @345 was to buy for medium term ie you would have sold later on rises.

Andhrabank @113( 05/05/11)

You may buy this for medium term ie sell at profit when opportune (Ref 1242/5450:189/123:96/64). We advised on 29/4/10 @127 to buy for medium term., on 3/6/10 @141 to sell.

Ucobank @114( 29/04/11)

You may buy this for long term…kbk(Ref 1218/5750:152/64:13/9). P.S. We advised on 05/05/10 @74 to buy for medium term.

ALBK @196( 03/05/11)

Allahabad Bank may be bought for long term (Ref 1183/5560:271/148:136/58). P.S. We advised on 30/4/10 @164 to buy for long term. Advised on 29/10/10 @241 to retain.

Tubeinvest @137( 03/05/11)

You may buy this for long term (Ref 1279/5560:164/92:12/16). P.S. We advised on 3/5/10 @96 to buy for long term. Advised on 30/07/10 @121 to buy for medium term.

PSB @110( 02/05/11)

Punjab and Sind Bank may be bought for long term( we covered it for the first time today) (Ref 1265/5700:150/95:-/-).

Aloktextile @27( 02/05/11)

You may buy this for long term, we advised earlier on 01/02/11 @ 26/- also to buy but for medium term (Ref 1043/5700:35/17:79/50).

EIDPARRY @236( 02/05/11)

You may buy this for medium term (Ref 1135/5700:-/189:-/13). P.S. We advised on 28/07/10 @399 to buy for medium term. Advised on 25/10/10 @523 to buy for medium term.

Titan @2187( 29/04/11)

You may buy this after some correction for long term (Ref 929/5750:4242/3030:62/19). P.S. We advised on 03/05/10 @2187 to buy on correction for long term.

Uniphos @152( 29/04/11)

You may buy this for long term (Ref 1034/5750:219/125:15/6). P.S. We advised on 29/04/10 to buy for long term. Advised on 26/07/10 @179 to buy for long term.

Unitedbnk @108( 29/04/11)

You may buy this for long term (Ref 1336/5750:150/73:-/-). P.S. We advised on 26/07/10 @88 to buy for long term. Advised on 21/01/11 @94 to buy for long term.

TVSMOTOR @56( 29/04/11)

You may buy this for long term (Ref 1010/5750:-/43:19/-). P.S. We advised on 21/07/10 @127 to buy for medium term( it gave bonus in 1:1 ratio since then).

Corpbank @576( 29/04/11)

Corporation Bank may be bought for long term (Ref 1217/5750:814/421:131/67). P.S. We advised on 23/04/10 @495 to buy for long term. Advised on 28/07/10 @567 to buy for long term.

Ucobank @114( 29/04/11)

You may buy this for long term (Ref 1218/5750:152/64:13/9). P.S. We advised on 05/05/10 @74 to buy for long term. Advised on 23/07/10 @90 to buy for medium term.

HCC @35( 29/04/11)

Hindustan Construction Co may be bought for long term now. It gave bonus after second quarter last year (Ref 1037/5750:-/31:22/19).

Denabank @104( 29/04/11)

You may buy it for medium term( ie you may book profits midway through till the next advice) (Ref 1231/5750:151/80:62/60). P.S. We advised on 27/04/10 @83 to buy for medium term.

BEL @1829( 29/04/11)

Bharat Electronics may be bought for medium term (Ref 1273/5750:1928/1600:177/86). P.S. We advised on 03/02/11 @1731 to sell off to book profits.

Crompgreav @279( 28/04/11)

Yu may buy this for long term (Ref 960/5800:349/219:43/96). P.S. We advised on 14/05/10 @248 to buy on correction for long term. Advised on 19/07/10 @269 to sell off.

HCL-Insys @111( 28/04/11)

You may buy this for medium term (Ref 940/5800:143/82:15/30). P.S. We advised on 01/02/11 @103 to ignore this for time being.

JSWENERGY @74( 28/04/11)

You may buy this for long term (Ref 1058/5800:136/67:203/-).

Petronet @133( 27/04/11)

You may buy it for long term…’Bk(Ref 965/5830:141/76:87/41). P.S. We advised on 27/04/10 @81 to buy at under 75/- for medium term. Advised on 29/07/10 @95 to buy.

Boschltd @6950( 27/04/11)

You may buy this for long term…kbk(Ref 997/5830:7015/4700). P.S. We advised on 11/08/11 @6950 to buy for long term. Since the advice is to buy for long term even today.

Dabur @99( 27/04/11)

You may buy this for long term (Ref 910/5830:-/86:35/21).This has given bonus in ratio of 1:1 since last year.

Ambujacem @150( 27/04/11)

You may buy it for long term (Ref 1080/5830:166/102:151/123). P.S. We advised on 27/04/10 @120 to buy for medium term. Advised on 22/07/10 @114 to buy for medium term.

SESAGOA @323( 26/04/11)

You may buy this for long term (Ref 1374/5880:448/254:646/242) P.S. We advised on 20/04/10 @456 to buy for long term but you may have had to get out of it.

ACC @1126( 26/04/11)

You may now sell this on surges and accumulate back on dips for long term (Ref 994/5880:1144/800:132/190). P.S. We advised on 22/04/10 @918 to buy it for long term.

Indianb @248( 25/04/11)

You may buy Indian Bank for medium/long term (Ref 1263/5880:316/192:337/248). P.S. We advised on 26/04/10 @219 to buy for long term. Advised on 26/07/10 @220 to buy for medium term.

STER @183( 25/04/11)

Sterlite Ind may be bought for medium term (Ref 1198/5880:-/149:82/70). P.S. You were advised on 26/07/10 @173 to buy it for medium/long term. Advised on 25/01/11 @178 to buy.

Hindzinc @152( 21/04/11)

You may buy this for long term (Ref 1144/5880:-/125:359/315). P.S. You were advised on 24/04/10 @1239 to retain and add fr long term. Advised on 26/07/10 @999 to retain.

Jindalstel @695( 21/04/11)

You may buy Jindal Steel and Power for long term (Ref 1126/5880:796/574:243/112). P.S. You were advised on 04/05/10 @715 to buy this on correction. Advised on 28/07/10 @628 to buy.

PFC @236( 20/04/11)

You may buy it for long term (Ref 1295/5860:385/217:212/136). You were advised to buy it @323 on 22/07/10 for medium term.

IDBIBANK @149( 19/04/11)

You may retain this and add more for long term (Ref 1120/5740:202/105:368/-). We previously advised you to buy this for long term @121 on 22 July 11.

Bond Yield

2011-05-26T11:07:00.002+05:30

The 10yrs govt paper in India is now yielding 8.37pc and this is 32 month high. If the inflation remains at 7pc for coming weeks, the real rate of interest will be 1.37pc and much in line with the world’s other economies. But the inflation also acts in some unsavoury ways ie it transfers purchasing power from one pocket to another without the intentions being such. This is the ugly part.

The govt is readying to announce the diesel hike which is supposed to be an anti-poor measure. But this perception is wrong because the diesel is being consumed more by the SUV owners than by the farmers to irrigate fields. Also it is used by commercial establishment catering to rich to generate power.

India’s petroleum pricing policy is basically a faulted one. What rational can be found in an exercise which takes money by way of excise duty and sales tax (it is Rs28/ltr of petrol and slightly lesser for diesel) from the same people and gives back relief to them by way under-recoveries in hands of up-stream and down-stream companies. This under recovery is made up by transfers from exchequer to companies. One is hardly able to understand the level of efficiency of the companies involved in petro-chain. Further, this kind of large transfer of monetary in hands of govt, the companies and others leaves room for irresponsible uses. The high price of petro-products due to excessive taxation gives incentive to dealer to short deliver.Products with higher subsidy are inefficiently used. The capital investments are mis-directed. The reversion to market based pricing will have to eventually take place but a lot of precious capital will be spoilt by then.

The skewed pricing will lead to distorted development of alternative sources of energy . It also makes the users to keep two sets of equipment for being able to switch according to availability of raw material like having oil-fired furnaces as also coal-fired and electric furnaces. This results in defective quality of end product and raises costs and increases down time. So, the cost to economy of present petroleum policy of India is enormous. The neta-babu hold on it is detrimental in all ways. The administrative costs to keep this system is also too high. The users are not fore-warned and remain complacent about the future availability and cost and neither they can resort to hedging etc..

Now, coming to market, Nifty was in poor shape yesterday but has opened with slight edge up. The market seems to be too confused for it is difficult to under-rate the PE 16 and also difficult to judge about the earning potential of companies in present conditions. The markets would only go up down when the professionals get pitted against the public but since the public participation in low, the market will remain range bound…kbk

Mamta and Gandhi

2011-05-22T10:09:00.002+05:30

Ms Mamta took oath of office after her party Trinmool Congress’s land slide victory as Chief Minister of West Bengal. She stands for people’s welfare and has defeated CPM on the promise of good governance, end of CPM cadre’s menacing activities, freeing police from obligation to CPM’s dictates and ensuring general welfare of masses through increased industrial activity.

India’s GDP growth relies on the performance in four southern states, two western states and three northern states. The hinterland represented by UP,Bihar,Rajasthan and MP have been dragging it so far. West Bengal also was poorly performing state inspite of having potential. Since the change of guard in Bihar, its contribution is now getting better, a similar possibility can be seen in case of West Bengal now.

This is how India’s march towards becoming a developed nation will be achieved but the states of UP also has to see a change in leadership to come back to its old glory when likes of Govind Vallabh Pant and C B Gupta were in leadership. MP and Rajsthan will catch sooner or later because there is silent progress going on. Gujarat is in path-breaking mould under Modi. Its past 10yrs GDP growth has exceeded the 10pc average. This is no ordinary achievement and the service,manufacturing as well agriculture have contributed to the GDP growth. On social parameters also Gujarat stands apart.

I have given the above narrative only to convey to you that India’s progress has momentum and will not be retarded just because of the inflation and high interest rates. These may be seen as a threat but last ten years of fine performance have seen both fluctuating without denting much. Now, since the voting age is only 18 years and the youth who are in the voting age have become matured in a different India. That’s why the political scene. Is changing fast and cast leaders are being sidelined all over the country. This political maturity of the nation is going to translate into faster progress on all fronts.

I saw some parallels between Gandhi and Mamta. Mamta was physically manhandled in the beginning of her career like Gandhi was in South Africa. Gandhi. Came to adopt the living style of common citizens of that time before embarking on full scale political journey. Mamta never shed the living like commoners even after having grown taller in grabbing formal power as minister. Gandhi opposed salt tax and thereby challenged govt’s authority, Mamta did it by taking up cause of unwilling farmers to surrender their lands under govt’s dictates and thereby challenging govt of West Bengal. Her language of communicating with masses remained Bengali and Gandhi adopted Hindi. Both had effective communication with masses.

The difference between the two is that one was accepted because he came down from high pedestal and Mamta came to be more accepted after climbing a few stairs. Gandhi refused to take directly in his own hands, Mamta has decided to take it wholly in her own hands. Gandhi philosophised much, Mamta has no flair for it. Gandhi had command over English, Mamta has just workable knowledge of English. Gandhi had respect of all, even those who he was fighting against. Mamta can not claim the same and does not command any respect of her adversaries. Gandhi was helped by the industrialists of India, Mamta has been seen as an enemy by them.

I appreciate Mamta’s political calibre but she has yet to achieve the status of successful leader who delivers on ground. If she is able to check corruption and keep law and order in good shape, I think she will have achieved every thing because rest will naturally follow. The central govt like wise has a similar duty ie to keep nation secured internally and externally and to simplify the legal framework so as not leave any scope for corruption besides ensuring a mechanism to catch and punish the corrupt. The judicial reforms are another area that requires to be attended…kbk

Inflation and its effect on markets

2011-05-22T09:07:00.000+05:30

The inflation is responsible for the present bad mood of market. The petroleum prices are now higher which is again an inflation related matter. The bullion and other metals have also become costlier. The inflation made RBI adopt dear money policy and interest rates have become higher.The market has taken it to be a bad sign.

Now let’s see if the inflation which has been raging in bouts in India. Let us take the year 1978-79 as the beginning of the modern era of Indian stock markets when Sensex was created to monitor the stock market. It started at 100 and has reached 18000 in 33 years of its existence. The petrol prices were in the range of Rs7-8/ltr it is now ten times more. Similarly, the steel prices were about Rs 3500/tonne, this also is ten times costlier. The cement bag used to be Rs 35/50kg now it is Rs 200/50kg. The interest rates were about 10pc for bank fixed deposits and are about the same. Fixed deposit rates have never been higher than 12pc. One thing is clear that the inflation which has been order of the day through out hasn’t. kept market from moving up by 180 times in terms of Sensex against the inflation making costs go up by 10 times. So, in the long run co-relation is positive and should not un-nerve those who want to invest in equity pocket for long run.

The Nifty which came in to being in 1994 at 1000 is also at 5500. The period of 17 years has seen a similar pattern in prices as given above, so for this shorter period the co-relation has remained positive.

The pattern got disturbed since 2008 after the financial crisis faced by the world. But the markets were wrongly up just before it and were down to the extra extent afterwards due to difficulty about assessing financial situation and the availability of remedial measures. The choice of the set of measures and the effect of the same kept people in doubts. When the doubts were cleared and a semblance of normalcy was noticed the markets behaviour became normal too.

So, keeping aside the aberration of 2008-09, we may safely assume that the markets will not be harmed due to inflation in long run. Also the high rate of interest will only see reversal because the global rates are lower even considering the difference in inflation rates. The world will pour in money here in very many ways.

Money like water moves form one place to another to keep similar level, of course the artificial barriers have to be removed. The barriers of any kind remain under pressure by the higher level in one place and lower level in another. The weakness in barrier is not able to check the flows from higher level to lower level. So, India remaining a high interest pocket is not possible.

The basics for market’s growth are good governance at company and political level, the opportunity thrown up by market and by the resources available with companies/entrepreneurs. These basics remain in case of India , only the first requisite requires some strengthening.

In light of above I see Nifty and Sensex universe as being numbered by no lesser companies than those that command world’s attention. So, generally speaking the Nifty should not be under constant dis-regard.

Even while I am writing this Nifty is trading at 5481 (+53) at this 1000hrs today…kbk

Triggers are absent from the market

2011-05-19T09:00:00.001+05:30

FIIs have raised their stakes in India Inc to 20.4pc (+175bps) in FY 11 which is not much. It has been done through purchase of ADRs/GDRs and also through market.

FIIs holding is 44.92pc on free float basis. This level of holding does not leave much room for the FIIs to raise stake and so, it may be concluded that their interest in India is not waning rather the saturation has been reached. They are constrained also on account of hitting the ceiling of permissible limit is some individual companies.

The promoter group (for private, govt and foreign companies, all together) is 54.6pc. The FIIs injected a total of Rs 110,100 crs , it means that they brought in more money than the entire fresh offering by Indian companies during FY 11. We should wonder that where the Indian savings are getting parked. If the foreigners can trust their money in risk capital basket , we should be more comfortable with it. Is it that we are more aware of the dishonest practices of Indian managements than they are or is it that the Indian growth story is so fascinating that they are ready to leave it in hands of Indian managements of doubtful integrity.

Please don’t think I am overly critical of Indian managements but I have had first hand brushes with most of the Indian management practices aimed at putting investors, depositors, customers and employees to dis-advantage. The worst part is that the cheating the exchequer also goes on but the investors may gain themselves on that account in some ways. The psychology of the managements is such that they consider the corporate property as their own, however, when the rough patches are encountered in corporate journey they finds ways to make the sleeping partners to bear most of the shock.

My observation is that if the majority in govt and managements become honest to a good level, the Indian growth rate will be double of what it is today. We can be the most desired destination for capital from every origin. Indian talent is great but that greatness is mis-used in damaging the cause of each other ie the providers of land,labour,capital, enterprise and organisation and the regulators, tax-men,law-makers, dispute-settlers, administrators and order-keepers. The public remains as mute observer as it has been taken for granted by the elite of society for ages. They deserve the qualms if under too much stress for survival, at the most.

The Nifty was for yet another day but with lesser vengeance. The SBI’s result spoilt the mood and the bottom point has come to be the subject of decision as if some fear has set in. This may be due to the optimistic moves now and then that have created this psychology which does not want to miss the up move neither the down side risk is desirable. How can one have best of both world’s . So the wisdom lies in properly allocating the investible resources in the debt, bullion and equity pockets as per the risk appetite of the individual and get swayed by the day to day fluctuations.

The SGX Nifty is at 5434 at the moment before opening at NSE. The US and European markets were better yesterday and Asian market have opened mixed. Crude is in a narrow grove for some time. The lustre of precious metals has been lost a bit. The domestic political scene is not going to be bad in near future after the recent elections in five states. The scam season also seems to be over. The serious companies may now plan future course. The terrorists also seem to be hibernating. All in all, the mood is sombre but triggers are absent…kbk

Risk capital in the communist regime

2011-05-17T09:33:00.002+05:30

The bad news is not dying down. It camein the form of IMF Chief Mr Strauss Kahn getting arrested for sexual assault on a hotel maid. His arrest is being seen to delay the relief for Greece.

Our markets tanked yesterday due to petrol price hike. The inflation pressure is mounting and is being seen by market men as some thing that would spoil the party but I am surprised as we haven’t been having party times for a long long time. In this light can the inflation remain a potential party spoiler in the long run, I think not.

The markets remain sluggish also due to positioning of the stars , I do not know what is it at the moment but should be checked. When some things happen that have no immediate reasons to connect to it, its the stars that are responsible. We see this happen in lives of individuals and also the nations.

The results of 1430 companies for the last quarter have shown improvement of 21.10 pc in sales and 17.72pc in profits over the corresponding quarter last year. Some big companies have yet to announce results which may not be any worse than for the sample above. The indices have however not given more than 7pc return over the last year.

A reason for the bleak prospects and poor performance so far may be due to flight of capital around the world into bullion. Silver has given more than 80pc and gold more than 20pc during the past year. I don’t think monetary authorities will allow the bullion carrying the day for another year because if this happens, it will a precursor for a financial upheaval around the world.

How can the markets keep putting lesser premium on the risk capital which is responsible for deploying and servicing the savings of people. This has particularly more importance in a developing economy like ours. The richer nation which have already exploited all the idle resources already may have lesser role to play by the risk capital but in countries like ours this is not the case. Look at West Bengal, its people live poorer than they used to in British times. The reason is that the risk capital has been scared away by the communist regime in last 35 years.

The equity offering since 2007 have been Rs 70K crs in 2007,Rs 20k crs in 2008, Rs 68K crs in 2009, Rs 106K crs in 2010 and Rs 19k crs so far in 2011. This has to scale up if India is to progress further because the govt today does not take the responsibility on its own shoulders any more. For this to happen the govt is automatically burdened with the task of keeping capital markets vibrant.

The Nifty is trading flat at 5501 at the opening time…kbk

Dearer petrol in India

2011-05-16T10:31:00.001+05:30

The oil marketing companies have raised price of petrol by Rs 5/ltr and the diesel prices would be raised is also certain. To bring the prices in line with the cost of Indian crude basket is the necessity of the day and impact etc that we feel or even see in short term is only of temporary nature as the under-recoveries also have the similar bearing on economy and it is to say that the approach in one is straighter and in the other case it is oblique. The straighter approach eventually is better for economy can generally be said.

The crude basket in early period of last decade was between ₨ 1,032 ($23)-25 than it went up to around ₨ 2,243 ($50) and later it reached around ₨ 3,365 ($75) and lately it hovers around ₨ 4,711 ($105) . In this light the price rise has some justification but the only problem is that the prices may not be lowered in the desired way once the international crude prices drop. However, there is lot of scope to reduce state sales tax/ vat and it should be ad-quantum (max Rs 10/ltr) than ad-valorem.

The equation has been favourable at least on one count and that is that the dollar has not become costlier in last year, it may now become costlier ie more rupee for each dollar which will make the crude cost higher without its international price going high.

There is a lot that can be done to mitigate the impact of high crude prices. The trend should be to move towards the most economic energy use. And also there should be stress on more efficient use of petroleum based products. We have to have more dependence on nuclear power, we have to exploit the hydro-electric potential to the maximum, the solar energy has to be harnessed at a greater scale and there is wind energy and tidal energy to be relied upon.

The bio-fuel also is an answer but is fraught with dangers of the food scarcity. The rich may eventually even see the poor as burden on society, whose existence may itself may seem to them to be un-necessary. There may be forced family planning policy for the poor. All this is likely to happen while the powerful in govt , the powerful in society who happen to be rich too will talk differently but adopt the opposite policy actions. Otherwise how would you explain lower rise in income of the poorer sections than the average growth of economy while our constitution still declares India as Socialist Republic of India. No questions are asked in parliament about these hard facts. If asked these are drowned in melee .

Let there be some optimism on account of Indian exports going up and this is not due to keeping Indian currency under priced as in case of China , it is on strength of Indian industry gaining efficiency in operations. In no small way, the labour and industry relations have been responsible too. The work stoppage on this account is now far less. There would be further improvement in cost-reduction after the labour laws are amended to cover the needs in new environment.

The smooth conduct of elections in five states recently further confirms that democracy is becoming stronger by the day. This makes India a much more stable economy albeit that the quality of the representatives has to improve for better governance besides their characters also have to be more strong with concern for people as first priority.

Coming back to petroleum prices, I think that it signals that the infrastructural projects which save fuel and carbon emissions should now the top priority of govt.. If goods can be hauled by rail at just one fifth of fuel consumed in comparison to haulage by road why shouldn’t the long haulage by entirely through railway networks.

The nations become stronger by finding answers to the weaknesses they have not by just feeling pressed for it. Countries like Japan who have minimal natural resource base have the highest incomes. We have the capacity to reach the same level if only we have leaders guiding us in right direction, and it is us who with throw up such leadership.
The young India has started voting differently and we have hope now.

The Nifty has naturally opened at lower level and is trading at 5510 at this very moment. The fall should see you committing more of your savings in equities. This is juncture where buying cheap will be a good strategy rather than buying after the trend is confirmed…kbk

Sell advice post Q4 results up to 12 May 2011

2011-05-14T12:10:00.003+05:30

ABB @862 (12/05/11)

You may sell this now (ref 726/5480:976/785:28/47). We advised on 30/7/10 @813 to sell off, on 4/11/10 @860 to sell off and buy back upon correction.

RCF @82 (10/05/11)

You may sell this off (ref 829/5560:132/71:42/34). We advised on 11/2/11 @79 to accumulate on dips for long term.

PTC @ 89 (10/5/11)

You may sell this on surges (ref 875/5540:150/74:13/7). We advised on 19/7/10 @105 to wait for correction, on28/10/10 @136 to ignore and on 8/2/11 @93 to accumulate on dips.

Unionbank @317 (06/05/11)

You may sell this on surges (ref 1040/5550:426/275:281/19). We advised on 6/5/10 @295 to buy for medium term, on 26/4/10 to buy for medium term again.

Bhartiartl @ 356 (05/05/11)

You may sell this on surges and buy back after some correction (ref 998/5450:428/252:244/396). We advised on 28/4/10 @293 to buy for long term, on 11/8/10 @320 to accumulate for long term.

Thermax @613 (04/05/11)

You may sell this if you hold it still, you were advised on 27/07/10 @793 to sell and buy back on heavy decline (ref 713/5560:930/536:69/54).

Bankindia @408 (03/05/11)

You may sell this now and buy back when available below 370/- till the next advice (ref 1059/5560:589/310:243/38).We advised on 7/5/10 @348 to buy for medium term.

Mahabank @58 (03/05/11)

Maharashtra Bank may be sold (ref 1100:5560:85/49:-/13).

Centurytex @339 (03/05/11)

You may sell this off (ref 963/5570:552/278:7/47).We advised on 2/11/10 @514 to accumulate for long term. Advised on 24/01/11 @360 to accumulate for medium term.

ICICIBANK @1112 (28/04/11)

You may sell this on surges and buy upon some correction for long term (ref 919/5800:1279/712:469/403).We advised you on 27/04/10 @945 to buy for medium term.

Bankbaroda @939 (28/04/11)

You may sell this on surges (ref 1194/5800:1051/647:61/345). We advised on 28/04/10 @686 to buy on dips. Advised on 29/07/10 @738 to buy for medium term.

Ultracemco @1060 (26/04/11)

You may sell this on surges (ref 874/5880:1197/821:93/72). We advised on 29/04/10 @1012 to buy it for medium term, meaning thereby that you get out of it.

Maruti @1325 (25/04/11)

You may sell this on surges and wait for next advice (ref 965/5580:1585/1122:166/297). We advised on 26/04/10 @1371 to buy this on declines and sell on surges.

TCS @1185 (21/04/11)

You may sell this on surges for the time being and use cash for other items (ref 1060/5880:1246/685:288/179). You were advised on 24/04/10 @ 789 to buy for long term.

LIC to invest in equities

2011-05-13T11:33:00.002+05:30

Life Insurance corpn. (LIC) , the public sector insurer has decided to put in as much as Rs 60 K crores during current year. It had seen drop of 30pc in equity investment last year totalling just Rs 43K crores. It was due to IRDA’s new regulation rules that saw ULIP sales falling. Now its back to normal and hopefully an equal amount will be invested by the private sector insurers. Total investments by LIC in 11-12 will be Rs 2 lac crs. First premium receipts for LIC were Rs 86444 crs in 10-11, an improvement of 22pc over the year.

The investments by insurers is best thing to happen to markets as this is for long term and acts as market stabiliser. Our markets have to develop capacity to absorb selling and buying without extra-ordinary movements because every news in fact can have only a moderate impact in longer run. It is not entirely the fault of market players, the rate of interest at high levels of about 10pc in India make it imperative that the equity investment shows that much return over the year.

This creates anxiety and the need to not be caught on the wrong foot which brings everybody to the act fast. The responsible reason to curb too much trading in earlier times was the physical existence of shares and out-cry system. Also, the UTI under Pherwani was also ensuring some balance. The govt was alive to see that the markets do not tumble too much for any governmental policy actions and used to advise the institutions to act in time.

The mutual fund industry has not been able to play a useful role so far due mainly to lack of size and no great trust in them from the side of public.

Industrial Growth has surged 7.3pc in March ’11 after staying below 5pc for last fur months, food inflation is down to 7.7pc in last week of April, export rose by 34pc in April and the April month’s direct tax collection is by 15pc. Nothing of this has been appreciated by market. It is not responding to good news but is ready to give weight to bad news.

This happens when the bearish trend is readying itself to reverse. But, the movement in bullion prices,crude and equities, all in one direction makes it difficult to judge as this is unnatural. It happened prior to 2008 melt-down. It has to do with level of money pool.

China has raised reserve requirement for banks but its market absorbed the news in a calmer way unlike when our central banker made the last policy rate change.

Nifty is trading at nearly the last days closing of 5486 at this very moment. The poll outcome for states is out and Trinmool Congress in WB , Congress in Assam, the ADMK in Tamilnadu and Left Front in Kerala are in the lead. This therefore is not going to have any great influence on markets.

The for about 1000 companies so far have shown quarterly sales performance at +22.80pc and profits at +15.51pc…kbk

Buy advice post Q4 results up to 10 Apr 2011

2011-05-11T12:12:00.000+05:30

Auropharma @194 (10/5/11) You may buy this for long term (ref 1103/5540:-/156:78/57).We advised on 3/11/10 @1269 (split in to five later on) to buy for medium term.

HDFC @ 660 (10/05/11) You may buy this for medium term (ref 1168/5540:-/582:412/339).We advised on 3/5/10 @2800 to buy for long term.

Bhusanstl @454 (09/05/11) Bhusan Steel may be bought for long term (ref 1121/5550:-/348:150/121).We advised on 2/8/10 @1557 (split into five later) to buy for medium term.

Hindunilvr @ 288 (09/05/11) You may buy Hindustan Unilever for long term, its a perfect defensive stock and these times you may be looking for on such stock (ref 923/5550:329/226:161/187).

Canbk @560 (05/05/11) Canara Bank may be bought for medium term(ref 1173/5450:844/386:250/200).We advised on 28/4/10 @408 to buy for long term,on 22/7/10 @486 to buy for medium term and on 21/10/10.

Torntpower @248 (05/05/11) You may buy it for long term(ref 1102/5450:375/184:51/123).Previous advice on 30/7/10 @345 was to buy for medium term ie you would have sold later on rises, nest advised.

Andhrabank @113 (05/05/11) You may buy this for medium term ie sell at profit when opportune (ref 1242/5450:189/123:96/64).We advised on 29/4/10 @127 to buy for medium term, on 3/6/10 @141 to sell.

Ucobank @114 (29/04/11) You may buy this for long term(ref 1218/5750:152/64:13/9).We advised on 05/05/10 @74 to buy for medium term.

ALBK @196 (03/05/11) Allahabad Bank may be bought for long term (ref 1183/5560:271/148:136/58).We advised on 30/4/10 @164 to buy for long term and advised on 29/10/10 @241 to retain and sell on.

Tubeinvest @137 (03/05/11)You may buy this for long term(ref 1279/5560:164/92:12/16).We advised on 3/5/10 @96 to buy for long term and advised on 30/07/10 @121 to buy for medium term.

PSB @110 (02/05/11) Punjab and Sind Bank may be bought for long term (we covered it for the first time) (ref 1265/5700:150/95:-/-).

Aloktextile @27 (02/05/11) You may buy this for long term, we advised earlier on 01/02/11 @ 26/- also to buy but for medium term (ref 1043/5700:35/17:79/50).

EIDPARRY @236 (02/05/11) You may buy this for medium term(ref 1135/5700:-/189:-/13).We advised on 28/07/10 @399 to buy for medium term and advised on 25/10/10 @523 to buy for medium term.

Titan @2187 (29/04/11) You may buy this after some correction for long term(ref 929/5750:4242/3030:62/19).We advised on 03/05/10 @2187 to buy on correction for long term.

Uniphos @152 (29/04/11) You may buy this for long term(ref 1034/5750:219/125:15/6).We advised on 29/04/10 to buy for long term and advised on 26/07/10 @179 to buy for long term.

Unitedbnk @108 (29/04/11) You may buy this for long term(ref 1336/5750:150/73:-/-).We advised on 26/07/10 @88 to buy for long term and advised on 21/01/11 @94 to buy for long term.

TVSMOTOR @56 (29/04/11) You may buy this for long term(ref 1010/5750:-/43:19/-).We advised on 21/07/10 @127 to buy for medium term (it gave bonus in 1:1 ratio since then).

Corpbank @576 (29/04/11) Corporation Bank may be bought for long term(ref 1217/5750:814/421:131/67).We advised on 23/04/10 @495 to buy for long term and advised on 28/07/10 @567 to buy for long term.

Ucobank @114 (29/04/11) You may buy this for long term(ref 1218/5750:152/64:13/9).We advised on 05/05/10 @74 to buy for long term and advised on 23/07/10 @90 to buy for medium term.

HCC @35 (29/04/11) Hindustan Construction Co may be bought for long term now.It gave bonus after second quarter last year (ref 1037/5750:-/31:22/19).

Denabank @104 (29/04/11) You may buy it for medium term ie you may book profits midway through till the next advice (ref 1231/5750:151/80:62/60).We advised on 27/04/10 @83 to buy for medium term.

BEL @1829 (29/04/11) Bharat Electronics may be bought for medium term(ref 1273/5750:1928/1600:177/86).We advised on 03/02/11 @1731 to sell off to book profits.

Crompgreav @279 (28/04/11) You may buy this for long term(ref 960/5800:349/219:43/96).We advised on 14/05/10 @248 to buy on correction for long term and advised on 19/07/10 @269 to sell off.

HCL-Insys @111 (28/04/11) You may buy this for medium term (ref 940/5800:143/82:15/30).We advised on 01/02/11 @103 to ignore this for time being.

JSWENERGY @74 (28/04/11) You may buy this for long term (ref 1058/5800:136/67:203/-).

Petronet @133 (27/04/11) You may buy it for long term (ref 965/5830:141/76:87/41). We advised on 27/04/10 @81 to buy at under 75/- for medium term.

Boschltd

Dabur @99 (27/04/11) You may buy this for long term(ref 910/5830:-/86:35/21).This has given bonus in ratio of 1:1 since last year.

Ambujacem @150 (27/04/11) You may buy it for long term(ref 1080/5830:166/102:151/123).We advised on 27/04/10 @120 to buy for medium term. Advised on 22/07/10 @114 to buy for medium term.

SESAGOA @323 (26/04/11) You may buy this for long term(ref 1374/5880:448/254:646/242).We advised on 20/04/10 @456 to buy for long term but you may have had to get out of it.

Markets are justly placed

2011-05-11T09:54:00.001+05:30

The market mechanism is difficult to understand as it involves very many aspects of economy, specific businesses,financial conditions,monetary policies,legal network,international situation,risk perception,risk appetite,mood prevailing,sentimental bias,management quality,weather conditions,demography,technological developments,fashion trends,energy scene,conflicts between nations,discoveries and also the position of stars. Some have immediate bearing, some have long term bearing and some have uncertain bearing and some have bearing in combination and otherwise not. Also some cancel out effect of each other. Inspite of all this an overall judgement can be made and for this some concrete statistics help.

Right now out of the 200 hundred most traded scrips on the Indian bourses, about 99 are selling at lower than the price exactly an year before and rest are at higher prices. The Nifty and Sensex have given positive return of abut 7pc during this period. The sales of 821 companies have improved by 23.54pc in FY 11 and the profits have improved by 16.18pc . The FY 10 had shown sales improvement by 32.25pc and profits improvement by 27.50pc.

The rupee/dollar parity has not changed over the year as it is 44.75 now against 44.85 last year. The crude is higher as also the bullion and other metals. The interest rates domestically are higher by about 2pc but remain unchanged in the developed world. Our inflation stays around 9pc but not for food prices today unlike the situation last year. Our gross market capitalisation for listed scrips is Rs 67.12 lac crores. Over the last year about Rs 65000 crs were raised by companies through IPOs and FPOs.

Considering all above and the other intangible aspects, I think markets are justly placed and any improvement in profits in this year will reflect in the same proportion on stocks price indices ie if the profits go up by 10pc this year the market will have to also go up by 10pc. This is my broader judgement. You are however given stock specific advice to take advantage of on every turn.

Auto sales in April 11 were up by just 13pc, this is due to high interest rates and also due to the higher base effect.
The Nifty has opened slightly higher at 5546 today…kbk

Missing logic of TV analysts

2011-05-10T20:06:00.000+05:30

The Greek bonds fell after downgrade by S&P. Euro Zone has been able to deal with the problems posed by Ireland,Spain and Portugal and I see no reason why the Greek package will fail to deliver. So, the impact it has had on the European markets will wane. The default may happen or may not happen in case of Greece but the effect of the same will be not all that stark.

Last week had seen commodity prices fall by 11pc and the same have steadied by + 1.6pc this week (this is per S and P GSCI Index of 24 raw-materials ). With crude prices also oscillating both ways , it may be said that the hedge funds may be booking profits on their diversified portfolio and respect for currencies may be emerging as dollar has improved in value.

If this is happening , the stocks should also be now seen in better light than all these past months and particularly so in our own market. The analysts on TV channels are at pains telling us all that there is going to be earnings downgrade, the monster of inflation will not be letting the shareholders have any benefits transferred to them even when the economy grows as the wages, the finance cost and raw-material suppliers will have eaten in to profitability.

I agree for the points picked but these are only partly analysed. How can you say that the corporates will not be able to pass on the costs to consumers even when the demand remains high and grows and the new capacities will not be planned due to high cost of finance. This should make the balance tilt in favour of manufacturing companies. Secondly, not all of the companies have connection with fund-costs or raw materials costs like the services sector, the FMCG sector (where mark up is too high for the costs to matter), the pharma sector and banking sector.

Besides some large producers have their own mining bases and hence are immune to raw-material costs rather gain due to high prices of raw-material. Apart from this many a large companies have surplus cash and hence do not get affected for high cost of finance. Further more, the high wages translate into higher spending by household. Lastly, the fresh investment would look at higher returns before committing funds for new ventures, this would keep competition at bay. These together form bulk of the total market capitalisation and hence to say that markets would be under pressure is a wrong thing to say. Here I see a deliberate attempt at mis-guiding people.

Also, I wonder if this logic was kept in mind by these analysts back in 2007 when the markets were higher than today and inflation etc was as much. If this logic was defied so blatantly then why would it so that it will follow the expected direction of these analysts.

I may tell you as what may be store for us in coming months. in my opinion the market in general will be higher by the same margin as the overall profits improve in percentage terms. The revenue will improve without doubt, some companies will convert it into high profits and some may not but to thinks that higher turnover will also results in lower profits is too far fetched. This can only happen where there is control of govt on both sides ie on raw-material pricing and end product pricing like in case of sugar.

The Nifty has opened at moderately higher level(5554pts) just now and may possibly improve as the day passes…kbk

Speed barriers of Indian economy

2011-05-09T10:18:00.001+05:30

I heard Kumar Birla saying to interviewer on CNBC yesterday that it is mainly that speed is not given premium which does require any intellectual input and is simply the matter of attitude. He was responding to the question as to what was keeping the Indian economy in check inspite of its having changed so much in the past period. I find the opinion of Birla to be reflecting the just the relevant point.

The speed is kept in check by those in govt who want to signal for money to let the things progress. The speed or thrust is not given by the bureaucracy as the reward for such things is not given rather the probes are initiated for finding what made the concerned to be interested in taking pains for speeding up (as if the progress of the country should not be any concern for anybody even those who are there to enable it). No doubt that this a sorry state of affairs.

I also have to point out Mr Birla that he represents the present generation of entrepreneurs and hence thing in this fashion. Only a generation back Indian businessmen wanted to remained sheltered against competition and coveted the license and quota regime. Ambanis had to fight a fierce battle to wade through the system by finding means not acceptable but in the process demonstrated that why it was necessary to unshackled the businesses.

The old-school and the new-school are still having their constituencies and both fail to see where lies Interest of nation. It is also a painful thing that there is no formal debate called for healthy discussion by govt to discuss matters threadbare. Every interest group tries oblique means and methods to press their own points. The parliament though an empowered forum for discussion on every thing lacks the people with enough knowledge about the economic matters and hence this kind of debate may be undertaken only outside of parliament but it has to be with sanction of parliament otherwise it will be an exercise in vain.

The Nifty has opened higher by a few points and is trading at 5567 at the moment. The cue its progress will be the world’s other markets because the international price movements in metals and crude have a bearing on it…kbk

RBI credit policy announcements

2011-05-03T10:20:00.002+05:30

It proved to be the last straw on Indian market’s camel’s back, RBI raised repo and reverse rates by 50bps today. The markets lost about 2.5pc in a single day. The reaction seems to be excessive as it happens to be the sixth day of fall which have seen markets lose close to five per cent.

The thinking is that the inflationary pressures remain and the contributing factors for the possible high inflation in future are the metals and energy prices. The monsoon while normal generally may still leave pockets of deficiency. The fear of unknown is weighing heavily in minds of policy makers.

The RBI wants to make up for the failure in the past year on the front of inflation control. It is ready to sacrifice a percent or two of the growth numbers in respect of GDP. I am reminded when Governor Reddy back in 2007 had been too concerned for inflation.

The saving grace of robust export performance could not save the day. The inflation at end of financial year was 9pc and it is naturally indigestible for RBI.

The CRR has not been touched and that’s a real relief in my view. India’s big corporations do not have huge fund requirements and would like to put break on expansion rather than borrow at high rates. The rate hike would make companies to raise money by issue of shares on public/right basis as it would come without committed burden. For most companies the scale of operation has gone up without corresponding rise in paid-up capital. The bad experience in 2008 melt-down which brought even the mighty like Tatas and Birlas on down on knees. This time no body would like to commit excessively. The investment would therefore suffer for a while.

The interest on savings accounts will be 4pc now against 3.5pc. This will raise cost for banks but may also let them have more funds in CASA.

In economics every thing has two sides to it ie positive and negative. In this light if the party has been spoilt today , it may pave way for better times down the line…kbk

Obama finishes Osama

2011-05-03T08:25:00.002+05:30

Last day was important in history as the most dreaded mastermind of terror network Al Qaeda was administered dose of a bullet in head. Osama met his life’s logical end and Obama redeemed the pledge to avenge the 9/11 strike.

The time to rejoice has come for the commoners in America but its time when the Pakistan (on whose soil the enactment took place) and India (who suffered the Mumbai serial blasts at the hands of Daud gang) have to think harder.

Pakistan has to explain that how it could be possible for Osama to have a house right in middle of the military town of Abbottabad near Islamabad. This confirms that the knowledge was with it but was kept a secret for some bargain and when the time came the information was given away and a blind eye was turned to what American commandos were going to do. Pakistan’s policy of selecting such bargain chips is despicable.

Now the question comes up that in spite of knowledge of Daud being in Karachi, India has not cared to declare that he will be punished where-ever he may have got shelter. The attempt to organise a similar exercise in case of Daud is duty of Indian state. If its Pakistan’s soil that is harbouring him, so be it. Lord Rama while fighting against Ravana had allowed a Yagna (to secure some deadly weapons from Lord Shiva) being carried out Ravana to be stormed in his own palace through means not exactly in line of code of war then prevalent.

The softness of Indian state makes its citizens some what uncomfortable and live in fear. If Pakistan is an enemy of the type it has shown so far, we have to be dealing with it in stricter ways. Of course, the pseudo American leadership may not approve it but a day comes when a nation has to show that it has matured. If the UN forces can reach Libya to eliminate a leader who was an accepted ruler of the nation till yesterday, I think the terror camps and Taliban hide-outs in Af-Pak region have to be finished once and for all by the international community.

The Muslim sympathy is now turning away from the right-wing religious terrorist organisations as it has not served the community in any way. Its time that Pakistani govt and its people become determined to be nation on the path to progress and do not see Islam in danger because of it.

The markets in Europe went up on the news of Obama’s death but it doesn’t seem a reason enough to influence markets anywhere. Back home our Nifty failed to keep gains of morning on 2nd May and lost considerably to end the day at 5704 . This level is considered by to be lower than the right level in light of the results announced so far. RBI’s impending policy initiative is keeping the market-men on tenterhooks. Let us watch the market today rather than take any precipitous action…kbk

Net interest margins of Indian banks

2011-04-27T19:26:00.000+05:30

Indian banks enjoy a high NIM (net interest margin) and RBI would like to seen them trim. In fact the NIM very from bank to bank ie ICICIBank has it at 2.pc, SBI at 3.4pc and HDFCBank at 4.2pc. In developed markets it ranges between 1.4 to 2pc generally. In fact, with IT enabled cost cutting, the banks will have to cut these margins sooner or later. The corporate bonds issues should be now be possble at a higher level and trading in such securities should be now encouraged. The stock markets have the wherewithal in the regard and enlightened investors may save the inter-mediation cost incurred by banks and keep for themselves. In this light the private banks thriving on NIM of high order will come under pressure.

Harvard Professor Joseph S Nye thinks that China may be aging earlier than becoming rich ie before it becomes an economy of the size of US by 2030. He also looks at Chinese problem of institutionalising for continued progress as it does not have suitable political system unlike India. Its progress so far has been robust in north-east more than in south-west.

Regional disparity is also in case of India but there is a mechanism to address concerns of people. Even otherwise India has a history of social continuity in changing times and did not suffer extra-ordinarily on account of political strife even when the invasions took place. It was only the scheming British who damaged the basic economic fabric but could not damage the social fabric as much. The middle-of-road attitude of Indians is ingrained and can not be easily up-rooted.

The Nifty has suffer some loss in last two sessions to close at 5833 but its more to do with the wait for the results to come which may extend till the end of May as some companies prefer to announce audited results directly and therefore are allowed tow months time after the end of accounting period. The mid-cap universe has not suffered and NSE mid-cap index closed at 8338 (+8pts).

CRISIL research suggests that EBIDTA margin will be 20pc for 2010-11 and may shrink by 1pc next year. The revenue growth is expected at 18pc.

The silver prices went up to Rs 75000/kg but lost about 7pc from the peak level yesterday. It is now possible that the up-trend in bullion may be halted…kbk

Indian Exports grow in 2010-11

2011-04-23T20:39:00.001+05:30

India did very well on export front during 2010-11 which showed 37.8pc improvement over last year. This has come about after a slightly negative performance last year which happened to be the year when the world trade as a whole was lower itself by 10.9pc (ie 2009).

This has seen trade deficit down to 6pc of GDP, the lowest in past six years. The encouraging thing is that we do not keep the currency rates down for the sake of exports and the exports have seen better performance viz a viz Latin America, Africa and ASIAN.

The rupee has maintained nearly par value against the dollar over the last 12 months at 44.32/$ . It has , however, become cheaper against Euro,Pound,Yen and Yuan.

The Indian operations have advantage of scale as well as Indian systems, skills and technology is getting better by the day is also a fact. The edge of China in the area of manufacturing is getting blunted due to its economy heating up as well as the labour costs there are going up. The world’s need for goods have to be fulfilled by either China or India, is clear. If you recall , at the time of SEZ rush and the controversies surrounding it, I had occasion to tell that the whole India should be considered as SEZ and the manufacturing clusters should come up naturally without an official hand guiding it.

The govt’s role is to take care of the infrastructure where ever it is found to be insufficient to allow unhindered economic growth. India should not while away its resource available for the infrastructure on prestigious mega-projects. It should only be open-minded and ready to use it whenever and wherever the crying need is noticed. It should also be going out of way to get the resources from out of country to meet the pressing needs of the specific centres and sectors.

The economic growth can never be thrust upon, it has to have a natural path in line with the resources available. The only need is that the govt remains conscious about its role of removing impediments in good time. The politics at times delays matters and at other times checks also the wrong direction taken (as was the case of opposition of SEZ policy).

Market celebrated the announcement by met-dept that monsoon would be nearly normal and it closed the truncated week at 5901 Nifty level on Thursday. It is difficult to tell about what course the market will take in long run or even in the medium run but I have to tell something by way of a possibility seen by me on strength of certain observations which I am not detailing just now for brevity. That possibility is that market may trade in the range of 6600-6800 Nifty by the end of the year 2011…kbk

Post results recommendations available for registered users

2011-04-22T08:43:00.002+05:30

HCLTECH @ 524 (20/04/11)

PFC @ 236 (20/04/11)

IDBIBANK @ 149 (19/04/2011)

HDFCBANK @ 2345 (19/04/2011)

INDUSINDBK @ 273 (18/04/11)

MRF @ 6505 (15/04/11)

INFOSYSTCH @ 2980 (15/04/11)

Nifty players holding for now

2011-04-21T09:30:00.001+05:30

The Nifty players have shown huge interest in holding it over the last two days. Today also it has taken some stride up and is being traded at 5900 at 0930hrs today. There have been only.a few results and the leader Infosys lost ground on back of some considerations which never was the point of discussion in its history so far ie the concerns about the promotion strategy etc and calling of shots by the co-founders. Later on some banks came out with good numbers and nerves were placated.

In the mean time, the gold has gone past Rs 22000/10gm (₨ 66,552 ()/oz) and silver Rs67000/kg.

The Supreme Court has refused bail to accused in telecom scam. The telecom stock had some beating but otherwise it has to pass off as non-event.

The world’s other markets have been good stead particularly the US markets which improved between 1.5pc to 2pc. The Asian markets are also in green this morning. The mercurial character is however going to stay here and elsewhere because the. concerns about inflation, interest rates, deficits, debt issues, oil prices and of trust in system remain. Too much has changed in the world of today and the counting chips (ie currencies) have been losing values at a fast pace making the possibility of big moves possible both ways ie values suddenly going up if the supply is curtailed or shrinks and values going down faster due to sudden increase in currency stock with public. The gold/silver values are going to be very volatile in coming months because the people incharge of big economies may secretly decide to change course. This would make quarters gain unduly and some lose unduly.

Locally, I have been advising you to err on the side of buying good stocks (recommended stocks) and remain active in the way suggested. When every thing is in spinning mode, those who stick to a position themselves rather than spin along with rest have better understanding to decode the situation for action…kbk

Inflation and its effect on markets

2011-04-20T20:40:00.000+05:30

The inflation has been a dreaded phenomenon for the market pundits, which in fact is the fear of higher interest rate regime and possible contraction in money supply to tame inflation. The contraction of money supply, if it happens, is really bad for all traded commodities and for the stocks in particular because only the surplus finds way into markets. The gold and silver would be no exception.

But what is being seen is that while the interest rates are being raised in line with inflation to let the savers have some incentive, the money supply is not being curtailed because it will hurt the influential people in society and also will be resulting in job losses.

USA’s rating has been reduced by S & P on account of mounting debt (presently ₨ 636 ($14.3) trillion) and about the ambiguity in tackling it. Those who can see , the American debt burden is being continuously reduced by diluting the dollars value and that may take some burden out for the debt ridden nation but because the US has been an anchor economy and dollar an anchor currency in the past many decades, the weakening of both is making ripples in financial world. The Europe is not complaining so much because it is also in a similar boat as America if not in the same boat but the emerging economies like China have become too scared and restless. The financial turmoil, another time, will see China suffering also as it has not got more integrated with the world’s other economies for selling its goods to and sourcing its raw material from.The middle-eastern economies of Oil Exporting nations too have feeling of discomfiture. Some which have less oil to fall back on are seeing political upheavals. Japan has had its own cup of storm. In a way, all is not well.

Our inflation touched high point of 11pc in Jan ’11 and since then it is hovering between 8pc and 9pc. The high base effect and the prudent policies of our central banker may see it moderating and hence one day of worry gives way to hopeful times. Our markets swing in line from losing some ground to gaining some ground. Today saw Nifty smartly move up by 110 points and closed at 5851.

We should be better placed than others in terms of market moves because our downside is limited (already explained previously) and getting further supported after every quarterly result. My readers should pay proper attention to the specific stock related recommendations and not carry load of worry on account of behaviour of indices. They will be in good stead as can be seen from the history previous recommendation.

A survey has shown that Indian corporates pay an average salary of Rs 4.80 lac per employee and generate profit of Rs 6 lac per employee and that seems to me a very fair assessment. This should keep the tempo in hiring people and this should also spread the benefits of progress down the line. The govt should attempt at reforming the labour laws in good time.

There would be a spate of issues hitting the market in coming weeks and months. This would not bring too much pressure on market and should be making it more stable. Our market is coming of age, of this there is hardly any doubt…kbk

BRICS Meet

2011-04-15T08:35:00.001+05:30

The leaders of BRICS met in Sanya (China) and deliberated some important issues. They have announced that India, Brazil and South Africa should have a greater role to play in the UN. The need for a permanent seat for India in the Security Council has been given stress.

A concern was shown for the need of having a reserve currency widely acceptable and SDRs ( Special Drawing Rights) under in the intention monetary system were seen as fulfilling the need after the suitable adjustment of basket of currencies SDR represents. Clearly there is growing discomfort at the decline of dollar as a reserve currency and also Euro not being a good contender. The dollar was deliberately damaged by the US govt in light of the 2008 financial crisis and the huge burden it carried in terms of dollar denominated debt could have been reduced by diluting its value. China suffered greatly on that account. BRICS have therefore decided to do trade in terms of their own currencies between themselves. The ultimate solution is far to be found and would be different. The important point is that the attempt to find a solution is being made more seriously.

It may be noted for reference that BRICS represent 16pc of world’s GDP and 43pc of its population. The GDP share as per PPP ( purchasing power parity) is 25pc . The share is likely to go up due to higher growth rate in BRICS universe.

In fact the future will see India and China co-operating more or be adversaries in greater degree. If economic development goes on, it will make them come closer only. The affluence makes countries averse to having the theatres of war nearer themselves. Recall the agitation of US after the 9/11 while it has never minded to pound the nations after nations with bomb of every kind. This very kind of concerns will keep the giants of Asia from indulging in conflicts on border issues. China’s love of Pakistan will be of lesser degree and trade with India will be robust.

The Nifty closed at 5911 on last day of trading ie 13 April 11 and has opened lower at 5860. The result of Infosys Tech. is to be announced today and would have bearing on market…kbk

Japan's atomic radiation threat

2011-04-13T18:38:00.009+05:30

Japan suffered another quake of 7.1 magnitude which has made the atomic radiation crisis there as bad as the Russian one at Chernobyl. European and US market suffered yesterday on account of this. The markets in India were closed on account of holiday for Ramnavami.

The IIP numbers announced were not encouraging and will have impact on market. The agriculture has 14pc ratio in gross GDP of India. This makes the case for India’s poor who mostly live in rural areas to move to urban areas and learn fresh skills.

Alternatively, there would have to be a greater attempt at shifting economic activity to rural areas. Electrification of villages and use of smaller machines for production of goods may be necessary for this.

The govt has to have a fresh look at Gandhian philosophy of making the village as the unit for development. The road network, the IT and modern means of communication may in fact be helpful for achieving this goal, only govt has to lay stress on it. There has to be a greater stress on localising production and consumption. Local brands should be made popular for the purpose and the taxation pattern should discourage long haulage of goods.

The economic vulnerability faced by the world can reduce only if the nations aim at lesser exchange of goods and aim at exporting only the surpluses. This is that crossing of seas by the similar products just because the preference of brands is foolish. This happens in case of Cars. All countries are importing and exporting the cars. Why should it happen. This happens also in case of food items and should stop.

RBI may raise interest again in line with the global trend. I feel , however, that this should not be done.

Nifty has opened lower at 5760 and should now stabilise and lose no further ground as the 200 moving average comes for its support…kbk

BRICS to cover 3.5 billion people

2011-04-12T10:25:00.000+05:30

The BRIC (ie four developing markets of Brazil,Russia,India and China) will now be called BRICS as South Africa would be included. This will make it more representative. BRICS would cover nearly half the world’s population.

The defence contracts are now being given to private parties. Tatas have got Rs 1094 worth of contract for modernising air force bases of Indian Air Force . They won its against international bidding. The defence related work should be given to private in India for broad basing and cost effectiveness.

EU saw interest rates raised by 25bps.It may raise it further. The US has already done so once. There is fear of inflation going up in those places and the second stimulus of monetary easing may be converting into slow contraction as the US unemployment rates has come down in the latest month.

Japan, however, is in funds injection mode to take care of reconstruction after the damage due to Tsunami. Bank of Japan would channels as much as 1 trillion Yen to businesses affected by quake.

China has seen a trade deficit of the order of ₨ 45 ($1.02) billion in the first quarter of 2011. This happens to be its first quarterly deficit in seven years. Its imports jumped by 32.6pc to ₨ 17,787 ($400.7) billion. Yuan’s appreciation would be correcting the trade imbalances which were also responsible for the financial crisis faced by the world.

Its mixed bag of news and therefore the markets may open unpredictably…kbk

New playing format for cricket

2011-04-10T10:40:00.000+05:30

The World Cup for one-day international cricket tournament was won by India after an struggling quarter final, semi-final and then final on the 2 April11 which happened to be the last day of the year as per Indian calender (officially adopted one)

It was magical moment for I was won for another time after a gap of 28 yrs. The India itself has transformed in the last 28 years economically which has enabled us to have some other sports also having our boys and girls on top of the world. The Cricketing crown will be held for a long long time is my expectation because it is drawing talent in a big way and with proper couching facilities around the country for the budding players will out-weigh the similar effort by other cricketing nations. The monetary constraint that has kept other sports failing to attract promising sportsmen is not there for cricket.

The IPL series is on but it does not attract me so much personally because of my finding it hard to select a team to back-up etc.. I think too much cricket may make it less popular eventually.

To keep interest going, the cricket has had many forms developing. Finding some weakness the newest form T20 where the talent of all players is not possible t be demonstrated in a single match, I have thought of a better format to play competitive cricket I know that I am unworthy to do so, but if you forgive my foolishness, you may pay some attention to it below :

The new form of cricket :

A) should be of 25 overs for each side of eleven players.

B) every players should be allowed to play maximum 30 balls if he is not out earlier.

C) it should be played from both the ends and no running for runs.

D) the field should have circular lines for one run boundary also if ball reaches this through aerial route then batsman scores 2 runs.

E) there should be no wicket keeper with gloves on, the back side should be covered by fielders placed at a distance.

F) the batsman should be given out whenever he is out of crease and wicket is hit by ball.by any of the fielder.

G) the bowling should be done by the player who has fielded the ball.

H) the innings should stop after 25 overs or as soon as playing team has scored more than the other or has become all out.

The above format will give every player an opportunity to show his talent fully in all departments of the game ie fielding, bowling and batting. It will still leave scope for mind play for the captain in fielder placement.

This format will require less time for the game to complete as it will do away with the need for crossing of the field and rearrangement of fielders. I request my readers to give suggestions to further improve it and also forward to masters of cricket to put this in practice…kbk

Auto Sector review

2011-04-09T19:17:00.001+05:30

The automobile industry has reason to be pleased as it has clocked a total sales of 1,55,13,156 units in 2010-11. This constitutes on the strength of sales jumps in cars by 30pc, 2-wheelers by 26pc, comm.vehicles by 27pc , 3iwheelers by 19pc .

The manufacturers have started to raise prices to cover material costs. The interest rates have been raised by the banks on loans to buyers f automobiles. The petrol prices are higher too and diesel price rise is on cards. All this may reflect some moderation in growth numbers in coming months but there is momentum and ever increasing number of people are aspiring to buy a suitable vehicle.

Because the Indian market has become big, it has attracted almost all important car makers of the world. The competition will be fierce and therefore for the investors this sector is replete with some danger if entry is at high level. Look for our post-result recommendations before you make an investment in this sector…kbk

Anna's demands met

2011-04-09T19:12:00.000+05:30

The govt relented and has accepted the demands of Anna Hazare in totality. Kapil Sibbal was the govt’s face doing the negotiations and has termed it as victory of people and democracy. What a pity that when the govt had the capacity to accept the demands why in the first place it let Anna go without food for more than three days. Anna would break fast only at 10AM today after the GO (Government Order) is issued and received. While the govt announcement came yesterday evening , it could not produce the desired paper immediately to see the Anna breaks fast immediately. How the govt will work under emergencies for the present case is no less than an emergency, a veteran’s life is at stake.

The govt’s volte face apart, there is some thing to celebrate. This is the almost incident free movement covering entire India with participation of youth in good measure. Such peaceful popular upsurge has put India at top of civilised nations and has confirmed that democracy in ingrained here not imported (as has been made out some western scholars).

The demands have been constitution of a ten member committee taking five members from govt (all ministers) and five members from civil-society and chaired by a senior minister and co-chaired by Shanti Bhushan (a legal luminary) from peoples side. As per announcement by PM himself, this bill will be presented before the parliament in monsoon session and therefore has to be readied by end of June ’11.

The slip between cup and lip would remain as there may be some stalemate in drafting the bill, there may be some amendments sought by MPs which may not be acceptable to the crusaders against corruption. But, there has been at least a show of over-whelming opinion against corruption and readiness of people to go to any extent. The effect is going to be lasting as the next election will throw-up a different body of MPs.

Another thing of importance noticed is that the bollywood people, the corporate heads, the public servants, the jurists, the educationists along with the social workers made it known to govt that they side with Anna. This required strength because standing-up against govt is easy for all.

Now, the corruption in high places may be addressed by this move but what remains the duty of the commoners is to refuse to accept or give bribe for any thing at all. This can come about when careful study of rules and procedures is undertaken and corrective measures adopted.

Since this site is devoted to guiding the investing class, I may tell that Monday’s market may welcome the developments after having lost about a percent on Friday in line with expectation.

Let’s remain hopeful. Long live Anna…kbk

Anna's effect on politicians

2011-04-08T22:59:00.000+05:30

Today is will see the Anna’s fast entering fourth day. It is getting increasing support from people around the country and this is making the govt and political masters sit-up not because they have got interested in doing what is demanded but at the prospect of the move taking any ugly turn due to their refusal or rigid attitude thus far which will see the well-known political careerists of today getting blown-up in the aftermath for all time to come.

The other side to the issue is that the Anna and supporters are not letting any diluted version of the Lokpal Bill be considered and if the bill, that will incorporate the provisions envisaged by them, is passed, it will see 90pc of the politicians in power now or earlier alongwith the bureaucrats (including the retired ones) in problems with the Lokpal machinery. This is what is making the govt neither being to gulp it or spit it. This is a really sorry state of affair. If only Manmohan , the honest with money, becomes honest with morality and either grabs this an opportunity to make the dis-honest really uncomfortable and leave the scene or puts in paper. He has only limited time to redeem his lost reputation.

Sonia is shrewder of the lot, she has spoken the right words by showing solidarity with Anna and has lauded the cause itself. But cunningly she has not decided to use her power of dictating to Manmohan .

This is time again it has been proved that those who live simply and take pains for the commoners do have power to influence the establishment. It is not necessary for them to be highly educated or have lineage. Anna and Gandhi have this difference but the achievement of both has similar value. Gandhi is called a politician at times but Anna would not qualify for the same. He has only the straight messages to send forth. This time his massage is simple ie the public has to stand up against corruption or nation would perish. There is no doubt that our nation is at more risk than ever before since independence because there is now absolute lack of practicing politicians who have the capacity or courage to defeat the forces inimical to the national interest.

The whole matter has to be kept watch on by the market participants as it has potential to result in cautious unloading on one hand and also may trap the bears and give push to market. The Nifty has infact opened higher today after remaining dull for whole of yesterday. It is trading at 5842 at the close today…kbk

Gandhian Protest by Anna Hazare on corruption

2011-04-07T19:57:00.000+05:30

The veteran social reformer Anna Hazare has gone on ‘fast unto death’ against govt not bringing the Lokpal Bill in right form which has been kept pending by successive govts over the last 42 yrs. He has pressurised the govt to adopt the bill in the form he suggests. While the pressure on govt through the Gandhian means of protest is not wrong but the thrust for passing a bill without covering the legal angles in entirety is slightly way off the mark. There is a big show of solidarity by the youth and the middle classes. This is a natural reaction of people who find it hard to see that corrupt get punished and country allowed to progress fast economically and socially.

On analysing the situation today further it is seen that the middle classes in India are most mired in corruption, as the bribe takers and bribe givers. It is also true that most of them bend themselves not as preference but because otherwise the life itself would come to a stand still. The govt employees (most forming the middle class) love protection provided the govt service but despise the low salaries and therefore prey on the rest of the middle class (formed by small businessmen and the private sector employees). Both live in the same society and understand the ‘majboori’ and hence the reactions have been muted. This time the bigger scams that came to light recently are the once that have made ordinary citizens (mostly middle class) see some bigger chaos coming and also the possibility of losing freedom or dilution of democracy etc.

They also think that inflation which is eating into their savings and worth of incomes is due to corruption at the top (by netas,babus and lalas). There may be some truth in this as the financial system has become fragile due to the big ill-gotten money moving here an there and the burden of tax being born by the people who can not escape. This has created an extra-burden on some and made some richer by wrong means.

The protest, though limited to demanding action against corruption, has similar overtones that were seen in Egypt and Libya. The difference is that there the change of govt was demanded and here there is yet not a demand for the change of govt. It is understandable.

We have seen change of govt through election process but the will to eradicate the corruption remained absent for all govts. The electoral process does not throw up the govt which would tackle corruption because the anti-corruption is a burning issue for middle-classes who do not form the majority in most constituencies. The weaker sections are swayed more by the prospect of reservations and the subsidies as they find it hard to survive. This is like ‘dubtey ko tinke ka sahara’. They do not understand that the ‘tinka’ is not going to save them from drowning but rather making them drown on account of misplaced attention. A time has come that means are found to transfer (ie use) resources held by the super-rich (2pc of richest) for the benefit of poorest 20pc. Is going to be big burden if the 2pc richest take care of the poorest 20pc. I think this will not be too burdensome for the rich while it will unleash the productive potential of the masses which perform at least level of efficiency.

I think the recent mass movement will benefit because the middle-class have grown in numbers and the politicians not seen to be favouring the anti-corruption cause or who are seen as corrupt themselves would not enter enter gates of
Parliament House. This message is being read by them and is also putting them in paralytic-mode.

The opposition now has a duty and that is to prepare a draft bill under guidance by legal expert at fast pace and put it before the civil-society and Anna for approval and amendment and then force the govt for its presentation a passage…kbk

Status of commodities and market

2011-04-06T19:43:00.003+05:30

Something is really alarming n the front of value of currencies as can be judged by the extra-ordinary rate of silver of touching the 57500 rupee mark for a KG.

The other commodities which are not for storing value like gold and silver etc., are also ruling high like Brent Crude prices have gone up to ₨ 5,393 ($122)/bbl.

China has once more raised rates of lending and deposits for one year to 6.31pc and 3.25pc to counter inflationary pressures and avoid asset bubble risks in a fast growth economy. We have similar problem and the RBI has been acting in a similar way.

RBI is worries at the rise in real estate loans.

The market capitalisation for stocks listed on BSE has gone past Rs 70 lac crores from under Rs 65 lac crores since 7 Mar 11. It had gone down by the same quantum and speed after Dec 10 . All this happened without any fundamental change in environment except that people are getting jittery for some unknown fears on one hand and at preserving the worth of savings which are getting affected uncontrollably .

This situation has come about due to the govts of world deciding to keep the economic slow-down at bay by injection of money into economies. This may have saved the day now but has brought about greater uncertainties. This has made atmosphere more unstable and prone to collapse of order in some ways unthinkable for the present.

I have only one concern and that is how on earth are people going to continue to live as they at present and improve further without the ensuring supplies of food and other consumable items like crude and coal etc. The dependence on atomic power has been in question after the Japanese episode.

Earlier, the economies of the world were not so integrated and the integration was taking at a slower pace leaving enough time for corrective measures. Now, the integration seems to be almost complete. This situation has made the entire world vulnerable at the same time and almost equally. The investments all across the world by all people is now seeing the most markets behave in a similar fashion. It means that no safe pockets remain.

Even politically the world has been getting affected by developments in particular country or region and becomes obliged to take action like the developments in west Asia have required it do .

In the end, the investors have to walk on razor’s edge and there is no way out but to brunt when it comes.

The Nifty has opened positive even today at 5915. The FII investment for 2011 has turned positive once again ie they have bought back more than what they sold in the beginning of the year. I favour some profit bookings at the present level as the money would still earn through interest…kbk

Analysis of stock recommendations

2011-04-05T18:04:00.001+05:30

You were advised to go for the following stocks for medium term after the respective results for the quarter ended 31 Dec 2010. The markets have been positive for the past nine days and this may well be taken an occasion to at least book some profits in items bought for medium term. Some of the items have been shown below for the needed action if so desired by you :

Axisbank : recommended on 14/01/11 @ 1280 , closed @1432 on 04/04/11

ACC : recommended on 03/02/11 @923 , closed @1117/-

Arvind : recommended on 27/01/11 @ 64 , closed @69

Ambujacem : recommended on 03/02/11 @125 , closed @148/-

ALBK (Allahabad Bank) : recommended on 01/02/11 @210 , closed @229

Apollotyre : recommended on 11/02/11 @ 50 , closed @70

Bankbaroda : recommended on 23/02/11 @880 , closed @950/-

Bhusanstl : recoommended on 07/02/11 @403 , closed @45/-

DLF : recommended on 03/02/11 @240 , closed at 272/-

IOB : recommended on 01/02/11 @127 , closed at @145/- .

M&M : recommended on 11/02/11 @667 , closed @743/-

PNB : recommended on 21/01/11 @1116 , closed @1194/-

Powergrid : recommended on 08/02/11 , closed @105/-

Relinfra : recommended on 14/02/11 @626 , closed @692/-

SBIN : recommended on 21/01/11 @2598 , closed @2763/-

Syndibank : recommended on 03/02/11 @112 , closed @124/-

Tatamotors : recommended on 11/02/11 @1170 , closed @ 1254/-

Tatapower : recmmended on 14/02/11 @1243 , closed @1337/-

TechM : recommended on 21/01/11 @689 , closed @ 701/-

Unionbank : recommended on 25/01/11 @336 , closed @352/-

Welcorp : recommended on 24/01/11 @161 , closed @206/-

Now you have seen that the closing on 4th April for all the above items. It has been at a level which gives good profits. Since these were for medium term, you may book profits and be in cash to avail maximum benefit by getting in to items to be recommended in coming weeks. I may tell you here that ours is a solid system of identifying good stocks and its not a tipping business...kbk

2G Scam : Whether limited to political fall outs?

2011-04-03T17:58:00.009+05:30

The 2G Scam which rattled parliament to such a great extent is under probe by CBI. CBI has filed charge-sheet against the king-pin A Raja and has covered Shahid Balwa,Sanjay Chandra and Vinod Goenka (corporates heads) as co-conspirators along with Babus in govt . The three corporate entities Reliance Telecom, Swan Telecom and Unitech Wireless have been found to have benefited from the fraudulent exercise of spectrum allotment.

Let us now simply examine what is that will be found by the courts as wrong-doing on the part of A Raja and what punishment it may entail if the cheating and fraud charges are proved. I may tell out of my understanding and experience that it will not be a much because of the following :

A) the loss to exchequer theory may be a big political thing but has no meaning or value for the govts have been responsible, in one way or other, to harm the exchequer. The court would not place too much importance to this aspect.

B) forging of document, if proved , may result in punishment but would not be any big one because the case histories will show much worse document related forgeries not inviting big punishments.

C) the bribery charge may not be proved beyond doubt because of difficulty in showing money trail as there have been elimination of people in the chain (Batcha , the Raja’s helper and friend, has already died) and more links will be broken , human or paper.

D) the corporates involved will go absolutely scot-free because what they have done is not tantamount to mis-appropriation of funds or cheating the share-holders which is much worse a crime than the criminality involved in the present case. The managements have not been punished for crimes against share-holders of every type ie forging share-holders registers, fudging account books, concealing income, spending for personal purposes , helping relatives by entering into buy, sell contracts not exactly in an honest way.

E) the ‘babus’ will have every excuse and would show that they acted as per the ministerial orders.

So, the political fall-out is the only thing that has mattered and this also is going to die down. What a pity that our laws should be so bad as to not cover the crimes of high monetary involvement differently, which should be proceeded against at the greatest speed and should have more stringent punishment and not letting the enjoyment of scam-money in any way. If this is not done, there will be scams after scams…kbk

Essar exit Vodafone

2011-04-01T17:55:00.000+05:30

Essar has exercised option and has sold out to Vodafone their entire stake in Vodafone Essar for ₨ 222 ($5)billion. This has come as a relief to Vodafone as the two parties were not getting along comfortably. The deal for just a part (33pc) has yielded Rs 22000 crs for Shashi and Ravi Ruia. I may mention here that in mid-1980s , the total market cap of Indian equities was about Rs 50000 crs. India and Indian industrialists have come a long way.

Nifty has had a good and continuous run-up and today’s opening also is in the positive. The FIIs have been responsible for it by pumping a cumulative Rs 8451 crs in last nine sessions while DIIs have sold Rs 1772 cr worth of equities. We have to be careful as this situation may have been created with some purpose other than investing for medium/long term. The derivative positions may have been built-up with a view to enacting some thing unexpected, there should be any big worry as the valuations are not unjustified still…kbk

Census 2011

2011-04-01T17:53:00.001+05:30

The Census 2011 counts India’s population at 1.21 billion (up 17.63pc over 2001). The rate of growth in population for the latest decade is lower by 4pc against he previous one. The literacy rate is now 74pc (up from 64.8pc previously). The child sex ratio has continued to show declining number of females.

While the rate of growth in population has come down, India still adds a big absolute number to its population and the food production has to keep pace. The govt therefore has to do every thing possible to ensure enough food availability besides caring for just the GDP growth. The GDP growth makes for higher demand for food items in a country at the stage of development that India is at the moment. It is therefore clear that agriculture and irrigation have to be higher priority than industry…kbk

Large cap vs mid cap stocks

2011-03-31T17:49:00.005+05:30

It is but natural for the FIIs to have greater interest in large caps than in mid caps. The BSE mid cap index has lost 23pc since Nov ’11 while the large caps have lost 12pc. Also since the all time levels on Jan ’08 , mid caps are down 36pc.

The mid caps may become attractive once again. The controlling interest in A P Paper (capacity 250000 tonnes) was bought by International Paper of USA for ₨ 18,789 ($423) million at substantial premium. This made paper shares go up by between 13 to 20pc . India is home to very fragmented production capacities in many an industries. The consolidation will see a good change in the scenario as the market itself is growing fast due to local demand.

When the markets were down, you were told on many occasions earlier that the the room for fall is limited and the is now confirmed at a very decent closing of Nifty at 5833 today which happens to be day of expiry for March series. This is while the RBI has raised interest rates. There is however some relief on the front of news related to Scams. The recent low of 5240 seems to be an aberration. The crude is still high. Rupee is Strong at 44.78 to a dollar. In effect, India may have seen high inflation during last one year but Rupee has still been level with USD. This is remarkable and comes on back of steady inflows…kbk

Stock picking by DII and FII

2011-03-29T17:45:00.004+05:30

The FIIs and DIIs do not see eye to eye where the stock picking goes. It is natural that they have weightage selected differently because the FIIs have very vast investment opportunities spread all over the world while DIIs have only Indian market t look at. Also the FIIs prefer to invest in professionally managed companies while DIIs may go for even family owned businesses due to first hand knowledge and long years of experience about them.

Mark Mobius that it is best to remain diversified in India and I think he is right. The conditions in India are such that both ways movements are possible. The concerns about food inflation remain and the oil prices may affect but since the rupee has been appreciating and govt has been slow in revising the oil prices and keep the industry insulated.

What I think is that the liquidity conditions will be more responsible in markets future movements as liquidity also will affect the performance of companies too. The tight liquidity may see contraction in profitability in many areas including auto and housing. The interest rates are irrelevant at the moment as if the inflation is not going out of hand (as it should not on the back of base effect) , the RBI would have to keep interest rates from going further up.

The Nifty closed at 5687 and has been rising for past five days in a row…kbk

Reliance to enter finance field

2011-03-28T17:40:00.000+05:30

After the patch-up between the two Ambani brothers, it was only expected that Mukesh Ambani would enter finance business. Finance field is necessary for the group as it has a lot of free funds in hand and may not g into manufacturing ventures of small sizes due to management issues. They will role out financial services in partnership with D E Shaw. It is not sure if the share-holders of the group will have any direct benefit.

The Nifty is still down by about 8pc since the beginning of the calender year 2011. The Nikkei on the other hand is down just 6pc since then. Is it not surprising that Nikkei lost so little in spite of the earth-quake and tsunami related damages because the govt of Japan committed ₨ 8,884 ($200) billion in reconstruction etc. Also the central bank in Japan pumped in a lot of money directly in to market to let it remain stable. Our Nifty is now to struggle a bit to continue its march up and reach a level where the returns for the investors who entered market in 2010 remain positive at least if not very rewarding. The scenario at present suggests that the down-side would be only limited and would invite investors while the up-side would be watched more keenly and not exited in a rush.

The month of April would see better liquidity and mere attention of the investors in selecting right stocks for investment. The result season is to commence in about three weeks and would be re-assuring to investors as on the performance front none of the sectors have been under stress.For reference the weekly closing for Nifty was 5654…kbk

Happy Holi to all

2011-03-19T18:19:00.002+05:30

Let this festival bring peace,love and tranquaility for every body on earth.

China had a taste of trade deficit

2011-03-11T11:27:00.000+05:30

The Nifty was down yesterday and has opened lower under 5500 level. The volatility has subdued but uncertainties remain. There is no precipitous news but the political developments in oil producing world is keep oil on high and therefore the rest of the world’s economies have concerns. Another point of view is emerging and is that the most of the bigger oil producers in West Asia have gained on account of high oil prices, their financial position is very strong and the uprising there would be limited as the state is in a position to take care of needs of people.

Indian political scene is getting stabilised and the news relating to corruption exposures is getting stale, even otherwise these scams are of many years back. The net effect on everything that happened in recent past will make governance , corporate governance and political practices more honest and desirable. It is due to the population at large getting more concerned with issues of development and national issues.

I repeat once again that the opening of door for investment by foreigners directly through MF route is a great thing to happen. This will see market maturing further. The month of April sees liquidity coming back after the govt going ahead to settle long pending bills in March and also spending the allocated amounts as other the same gets lapsed.

The China has had a taste of trade deficit for the first time in many-many years. This has relieved of one worry of US which has been suffering on account of trade surplus of China. India has shown hat it can fill the gap left by China as it has exported ₨ 9,398 ($208)b worth of goods in April-Feb period exceeding govt’s target of ₨ 9,037 ($200)b

Forbes has compiled fresh list of world’s billionaires which shows Mexican billionaire Carlos Slim at the top with ₨ 3,344 ($74)b . NRI tycoon Mittal ranked 6th while Mukesh Ambani was placed at 9th slot.

Noteworthy is the fact that the list of billionaires has increased to 1210 . America still has 33pc of them. Indian strength went up to 55 from 49 and China now has 115 against 69. Hongkong has 36 now against 25. Clearly, the turmoil around the world is favouring the rich…kbk

Stocks,inflation and GDP growth

2011-03-09T21:03:00.000+05:30

Is there a co-relation between inflation and GDP growth, let us find out. IMF collected data for India and found that the maximum GDP growth happened in the years between 2005-09 averaging 8.2pc while the average inflation for the same period was 7.2pc. Now, 2000-04 the GDP growth averaged 5.6pc against average inflation of 3.9pc. These two periods show that inflation and GDP growth can go hand in hand and higher inflation is not necessarily bad, rather works for higher GDP growth. This is the line I have advocated while the markets were suffering due to inflation fears. After our economy embarked on path of reforms beginning 1990, the period 1990-94 saw GDP growth averaging 4.7pc against inflation growth averaging 10.2pc and the period between 1995-99 the same were 6.8pc(GDP) and 8.9pc(inflation).

We are all aware that stock market remained fluid between 1995 an 2004 when the Nifty kept itself in the range of 1000 to 2000. Since 2004 Nifty progressed most impressively but this was a period of higher inflation too. So, in a way, it may be said that if the inflation happens due to some supply-side mismatch and the rate of interest is not too high ie when the real rate of interest is not too much ie keeps in the range of 1 to 2.5pc, the growth of GDP and growth in stock-indices is not threatened. It is only when the real rate of interest goes past 3pc, there is threat of corporate profitability taking a beating resulting in bearish moves.

In case of China the average inflation topped 12pc between 1985-89 and the average GDP growth topped 11.4pc between 2005-09. The economies of Brazil and Russia have become stable only since 2000 and rest of economies of the developing world are too small to talk about.

In light of above, what we see is that India is becoming matured economically. Even if it’s GDP is growing a bit lower than a few other economies of the world, it is still going to be a preferred place for the investors from around the world…kbk

Market scenario as on 8 Mar 2011

2011-03-08T10:11:00.000+05:30

The Nifty lost 75 points yesterday (closed 5463) and is struggling. The news flow has been negative. The Libyan crisis remained unresolved and the Congress-DMK have not reconciled their differences. The crude oil prices are at high point and do not allow any body to breathe easy. But the problems referred above are not of permanent nature and would have to loose effect shortly.

The gold and silver prices have scaled up further to be at almost all time highs at Rs 21125/10gm and Rs 55000/kg. The rupee/dollar parity is at 45. The weaker rupee would be deterrent against FII selling and high bullion prices will discourage savers from investing there. The yield for govt paper is moderating suggesting that the availability of money is now comfortable. If the inflation remains under a band, RBI may not too hawkish.
The month of March has seen no outflow of FII funds rather there is small positive flow. The scenario, therefore, is being viewed by me as improving and more congenial for investing carefully…kbk

India is not as corrupt as China

2011-03-07T10:04:00.000+05:30

There is so much in news about corruption in India but Fitch thinks that India is not as corrupt as China and Russia. They find that regulation and tax treatment are the areas of weakness in India. India is on way to improvement in all these respects, is what I think and hence the stock markets should have lesser degree of concern in respect of corruption.

The Nifty has opened lower on 7 Mar 2011 and is hovering around 5450 due to DMK and Congress being on verge of breaking up as also due to ‘crude’ concerns.

The FIIs may not bring as much money this year as in 2010 (inflow in 2010 equalled $29.36 billion).
Its time we watch markets for some time before doing something…kbk

The Budget effect may wear off soon

2011-03-03T11:16:00.000+05:30

The budget effect did take the Nifty up past 5500 on Tuesday as was my expectation that many resistances will be crossed on account of budget itself.

Since then the auto sales numbers have been good and since these are for the latest month, the effect of higher interest rates seems not to have dented demand. This tells us that people from interiors of the country are more into the market for buying cars and two-wheelers and they offer full cost upfront.

It is interesting to note that gold appreciated by about 23pc in year 2010 while the silver covered a lot of ground by posting gains of 71pc during 2010. The 2010 saw Nifty improve by 17.95pc. But this does not yet make a case for investing in precious metals because this kind of investment is not productive investment and in times of normalcy on political and financial fronts, the prices of gold/silver will see downward movements. Also since the beginning of 2011 the equity market saw big correction. This correction has been so large that all gains since Jan 2010 have been wiped out. Whatever the reason for it, the net result is that equity investors did not make money between Jan 2010 and now. The 14 month long period for any investment avenue is not a small period and if the returns have not been positive during such long period without the fundamentals changing adversely to this extent, it is a simple case of making the year 2011 more promising by way of returns.

The budget effect may wear off today but with the budget going past as an event, the focus will now emerge on the longer term extending to a period of one year and beyond.

Tatas may list JLR venture in UK. This will be tremendous for Tatamotors as it will unlock big value for them since JLR has been showing robust performance now. The gamble of acquiring JLR has paid off as also the in case of Corus. This imparts strength to Nifty/Sensex itself which have lost values while western markets have gained values over the year…kbk

Budget is hard to criticise

2011-03-01T11:59:00.001+05:30

The budget 2011-12 presented yesterday by Pranab Da has been in line with the hopeful signs presented in the economic survey.

The biggest worry about the deficit going out of hand has been nipped in the bud for it has been possible for the govt to show only lower deficit at 5.1pc of GDP for 10-11 besides the 11-12 deficit has been pegged at 4.6pc. Was there any magic as some wonder, I don’t think its magic at all because the buoyancy of tax revenue has made it possible (gross tax receipts for 11-12 Rs 9.3 lac crs against expenditure of Rs 12.58 lac crs).

The govt will work with just 3.4pc (of GDP) revenue deficit and this is OK for a developing economy.

The interest out go will be Rs 2.68 lac crs (l.y.Rs 2.20lac crs), subsidy burden will be Rs 1.43lac crs (Rs1.64 lac crs). The subsidies cost less because the petrol prices were deregulated last year. The govt will also initiate a process under which there is direct money transfer to the BPL families and subsidies are done away with. This would be great and stop the diversion of subsidised items to black market.

The salaries bill will cost govt Rs 16.07 lac crs (Rs 15.08 lac crs). The govt should devise means to atleast have less number of people to work for it in an efficient way, as it can not lower the salaries.

The companies have to pay higher MAT at 18.5pc but lower surcharge at 5pc. So there is overall balance and no punishment has been meted out to corporates.

The personal tax burden is reduced mildly but since the DTC is going to be coming next year, this pocket poses no big threat or otherwise.

The service tax net has been widened and this is good as the rate has not been disturbed. This is shows that the govt is serious about GST roadmap as soon as consensus is arrived.

The infrastructure has been given a boost , it receives Rs 40.44 K crs or 23.3pc plus.

The social sector spending of Rs 23.37 K crs will be 17pc more.

The biggest and bolder attempts are that the foreign investors (all types) will be able to invest in India through Mutual Funds. There would be a simple requirement of fulfilling the KYC (know your customer) requirements. This is very justified and this paves way for every body on earth to participate in India growth story. The whimsical FII actions will not bother much as there would be broad basing of the investors class. If properly marketed , this will be a huge thing. Since there are MFs witch are managed by international players, I think the marketing would be a long drawn process.

The limit on FII holding of Indian Corporate bonds has been raised to ₨ 1,811 () billion. This paves way for cheaper fund flow into India.

The excise and customs duties have been mostly left unchanged and this should be boost t markets. The iron ore export will attract higher duty of 20pc but this is good for the raw-material resources have to be preserved of national needs first if we have become a larger manufacturing economy.

The agriculture has been helped in very many ways but there could have been a greater thrust. One of the good things to happen is the grant of infrastructure status to cold chains. Also there would be construction of storage capacity for food grains to save it for rotting in the open.

In light of above I may safely assume that market should have better times ahead particularly when its not at a risky level. The Nifty may now surely go past its resistance levels as soon as west Asia turns back to quieter times…kbk
P.S. Nifty closed at 5333 yesterday.

Sensex on Budget eve

2011-02-28T11:51:00.003+05:30

The close of Sensex on Budget eve since 2007 has been as under:

Feb 27 2007 : 13479
Feb 28 2008 : 17824
July03 2009 : 14913
(Because of elections it was postponed)
Feb 25 2010 : 16254
Feb 25 2011 : 17701

The budgets for first two years above were presented by P Chidambaram but since he could not address the requirement for a suitable relief package in the aftermath of global crisis, Pranab Mukherjee was entrusted with finance portfolio. I must say he did a good job and has once again presented a balanced and likable budget today keeping the markets in positive territory for the whole day today (the detailed analysis will be covered separately by me).

I, however, I draw your attention to the fact that in four complete years since 2007 the Sensex has improved by just 40pc, in three complete years since 2008 it has been static and in one full year since 2010 it has shown just 10pc improvement. We know that the four years gone by have resulted in about 40pc cumulative GDP growth and no year since then has seen lower than 7pc GDP growth. Why then we should be worried about the downside still. Besides what I talk about is GDP growth not the companies sales/profits growth which have been almost double of the GDP growth. This makes us stand at a far safer point at this time in history and the negative bias has already had a profound influence on the broader indices. The negativeness is just an idea and not a reality, in fact, the reality may turn out to be with many positives adding to performance. There would then be mad rush for grabbing equities which have to be invested in not so much for love for them as for ensuring tax free gains and gains enough to ward off the impact of inflation on your wealth. Look for signs of stability in markets and make your move quickly as the worse thing than not investing in equities is to invest at higher than reasonable prices. So while you may be patient as much as you want but let it not result in an opportunity missed…kbk

Tax to GDP and Debt to GDP Ratio

2011-02-26T18:03:00.001+05:30

The budget may have been readied by now and only cosmetic changes at the instance of political bosses of Congress may be incorporated.

The main point that has bearing on the budget making exercise is that we have tax to GDP ratio of about 18pc and have debt (state and central) to GDP ratio of 80pc. Both seem to be wrong by tax ratio being on the lower side and the other debt ratio being on the higher side. Both have to be corrected with minimal impact on the economic growth and without impact on poorer masses. We know that the rich have become richer and account for a lot of conspicuous consumption. If only we have a large amount of tax collected by imposing higher tax on wealth (which should be all kind of assets in ownership of individuals, HUFs and trusts without exemption). The valuation may be made simpler by just giving broader guidelines where the market value is indeterminable. This filing would make the basis for curbing the corruption to. This revenue through wealth tax would not disturb the markets or the poor because productive assets are being tax extra or the subsidies are not being lowered. If we assume that the wealth of nation at between Rs 400 lac crs to Rs 600 lac crs and if 40pc of population owns 60pc of it then we may collect between Rs 3.6 lac crs to Rs 4.9 lac crs at 1.5pc from the rich of the nation. This kind of revenue generation would correct all budgetary imbalances would let the wealth tax as the sole item to balance the budgetary requirement and would make the assets held more in the form of productive assets…kbk

P.S. This will not be done for sure because the pseudo politicians and influential businessmen and tricky bureaucrats would not allow this to happen because it is going to hurt them most without leaving even fig leaf to cover their nakedness.Even the enthusiastic left would not bring this in discussion at any forum as for them too the poor is tool.

Nifty closed 5262 losing 174 points

2011-02-25T08:00:00.001+05:30

Markets yesterday were badly hit and Nifty closed 5262 losing 174 points. The reason for fall was the crude price concern on account of Libyan crisis. The world’s other markets were under pressure too. But the level around 5250 is quite inviting as has been told on earlier occasion too but only the one who have nerves of steel should have full equity exposure and others may gradually increase it. The moot point remains that the inflation may be responsible for the present pressure on market but the best bet too hedge inflation is investment in equities. This has been proven all through the history of stock markets and economy. The inflation has eroded value of rupee by as much as 70pc over the decade which saw the equities up in value as much as 5 times. I have told you some thing basic but in financial world any things may be possible because some things are by design while some by the way when the public sentiments get attached too, the net outcome borders on the extremes at certain points in time but only to come back to the middle course. Those who can know when the extreme points have approached may benefit in both ways ie course up and course down…kbk

Pranab da budget

2011-02-23T11:49:00.003+05:30

On everybody’s mind is the question about budget balancing by Pranab. As far as I see, he has very limited scope. He can tinker with excise duty in a small way, he may also be populist by raising the taxable income limit, he may make some effort at mobilising resource for infrastructure spending, he may provide more for agriculture, he may show that he cares for the poor but would fall short of really helping him.

The concern for poor may only be shown through increasing his consumption of items essential to him ie the food first of all. If this is done it can only be at the cost of letting the middle classes have some less since the import of food is not the priority of the govt. If the food items are imported the farmer will be upset. And therefore the stress on import of oil will remain a priority and food will be available to poor in lesser quantity. He would never be having balanced diet until the availability of all types of food items is increased. This can be achieved when the govt keeps procurement prices high and imports also and sells at somewhat lower prices to poor absorbing the losses in the process. This simple thing disturbs the corporates because this shrinks the govt expenditure for their sake and even put pressures on govt for greater tax effort which is anathema to them.

The answer lies in totally simplifying the budget exercise where no extra-ordinary deficit is planned, where nothing except food is provided subsidy for (in manner explained above), even agricultural inputs should not have any subsidy element to avoid wasteful use.

The defence requirement should be fully met. The classification of goods should be only in terms of essential and rest and taxes should be uniform two rates for each of the two categories. This can be suitably adjusted to cover the tax needs ie revenue requirements. If the inflation still happens then let it happen. Interest rates should be only market determined. With washing its hands of taking care of inflation and interest rates , the govt may concentrate on governance (including external and internal security).

Reliance has entered into a big deal with BP in the area of gas production and distribution. This make the mood upbeat generally. The markets is struggling to keep at present level but I think it may be consolidating. The next course usually is upward whenever any trigger is available.

Saraogi of Balrampur Chiini explained that they have opted for company buying back @85 per share for nothing but taking benefit of the situation where the enterprise value is Rs 4000 crs and market cap is under Rs 2000 crs. He also mentioned that the amount of Rs 110 crs for the purpose is just equal to depreciation for one year. What this means is that since the share prices is lower it is better buy back shares rather than use cash flow for capex. The case of Bajajhind is even more inviting as the enterprise value is not less than Rs 6000 crs and depreciation for one year is more than Rs 300 crs against market cap of Rs 1500 crs. But even if the buy back is not resorted, the cashflow will reduce the interest outgo which is also high for Bajajhind. I only hope that the Bajajhind management does not once again cheat the investor by alloting itself sweat equity when the average for six months is low.

Japan has also entered into agreement for freer flow of goods, it will keep import duties low for Indian goods but would not expect similar low rates for its own goods imported by India. This is good for us. In fact Japan is looking for avenues for investment in India…kbk

Issue of frequency spectrum pricing

2011-02-21T19:15:00.002+05:30

How do we resolve the issue of frequency spectrum pricing in case of Telecom industry? According to analysis done by me the following method can be used which may ensure equitable process.

Three stage process should be followed:

a) Qualifying round - separate bids for financial and technical qualifications

b) Spectrum round - bids should be in a band giving minimum and maximum price of spectrum

c) Tariff round - bidding for minimum cost to the customer

This process is based on guidelines given by WTO for natural resources in the following paragraphs.

Natural resources are usually valued by reference to their economic rents, referred to as “resource rents.” The resource rent of a natural resource is the total revenue that can be generated from the extraction of the natural resource, less the cost of extracting the resource (including a normal return on investment to the extractive enterprise).

Applying the Less Than Adequate Rent (LTAR) concept to natural resource rights leads to this question: what portion of the resource rents does a government need to collect in order to obtain “adequate remuneration” for the “goods” that it has provided? One possible answer – “all of the resource rents” – seems inherently implausible. Among other considerations, governments have rarely sought to collect all of the resource rents associated with sovereign natural resources. Moreover, the standard is “adequate” remuneration, not “maximum” remuneration. How do we determine whether a lesser amount of rent collection is “adequate”?

Any set of principles concerning natural resource subsidies should apply coherently and consistently across different resource sectors.

Without proposing a definitive resolution to these issues, the following are among the considerations that might be relevant in evaluating whether governments receive “adequate remuneration” for the conferral of natural resource rights:

Does the government use market-based mechanisms, such as auctions or sealed bids, to allocate natural resource rights?
Does the government price natural resources so as to recover the government’s cost of providing and maintaining the resource? This might include the cost of negative externalities (e.g., pollution,health hazards in case of cell phones), as well as the cost of supporting other public benefits associated with the resource.
Does the government price natural resources in a manner that encourages non-sustainable or non-commercial exploitation of the resource? This might occur, for example, if the government prices natural resources in a manner that allows a commercial enterprise to extract resources that have negative resource rents, i.e., resources that would not be extracted by the enterprise under normal market conditions.

by Sharad Khandelwal

PM should exercise power in coalition for good governance

2011-02-18T11:56:00.002+05:30

The market proved the doom sayer wrong with more than 1pc addition to Nifty at 5546 , the markets have been positive for the fifth day in a row. This has confirmed that there was cartel at the back of excessive losses seen earlier. The basics for the economy do not turn very bad or very just when a few place an out-of-proportion weight to the current bad news of passing nature.

The PM’s positive approach at aiming to steer the nation ahead and finish the unfinished agenda is also a factor in markets up-moves.The technical analysts say that it has upside target of 5612-5632 and strong support at 5460.

I based my judgement on the basic strengths of markets and told you in no uncertain terms to increase equity exposure and a good benefit is there to take home if you decide. I maintain, however, that the inflation related fall in money’s purchasing power can best be arrested by relying more on equity.

If you draw a very bad scenario of the world’s (including India’s) economy and near collapse of the financial system once again then even the money in deposits, bonds and debentures also will be at the same or even the worse risk as equities. Worse because the money goes wholly if the borrower goes bankrupt but if you have equities you are still the owner of what the company is left with. So, cheer up when the market has come back at three week high level.

The world stocks have hit a 30 month high and why not, because there was an excessive monetary expansion which not only ensured that the working of companies improve but also raised the availability of investible funds in hands of people. I have an inkling that the market euphoria will die down only after a series of high jumps in close proximity. So long as the up-moves are in normal range, the danger of meltdown is less.

The budget is round the corner and if only the govt sheds its pseudo love for the poor masses, the budget may be easily balanced and the allocations will go a long way in improving the lot of countrymen as a whole. The subsidies help none but the dis-honest who put in hard-labour at taking it away from the deserved. This results in two sections wasting time in just grabbing the benefit of subsidies ie the section who it is meant for and the section which is involved in delivering it but labours hard for diverting it.

Every Prime Minister has a vision for the country but is made to act not in the best interest of the country because of those who are directly responsible to put him in seat of power. This dilutes his power and makes for the bad governance. What we require today is the emergence of a charismatic leader who commands far more respect of the people than the party h belongs to. This way the party’s other leaders and workers will be subservient to him rather than pull him down every now and then. The coalition politics has shown its worst side and the people have to have an opinion convergence and choose one or the other without any doubt. What has been gone through by the country politically would have made a solid leader to go for dissolution of the parliament and go for fresh elections but PM is in no position to do this.

The crude came off the highs and is now under $100/bbl. The long term yield has come down a bit to 8.09pc on the news of food inflation moderating to 11pc for the latest weekly figure (YoY).

The sugar export under OGL may be allowed in the meeting of EGoM to take place on Monday. This should see sugar prices improve. If a total quantity of on million tonnes goes out, the local sugar prices will reach a level of ensuring enough profitability for the millers.

The demand for gold in India has grown from 702 tonnes in 2001 to 963 tonnes in 2010. When the gold prices are four times now than in 2001, the total saving finding way into gold investment is close to Rs.2 lac crs now as against Rs.35K crs in 2001. This is about six times in terms of rupees. My wild estimate says that Indians have an investment of between Rs one lac crs to Rs two lacs crs in gold and silver while our total markets cap is only Rs 60 lac crs. With better education, more information, ease of investment and liquidity are the factors that will see the total market cap improving greatly from current levels ie more of the saving will find way in to market through the primary or secondary markets…kbk

Stock Recommendations - 16 Feb 11

2011-02-17T19:48:00.000+05:30

Tatasteel @ 640 (16/02/11)
You may retain this and add more for long term…kbk

Press, PM and Corruption

2011-02-16T23:30:00.002+05:30

The Prime Minister met editors today and gave his explanation about the 2G spectrum allotment. He rightly said that while he wrote to Raja in 2007 that the spectrum may be auctioned and on receiving communication from Raja and fin min that the policy of he day did not allow it and hence he had no further point to make particularly after being assured of fair dealings and level field for all. So far it is OK and Raja’s taking the country for ride happens to be his own misuse of power. He did not have any thing to say about as to why he could not intervene in time when Raja’s approach was so wrong etc. He further faulted when asked to what may have been the loss to exchequer as per his own estimation. He said that it can not be a subject matter of assessing loss in the same way as the subsidies for kerosene,fertilizers and food can not be subjected as to what loss occurred to the exchequer. Here, surprisingly, he had not considered the fact the subsidies for poor masses and the allotment of licences to business houses for commercial purposes are two different matters. The business houses did not serve the public but made huge gains for themselves without even offering the services. Such gains definitely can be said to be the loss for exchequer. Clearly there is more to it than he has tried to make out.

He refused to be called a lame-duck Prime Minister, may be that’s right but he has proved to be a careless Prime Minister or a Prime Minister not allowed to follow the best practices. His redressal of the wrongs fall too short of the requirement.

However, he rightly claimed that the world’s leaders have a sense of respect for the economic progress made under his leadership. He claimed that after all the scam related bad mood, there would still be GDP growth of the order of 8.5pc. He urged media and others to not play the scam matters too noisily and at least not present the fact in any distorted fashion. This is a just demand as the media at times tried to present thing not entirely in an objective manner. But PM also should show that he would mean business and have no softness when it comes to dealing with the wrong doers. Indian politics is too complicated to have a straightforwardly approach in all matters. In fact it is duty of the voters to strengthen the hands of cleaner politician at hustings. Isn’t it that you get the govt you deserve.

In the end, when the things settle down, there would be a renewed vigour about pursuing the unfinished agenda of improving infrastructure and curbing inflation under Manmohan’s able leadership. He has proved that he is not only a thrust-upon great but a great in reality after the last elections ( Congress having had him projected as the next Prime Minister).

The markets were wrongly down and have found their feet. I am happy to have given you low down on it in may last many posts. There is a point which you must understand and it is that when the companies are paying taxes at the maximum rates, the provisions for expenses and depreciation are made in full too. This makes the numbers more reliable and the future fall in profits, if any, remain less hurtful. In this light the bigger Nifty companies may be said to be in very fine health in most cases. Remember this and you would not be dreading the future of Nifty too much(close for the day 5481)…kbk

Stock Recommendations - 15 Feb 11

2011-02-15T22:41:00.001+05:30

Rcom @ 96 (14/02/11)

You may buy this in good measure for medium/long term…kbk (ref 1132/5430:207/89:-/60).

Hindalco @ 219 (14/02/11)

You may ignore this for time being , the previous advice @231 on 9/11/10 was to sell off …kbk (ref 846/5430:252/129:118/129).

Gammonind @ 116 (14/02/11)

You may sell this off …kbk (ref 895/5430:241/102:8/11).

Pentaloonr @ 255 (14/02/11)

You may keep out of it, previously advised on 30/08/10 @468 to sell off…kbk (ref 671/5430:528/228:8/11).

Relinfra @ 626 (14/02/11)

You may buy it for medium term…kbk (ref 950/5430:1224/492:43/34).

Tatapower @ 1243 (14/02/10)

You may retain this and accumulate on dips for medium/long term…kbk (ref 928/5430:1468/1156/25/88).

Adanient @603 (14/02/11)

You may ignore it now, you may have already sold it out as per advice on 28/10/10 (@684)…kbk (ref 798/5430:786/418:5/12).

Stock Recommendations - 14 Feb 11

2011-02-14T20:54:00.000+05:30

COALINDIA @ 302 (14/02/11)
You may buy this for long term…kbk (ref 1051/5430:356/291:75/-).

P.S. This scrip may prove to be great stabilizer of market due to heavy market-cap which is about 3.3pc of total market-cap.The business model is not prone to any risks like political, raw material or demand. If it can keep saving costs as there is scope for it, it may keep improving results. The expertise and man-power (trained) will make it bid for mines out-side India too.

SATYAMCOMP (Mahindra Satyam) @ 64 (14/02/11)
You may accumulate this on dips for medium/long term….kbk (ref 695/5430:113/54:13/60).

GLAXO @ 2199 (14/02/11)
You may accumulate this for long term…kbk (ref 1013/5430:2434/1502:59/51).

YTD fall in Sensex and Nifty of the order of over 15pc

2011-02-14T20:00:00.000+05:30

The YTD fall in Sensex and Nifty of the order of over 15pc was uncalled for and many wondered that it was through the efforts of bear cartels. The fall seemed to be starker in light of the fact the world’s most other markets were stronger by between 1 to 9pc. The SEBI has found some truth in the rumours and complaints about the organised attack on markets where the investors wealth suffered Rs 15 lac crs of loss in valuation. Some scrips behaved s erratically that many found themselves in very bad situations. I had observed the phenomenon quite early and pointed out to you on many occasions and kept feeding you as to why the markets did not deserve to be under such pressure. SEBI is probing the activities of some 25 entities covering even FIIs.

RCom has alleged Rs 1 lac cr fraud by old 2G operators and has demanded CBI probe. The telecom scene has become murkier during last few months and govt seems to be only on defensive and without any will or programme to tackle the issue urgently hoping that the time , the best healer, would let it all pass. Surveys tell that the corruption is now taken by people as some thing not acceptable at such levels and so much in magnitude. Indians have been comfortable about corruption in the form of ‘bakshish’ and ‘speed-money’ but find it rather indigestible in the form of big monies taken for undue favours and siphoning of ill-gotten money out of India. In such things the very security of the country itself is perceived to be in danger. There would surely be a reflection in the voting pattern when the elections take place next.

The margins were under pressure for some sectors but the sales growth has taken care to PATs remaining higher in absolute terms. The IIP data was poor for December 10 but the base effect, the data collection method, weightages etc make it difficult to rely too much n month by month data which are corrected also later in many cases. The growth will remain strong, of this there is not doubt.

Egypt’s dictator has resigned and fled leaving army in control. May they have fallen in to fire from the pan , only time will tell. The Constitution is to be adopted in six month, but constitution making is a very complex exercise and may be justly taken up only when the people in command have no personal agenda. We had a good Constitution due to the presence of self-less stalwarts at the right time in history. This may not the priviledge of Egypt. This was definitely not the priviledge of Pakistan which has been suffering in absence of a solid constitutional foundation ever since the time of independence.

While on the topic of political stability, I would like to suggest to govt to announce without any demur, the policy to providing shelter/asylum to all political victims of all other countries who face wrongful confinement, oppressive imprisonment or threat to life. This policy will strengthen our own democracy and would be the counter weapon against China and Pakistan. This silently brought constitutional provision would come in handy to keep the powerful neighbours from acting unthoughtful because India would be in a position to even send invitation to the political adversaries of the regimes there on the strength of provisions in law here. This will then be an act in persuasion of legal provisions which might not be taken as an inimical act. It is not unjustified to build defence on own strengths and and enemies weaknesses. China and Pakistan have weakness in heir political systems which may be used to weaken them in today’s integrated world…kbk

Stock Recommendations - 12 Feb 11

2011-02-14T19:49:00.001+05:30

M&M @ 667 (11/02/11)
You may accumulate this for medium term…kbk (ref 1001/5310:-/476:248/173).

BPCL @ 592 (11/02/11)
You may ignore it for the time being….kbk

RECLTD @ 235 (11/02/11)
You may buy this for long term with comfrt…kbk (ref 1372/5310:413/06:237/170).

Mcdowell-N @ 995 (11/02/11)
You may accumulate this on dips for long term…’Bk (ref 852/5310:1688/952:64/48).

Britannia @ 350 (11/02/11)
You may retain it and buy for long term…’Bk (ref 859/5310:-/341:13/10).

Nirma @ 252 (11/02/11)
You may sell this off …kbk (ref 896/5310:69/158:3/0).

RCF @ 79 (11/02/11)
You may ignore it for the time being…kbk (ref 860/5310:132/71:26/40).

KSOILS @ 33 (11/02/11)
You may buy this for medium term…kbk (ref 1018/5310:80/28:20/26).

Abirlanuvo @ 759 (11/0/11)
You may buy this for medium term…’Bk (ref 1140/5310:967/705:36/50).

Renuka @ 84 (11/02/11)
You may accumulate this for medium/long term…kbk (ref 959/5310:194/51:14/66).

Tatamotors @ 1170 (11/02/11)
You may accumulate this for medium/long term …kbk (ref 1163/5310:1382/633:121/177).

Stock Recommendations - 11 Feb 11

2011-02-12T20:41:00.002+05:30

CESC @ 270 : You may buy more of it for long term…kbk (ref 1160/5230:433/263:27/12).

APOLLOTYRE @ 50 : You may buy it for medium/long term…kbk

HINDPETRO @ 343 : You may retain this for medium/long term…kbk (ref 864/5310:555/292:107/27).