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Any way you look at it, rising food prices do not augur well for the economy

The powers-that-be seem to have decided that food price inflation is not a worry. For them, that is. From a political point of view, it is easy dismiss inflation as a concern of the urban middle- class. So, it seems perfectly logical to decide that the poor farmer needs to be rewarded for his efforts. With agricultural output hit by the bad monsoons this year, and the farm sector in sore need of investment, it is easy to rationalise that high food prices are the need of the hour.

Support prices for all the major crops are being raised—most recently for rice, dal and wheat. For sugarcane, which is bought by mills (not the government), the Centre has set a new, higher, Fair and Remunerative Price (FRP). Union agriculture minister Sharad Pawar said that “we expect the mills to pay more than FRP” as sugar prices are at a high. The case of wheat, one that I am familiar with, is the most perplexing: stocks held in FCI godowns are at an all-time high after two excellent harvests, but so are prices. And there seems to be no move to raise the amount of grain released into the market. Consistent with the broader line on the subject, government thinking seems to be the poorest—whether urban or rural—will be protected from the ravages of high food prices by our Public Distribution System. Little matter that everyone knows how inefficient and leaky this system is.

The writing on the wall is clear—high food prices are here to stay. Figures released in early November food prices are rising at an annual rate of over 13 per cent. Partly because of this, the RBI has raised its inflation forecast for 2009-10 to 6.5 per cent. These new realities make me pause to consider two matters—one macroeconomic, the other sector-specific. On the first, if inflation is projected at 6.5 per cent, then it seems that the long-term interest rate that the Government of India is paying for its borrowings is a steal. The current yield on paper due in 2019 is roughly 7.25 per cent. So, the real rate of interest a buyer of bonds can expect is only 0.75 per cent. This looks completely unsustainable; another reason to buy gold, which investors have been doing in increasing numbers. But, equally relevant, at some point, investors will feel suckered, and hold out for a higher rate of return. This fact, and the uncontrolled deficit of our governments—both Central and state—will lead to higher interest rates sooner, rather than later.

The second, and pretty obvious outcome of food price inflation is the impact it will have on margins for businesses using agricultural inputs. Food processing firms will be the worst hit, with sugar, wheat and milk prices at all-time highs, and no immediate relief in sight. But, agriculture provides inputs to a wide range of industries—alcohol and the downstream chemical industry use sugarcane; agro-residues help feed the paper industry and also fuel captive power generation plants. Across industries manufacturing margins were boosted last year as the slowdown led to reduced commodity prices across the world and the Union government rolled back excise duties across the board. Eventually, tax concessions will have to go, or else government borrowings will keep ballooning, affecting the economy through the mechanism of higher government borrowings. Whichever way you look at it, inflation cannot be good for our economy. It is unclear whether our senior political leaders genuinely believe that high food prices are, on balance, good. Perhaps they are trying to garner political capital from a situation beyond their control, Either way, I don’t like it.

HOW TO USE OLM 50: one-stop guide for mutual fund (MF) investments

Thisis your one-stop guide for mutual fund (MF) investments. OLM 50 is Outlook Money’s list of choicest funds that merit your attention, selected after an exhaustive study. It comprises funds from equity debt and mixed categories. You won’t find liquid funds here because this is an investment portfolio. Liquid funds are meant for parking surplus cash for short-term needs, they are not a permanent destination. Each edition of OLM 50 may carry a few new funds in place of some old ones, weeding out consistent non-performers or those where management changes have taken place, which would need to be tested. Only for fresh investments. OLM 50 may or may not cater to your existing investments. If your fund is not a part of OLM 50, it doesn’t necessarily mean you should exit. Also, if you have invested in a fund that was part of OLM 50 earlier, but is no longer in the list, it doesn’t mean you need to churn immediately. There could be many reasons as to why we knocked out a fund: management change, consistently declining performance and so on. Core and Satellite. A ‘core’ fund is more of an evergreen fund whose investment strategy is more long-lasting like plain-vanilla funds. A ‘satellite’ fund is a fair-weather fund, such as thematic or sector funds, that works in only certain market conditions.

Usually, your allocation to core funds should be more than to satellite funds, with the exact ratio depending on your risk profile. If you are risk-averse, your allocation to ‘core’ funds should be more, and vice-versa. Morningstar classifies large-cap and mid-cap schemes as per their portfolios and not their offer documents. Hence, you could find a fund that is, for instance, classified as a mid-cap fund in one quarter and a large-cap in the other. Other schemes. There are many five- or four- star rated funds that may not appear in OLM 50. It doesn’t mean they are not worthy. It could also mean that there are better alternatives. It also doesn’t mean all other schemes, other than OLM 50, merit a sell. With our MF coverage, we will keep you apprised of any investment opportunities that merit a sell, as also buy opportunities. How many. Though OLM 50 has many schemes, you shouldn’t invest in all. Pick seven to eight schemes. You might find many schemes from the same fund house in a category due to a superior track record. It’s best to diversify across fund houses. If you are a conservative, risk-averse investor with a time horizon of a year or two, pick more funds from the debt platter. But if you are in for the long haul, equity funds are your best bet.

IPCA stock seems a compelling growth story

 Tags: IPCA , IPCA LABORATORIES, IPCA stocks,

IPCA LABORATORIES Rs894 PE14.4

With high earnings visibility, a diversified portfolio and resilient growth, the IPCA stock seems a compelling growth story

aying a reasonable price for a stock is important, more so in an expensive market.  hese days, many companies look promising, but most of theirs stock prices have, possibly, run ahead of their intrinsic value. IPCA Laboratories a mid-sized pharmaceutical manufacturer where that has not happened despite the visibility on future earnings.

The company’s main business is manufacturing drug formulations. It started  manufacturing active pharmaceutical ingredients (API) and intermediaries to strengthen its drug formulations activity. Today, IPCA is a vertically integrated pharma company with API, intermediaries and formulations in its product portfolio, and has presence in more than hundred countries.

Business performance. The formulations business is IPCAs major revenue earner, contributing about 72 per cent to net sales at the end of FY09. API and intermediarjes formed the remaining 28 per cent. The company has focussed equally on both these segments, which has resulted in their healthy growth. During FY09, the company’s formulations business grew 18 per cent over the last year, and sales of API and intermediaries grew 31 per cent. IPCA has a diversified product portfolio covering therapeutic groups. It includes cardiovascular and anti-diabetic drugs, non-steroidal anti-inflammatory drugs, and anti-bacterial and anti-malarial drugs. The cardiovascular and anti-diabetic segment contributes the most to the company’s formulation revenues. These are lifestyle-related drugs that have immense potential in a country like India. With focus on the Indian market, the company is now expanding its portfolio with new launches in the lifestyle-related segment.

IPCA is also geographically diversified. In FY09, over 50 per cent of its revenue came from exports to regions such as Europe, the Americas and Africa. Despite the global downturn in FY09, the company’s exports grew by an impressive 27 per cent compared to around 5 per cent growth for the global pharmaceutical market.

Financial performance. IPCA has announced impressive results for the quarter ending September 2009 (Q2FY1O). Net total income moved up 24 per cent on a year-on-year (y-o-y) basis. The operating margin remained flat over Q2FYO9. The growth in profit was high at 75 per cent, although it was on last year’s low base (last year’s profits were affected by forex losses). The strong performance in the last quarter is not entirely a one-off. IPCA has been growing at a healthy pace for a long time. The compounded growth rate for its total income over the last 10 years is close to 14 per cent, with income from domestic sales and exports growing at almost the same pace. IPCA has also changed its product mix by shifting its dependence from low margin anti-malarial drugs to high-margin chronic and lifestyle medicines. The strategy has helped it grow its margins.

Valuation. IPCAs share price has doubled in value over the last year. Despite this, it is trading 14 times its trailing 12 months’ earnings per share. This value is attractive compared to the industry’s price-earnings multiple of 30. Also, the company is growing faster than both the domestic and the global pharma industry. Its last quarter growth figure is among the highest in the sector.

In future, exports will be the major driver of the company’s growth. In developed markets, it is building presence in generic medicines while in emerging markets, it is focused more on branded products. The company’s growing product portfolio in the lifestyle segment will also help it maintain strong growth in the domestic market. All this makes IPCA an investor’s pick in an expensive market. ii

Low Corporate Debt to Equity Is Usually Better

 Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques, How to Make Money In Stocks

Alter you have picked a stock with a small or reasonable number of shares in its capitalization, it pays to check the percentage of the firm's total capitalization represented by long-term debt or bonds.  Usually the lower the debt ratio, the safer and better the company.


Earnings per share of companies with high debt-to-equity ratios can be clobbered in difficult periods of high interest rates. These highly leveraged companies generally are deemed to be of poorer quality and higher risk.

A corporation that has been reducing its debt as a percent of equity over the last two or three years is well worth considering. If nothing else, the company's interest expense will be materially reduced and should result in increased earnings per share.
The presence of convertible bonds in a concern's capital structure could dilute corporate earnings if and when the bonds are converted into shares of common stock.

It should be understood that smaller capitalization stocks are less liquid, are substantially more volatile, and will tend to go up and down faster; therefore, they involve additional risk as well as greater opportunity. There are, however, definite ways of minimizing your risks, which will be discussed in Chapter 9.

Lower-priced stocks with thin (small) capitalization and no institutional sponsorship or ownership should be avoided, since they have poor liquidity and a lower-grade following.

A stock's daily trading volume is our best measure of its supply and demand. Trading volume should dry up on corrections and increase significantly on rallies. As a stock's price breaks out of a sound and proper base structure, its volume should increase at least 50% above normal. In many cases, it can increase 100% or more.

In summary, remember: stocks with a small or reasonable number of shares outstanding will, other things being equal, usually outperform older, large capitalization companies.

Look for Companies Buying Their Own Stock in the Open Market

Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques, How to Make Money In Stocks

One fairly positive sign, particularly in small- to medium-sized companies, is for the concern to be acquiring its own stock in the open marketplace over a consistent period of time. This reduces the number of shares of common stock in the capital structure and implies the corporation expects improved sales and earnings in the future.

Total company earnings will, as a result, usually be divided among a smaller number of shares, which will automatically increase the earnings per share. And as we've discussed, the percentage increase in earnings per share is one of the principal driving forces behind outstanding stocks.

Tandy Corp., Teledyne, and Metromedia are three organizations that successfully repurchased their own stock during the era from the mid- 1970s to the early 1980s. All three companies produced notable results in their earnings-per-share growth and in the price advance of their stock.

Tandy (split-adjusted) stock increased from $234 to $60 between 1973 and 1983. Teledyne stock zoomed from $8 to $190 in the thirteen years prior to June 1984, and Metromedia's stock price soared to $560 from $30 in the six years beginning in 1977. Teledyne shrunk its capitalization from 88 million shares in 1971 to 15 million shares and increased
its earnings from $0.61 a share to nearly $20 per share with eight different huvbacks.

Foolish Stock Splits Can Hurt

Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques, How to Make Money In Stocks

Corporate management at times makes the mistake of excessively splitting its company's stock. This is sometimes done based upon questionable advice from the company's Wall Street investment bankers.

In rny opinion, it is usually better for a company to split its shares 2-' for-1 or 3-for-2, rather than 3-for-l or 5-for-l. (When a stock splits 2-for- 1, you get two shares for each one previously held, but the new shares sell for half the price.)

Overabundant stock splits create a substantially larger supply and may put a company in the more lethargic performance, or "big cap," status sooner.

It is particularly foolish for a company whose stock has gone up in price for a year or two to have an extravagant stock split near the end of a bull market or in the early stage of a bear market. Yet this is exactly what most corporations do.

They think the stock will attract more buyers if it sells for a cheaper price per  hare. This may occur, but may have the opposite result the company wants, particularly if it's the second split in the last couple of years. Knowledgeable professionals and a few shrewd traders will probably use the oversized split as an opportunity to sell into the obvious "good news" and excitement, and take their profits.

Many times a stock's price will top around the second or third time it splits. However, in the year preceding great price advances of the leading stocks, in performance, only 18% had splits.

Large holders who are thinking of selling might feel it easier to sell some of their 100,000 shares before the split takes effect than to have to sell 300,000 shares after a 3-for-l split. And smart short sellers (a rather infinitesimal group) pick on stocks that are beginning to falter after enormous price runups—three-, five-, and ten-fold increases—and which are heavily owned by funds. The funds could, after an unreasonable
stock split, find the number of their shares tripled, thereby dramatically increasing the potential number of shares for sale.

Institutional Investors Have a Big Cap Handicap

 Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques, How to Make Money In Stocks

Many large institutional investors create a serious disadvantage for themselves because they incorrectly believe that due to their size they can only buy large capitalization companies. This automatically eliminates from consideration most of the true growth companies. It also practically guarantees inadequate performance because these  nvestors may restrict their selections mainly to slowly decaying, inefficient, fully matured companies. As an individual investor, you don't have this limitation.

If I were a large institutional investor, I would rather own 200 of the most outstanding, small- to medium-sized growth companies than 50 to 100 old, overgrown, large-capitalization stocks that appear on everyone's "favorite fifty" list.

If you desire clear-cut factual evidence, the 40 year  tudy of the greatest stock market winners indicated more than 95% of the companies had fewer than 25 million shares in their capitalization when they had their greatest period of earnings improvement and stock market performance. The average capitalization of top-performing listed stocks from 1970 through 1982 was 11.8 million shares. The median stock exhibited 4.6 million shares outstanding before advancing rapidly in price.

Pick Entrepreneurial Managements Rather Than Caretakers

 Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques, How to Make Money In Stocks

Giant size may create seeming power and influence, but size in corporations can also produce lack of imagination from older, more conservative "caretaker managements" less willing to innovate, take risks, and keep up with the times.

In most cases, top management of large companies does not own a meaningful portion of the company's common stock. This is a serious defect large companies should attempt to correct.

Also, too many layers of management separate the senior executive from what's really going on out in the field at the customer level. And in the real world, the ultimate boss in a company is the customer.

Times are changing at a quickening pace. A corporation with a fastselling, hot new product today will find sales slipping within three yearsif it doesn't continue to have important new products coming to market.

Most of today's inventions and exciting new products and services are created by hungry, innovative, small- and medium-sized young companies with entrepreneurial-type management. As a result, these organizations grow much faster and create most of the new jobs for all Americans. This is where the great future growth of America lies. Many
of these companies will be in the services or technology industries.

If a mammoth-sized company occasionally creates an important new product, it still may not materially help the company's stock because the new product will probably only account for a small percentage of the gigantic company's sales and earnings. The product is simply a little drop in a bucket that's just too big.

Big Is Not Always Better

Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques, How to Make Money In Stocks

The price of a common stock with 300 million shares outstanding is hard to budge up because of the large supply of stock available. A tremendous volume of buying (demand) is needed to create a rousing price increase.

On the other hand, if a company has only 2 or 3 million shares of common stock outstanding, a reasonable amount of buying can push the stock up rapidly because of the small available supply. If you are choosing between two stocks to buy, one with 10 million shares outstanding and the other with 60 million, the smaller one will usually be the rip-roaring performer if other factors are equal.

The total number of shares of common stock outstanding in a company's capital structure represents the potential amount of stock available for purchase.

The stock's "floating supply" is also frequently considered by market professionals. It measures the number of common shares left for possible purchase after subtracting the quantity of stock that is closely held by company management. Stocks that have a large percentage of ownership by top management are generally your best prospects.

There is another fundamental reason, besides supply and demand, that companies with large capitalizations (number of shares outstanding) as a rule produce dreadful price appreciation results in the stock market. The companies themselves are simply too big and sluggish.

How Does a Stock Go from $50 to $100?

Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques

As a final appeal to your trusty common sense and judgment, it should be stated that if a security has traded between $40 and $50 a share over many months and is now selling at $50 and is going to double in price, it positively must first go through $51, $52, $53, $54, $55, and the like,before it can reach $100.

Therefore, your job is to buy when a stock looks high to the majority of conventional investors and to sell after it moves substantially higher and finally begins to look attractive to some of those same investors.

In conclusion: Search for corporations that have a key new product or service, new management, or changes in conditions in their industry. And most importantly, companies whose stocks are emerging from price consolidation patterns and are close to, or actually touching, new highs in price are usually your best buy candidates. There will always be something new occurring in America every year. In 1993 alone, there were nearly 1,000 initial public offerings. Dynamic, innovative new companies— a bundle of future, potential big winners.

When to Correctly Begin Buying a Stock

Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques

A stock should be close to or actually making a new high in price after undergoing a price correction and consolidation. The consolidation (base-building period) in price could normally last anywhere from seven or eight weeks up to fifteen months.

As the stock emerges from its price adjustment phase, slowly resumes an uptrend, and is approaching new high ground, this is, believe it or not, the correct time to consider buying. The stock should be bought just as it's starting to break out of its price base.

You must avoid buying once the stock is extended more than 5% or 10% from the exact buy point off the base. Here is an example of the proper time to have bought Reebok, at $29, in February 1986 before it zoomed 260%. The second graph shows the correct time to have bought Amgen at $60—in March 1990—before it jumped more than sixfold.

Birla Sun Life’s ClassicLife Premier Plan

Tags:   Birla Sun Life’s Insurance,  Birla Sun Life’s ClassicLife Plan,  Birla Sun Life’s ClassicLife Premier Plan,

THIS PLAN FROM BIRLA SUN LIFE OFFERS A CHOICE OF 10 FUNDS. IT IS SUITABLE FOR INVESTORS WHO ARE MORE FOCUSSED ON THE CORPUS RATHER THAN DEATH BENEFITS

Birla Sun Life’s ClassicLife Premier Plan is a unit-linked %Plan with a whole life’ option to provide cover till 100 years of age. As Benefit Chart shows, the product is within the insurance guidelines on the capping of charges. The difference between the gross and net yield is 216 basis points in case of 10 per cent return. To comply with all parameters the company has to refile the product before 31 December 2009.
 
FEATURES
It offers a choice of 10 funds, with the flexibility to allocate varying percentages of premium to different funds. You benefit from additional units after the completion of 10 years and at the end of every five years thereafter. The guaranteed addition is 2 per cent of average fund value in the last 60 months.

 Death benefit. This is the higher of the fund value or sum assured reduced by withdrawals made earlier. Surrender benefit. For surrender after six years: there are no surrender charges paid and the entire fund value is paid to the policyholder. If surrender happens within three years: surrendered value is paid after completion of the third year.

Partial withdrawals. Withdrawals are allowed from the policy after the completion of three years or when the life insured attains maturity, whichever is later.
 
WHAT TO DO
The product is suitable for investors who are less worried about the death benefits and more about the corpus.

Sebi Unveils New Platform For SME Listing

Tags: SEBI,  Securities and Exchange Board, Securities and Exchange Board of India, 

The Securities and Exchange Board of India (Sebi) has ruled out the need for a separate exchange for small and medium enterprises (SMEs). Sebi chairman C.B. Bhave said that a separate platform for listing and trading in small- and medium-sized enterprises would be permitted on the existing exchanges. This would make the proposal cost-effective.

Norms. Companies with a paid-up capital of less than and up to Rs 25 crore would be able to list on the SME platform. If the paid-up capital of a firm rises above the Rs 25-crore mark following the issue, the firm will not be eligible for using the platform reserved for SMEs and it will have to move on to the regular platform. Exemptions. Companies listed on the SME platform would be exempted from certain eligibility norms applicable for initial and follow-on public offers. For instance, norms like profit track record for a specified previous period, which is applicable to other companies, would be waived off. Further, to keep compliance costs low for such companies, they have been exempted from quarterly declaration of financial results. Instead, they would be required to declare earnings on a half- yearly basis.

Sebi has allowed companies to go for pure auction of public issues instead of a price band for institutional investors. This means there will not be any price band and the company may just give the floor price to institutional investors who can then bid. However, if a company decides to follow this option, non-institutional investors (comprising retail investors, high net worth individuals, and employees) will have to be given shares at the floor price.

Says Prithvi Haldea, chairman and managing director, Praxis Consulting & Information Services: “SMEs are perceived to be high-risk, high-reward investment avenues. The regulator has tried to ensure that investment-savvy and well-informed investors participate in investing in these companies. The minimum contract size has, therefore, been fixed at Rs 1 lakh, which will discourage several small retail investors from investing in these perceived high-risk high- reward returning companies.”

Two Launches Set The Field For Customer Value

Tags: AEGON, Bharti Axis Elite Secure, lClCl Prudential, AEGON Religare, Kotak, Aviva, ING Vysya

Bharti Axa Life Insurance Company recently launched a new term plan, Elite Secure, which provides coverage till the age of 75, irrespective of the age of entry. Also, following the launch of the lowest cost Ulip, AEGON Religare Life Insurance has launched the lowest cost term plan, iTerm. It can only be bought over the Internet.

LOWEST TERM RATES
Plan                                      Premium (Rs)
AEGON Reliqare’s iTerm    14,350
Bharti Axis Elite Secure        16,350
lClCl Prudential                    17,859
AEGON Religare                19,100
Kotak                                 19,150
Aviva                                  19,500
ING Vysya                         22,460
‘The premiums are furamaleaged 40 years. sum asured of Rs 50 lacks and term of 20 years
Nute:All insurers ewcept LIC, TATA AIG,IDBI , Future General aud Canara HSBC Life Insurance have been considered.

Elite Secure. The minimum entry age for the plan is 18 years and the minimum sum assured is Rs 25 lakh. The plan may be bought for a term of 5, 10, 15, 20 or 25 years, or till the age of 75. One may attach two riders to the plan—critical illness, and accidental death and disability benefit riders. The policyholders of Bharti Axa’s existing term plan, SecureConfident (with minimum sum assured of Rs 25 lakh) are being automatically upgraded to Elite Secure’s rates.

iTerm: The minimum age for entry 18 while the minimum sum assured kept at Rs 10 lakh. The term available is five to 25 years.

When it comes to buying pure term insurance plans, in addition to buying the plan from lower cost insurers, Outlook Money has always recommended to choose the maximum term available or buy a plan that covers you for the maximum age possible.

The premium rates for these two plans are possibly the lowest, as shown in Lowest Term Rates.

Foreign Universities May Get Autonomy

 Tags:  Foreign Educational Institution, Foreign University,

The Foreign Educational Institutions Bill, 2007, has been hanging fire for a long time. Once it is passed, foreign universities will be allowed to open their autonomous campuses in India. Currently, they can have a presence in India only through tie-ups.

The present situation. The bill has been produced in the Cabinet, but after the prime minister’s office (PMO) intervened, it is awaiting clearance from the Ministry of Human Resource Development and other ministries before it is tabled in Parliament. That is expected to happen soon.

Says Naresh Gulati, CEO, Oceanic Consultant, a foreign education consultancy: “If foreign universities set up shop here, Indian universities will be forced to overhaul their educational system to match their standards. So, students stand to benefit. However, even though they can get a similar degree in India, it cannot replace the international exposure students get when they go abroad.”

Annuitants Could Invest In The Stockmarket

Tags: IRDA,  Insurance Regulatory and Development Authority, IRDA India,

The Insurance Regulatory and Development Authority (Irda) set up a committee this month to examine the current status of annuity products and the steps needed to introduce variable annuities in India. The committee is scheduled to submit its report by 31 January 2010.

Currently, annuity products invest only in debt products and investors get a fixed rate of return. With variable annuity, investors would be able to participate in the stockmarkets to keep growing their retirement corpus. The rate of interest, however, is not fixed in variable annuity products.

In light of the population growth and the need for a proper pension system, the variable annuity business has tremendous potential in India. Globally, countries are moving towards variable annuity products as they give flexibility to insurers and address most investor-related issues.

Regulator Makes Sweeping Changes

Tags: SEBI, Securites and Exchange Board of India, ICDR,

The Securities and Exchange Board of India (Sebi) has amended Issue of Capital and Disclosure Requfrements (ICDR) Regulations, which will change the way qualified institutional bidders (QIBs) bid in follow-on public offers (FF0).

The revision. Issuers coming up with an FF0 can now allow QIBs to bid shares at any price above the floor price. The shares will be allotted on the basis of the pure auction method or a price priority basis, where the highest bidder will be given the priority. Retail investors, however, will get shares at the floor price.

To prevent any single entity from accumulating most of the shares on offer, Sebi has also given issuers an option to cap the number of shares or percentage of issue capital which a single bidder can bid. This will ensure wider distribution of issued capital. Until now, QIBs had to bid in a price range. The issue price or the cut-off price was decided based on the demand for the issue. The cut-off price was the maximum price at which all shares on offer were subscribed.

 The new practice is a win-win situation for both the institutional investors and the issuer. Says Prithvi Haldea. managing director. Prime Database: “Institutional nvestors will get the chance to bid at a higher price [beyond the price range] if they think it is correct. The company, in turn, will also get a higher valuation.”

The new practice will continue to exist with the older one. It could later be extended to initial public offers. Cap on employee allotment. Sebi has also capped the number of shares that can be allotted to the issuer company’s employees in a public issue.

The value of the shares issued to an employee under the employee reserved category cannot exceed Rs 1 lakh. Also, the total shares issued under the employee category should not exceed 5 per cent of the post-issue capital.

Strict disclosure. Companies will now have to disclose balance sheet items on a half-yearly basis, which will help the investors understand their interim position in a much better manner.

Mutual Funds Could Soon Be Traded Online

Tags: MF, Mutual Funds, Online Trading, Sebi,

The Securities and Exchange Board of India (Sebi) is planning to introduce an online mutual fund (MF) platform by March 2010. Implications. The proposed platform will be more like a share trading floor where investors can buy and sell their MF units without a broker, just by accessing the requisite web portal. After the abolition of entry load, brokers are no more interested in selling MFs. Says the marketing chief of a Mumbai-based fund house: “This new move will help fund houses that are incurring losses by paying the distributor out of their own pockets, and investors who are being dumped by their distributor because of no load.” It will also help investors in that they can view their entire portfolio on a single portal and switch between schemes of different fund houses.

Sebi To Curb Institutional Participation in MFs

Tags: Sebi, MF, Mutual Funds, Investors, Investment, MF Industry, 

The 2008 market crash, which hit retail investors hard, has forced the Securities and Exchange Board of India (Sebi) to plug the system’s loopholes and check the monopoly
large investors in a mutual fund (MF) scheme. Sebi is looking to ensure that redemptions by a few investors do not destabilise the scheme and create a
on the fund, impacting retail investors. Backdrop. In December 2003, Sebi implemented a regulation unique
the Indian MF industry (popularly known as the ‘20-25’ rule), which put a restriction on fund houses to maintain a minimum of 20 investors, with a single investor not holding more than 25 per cent of the scheme’s corpus. The regulator is revisiting the rules, and it is likely increase the minimum number of investors required in a mutual fund scheme from 20 and bring down the maximum holding by a single investor from the current level of 25 per cent. In view of this, MF houses have started restructuring their portfolios by either shifting their corporate clients to broad-based schemes in their stable, or adding new investors.

Select Stocks with 25% to 50% Annual Growth Rates

Owning common stock is just the same as being a part owner in a business. And who wants to own part of an establishment showing no growth? The annual compounded growth rate of earnings in the superior firms you hand pick for purchasing stock in should be from 25% to 50%, or even 100% or more, per year over the last 4 or 5 years.

Between 1970 and 1982, the average annual compounded earnings growth rate of all outstanding performing stocks at their early emerging stage was 24%. The median, or most common, growth rate was 21% per year, and three out of four of the prominent winners revealed at least some positive annual growth rate over the five years preceding the giant increase in the value of the stock. One out of four were turnarounds.

A typical successful yearly earnings per share growth progression for a company's latest five-year period might look something like $.70, $1.15, $1.85, $2.80, $4.

The earnings estimate for the next year should also be up a healthy percentage; the greater the percentage, the better. However, remember estimates are opinions. Opinions may be wrong whereas actual reported earnings are facts that are ordinarily more dependable.

Check Other Key Stocks in the Group

For added safety, it is wise to check the industry group of your stock. You should be able to find at least one other noteworthy stock in the industry also showing good current earnings. This acts as a confirming factor. If you cannot find any other impressive stock in the group displaying strong earnings, the chances are greater that you have selected the wrong investment.

Note the date when a company expects to report its next quarterly earnings. One to four weeks prior to the report's release, a stock frequently displays unusual price strength or weakness, or simply "hesitates" while the market and other equities in the same group advance. This could give you an early clue of an approaching good or bad report. You may also want to be aware and suspicious of stocks that have gone several weeks beyond estimated reporting time without the release of an earnings announcement.

Consult Log Scale Weekly Graphs

One reason that logarithmic scale graphs are of such great value in security analysis is that acceleration or deceleration in the percentage rate of quarterly earnings increases can be seen very clearly on a log graph.

Log graphs show percentage changes accurately, since one inch anywhere on the price or earnings scale represents the same percentage change. This is not true of arithmetically scaled charts.

For example, a 100% stock price increase from $10 to $20 a share would show the same space change äs a 50% increase from $20 to $30 a share on an arithmetically scaled chart. A log graph, however, would show the 100% increase äs twice äs large äs the 50% increase. The principle of earnings acceleration or deceleration is essential to understand.
Fundamental security analysts who recommend Stocks because of an absolute level of earnings expected for the following year could be looking at the wrong set of facts. A stock that earned $5 per share and expects to report $6 the next year can mislead you unless you know the previous trend in the percentage rate of earnings change Read More

Two Quarters of Major Earnings Deceleration May Mean Trouble

Likewise, when the rate of earnings growth Starts to slow and begins meaningful deceleration (for instance, a 50% rate of increase suddenly decreases to only 15% for a couple quarters), the security probably has either topped out permanently, regardless of what analysts and Wall Street orogress will dwindle into a lengthy and unrewarding price consolidation period characterized by prolonged sideways movement.

I prefer to see two quarters of material slowdown before turning negative on a company's earnings since the best of organizations can periodically have one slow quarter.

SBI Extends Its Special Home Scheme

State Bank of India (SBI). India’s largest lender, has extended its ‘My Home Campaign’ till 31 March 2010. The campaign was originally launched on 8 August 2009 for a period of three months, but SBI extended it just before its expiry. P. Nandakumaran, chief general manager, retail loans, said: “The tremendous response to the campaign is the reason for its renewal. Home loan demand has also been high. During the period February 2009-September 2009, we opened 169,174 accounts across India. The disbursement has been over Rs 13,900 crore in the eight-month period.” Nandakumaran added that 85 per cent of the home loans were below Rs 30 lakh. This indicates that the scheme is extremely popular among customers who buy houses in the affordable segment. The Campaign. SBI offers three products under the ‘My Home Campaign’. One is the SBI Hi-Five Home Loan, under which a fixed rate of 8 per cent per annum (p.a.) is charged for five years for loans up to Rs 5 lakh and a maximum tenure of 10 years. For loans between Rs 5 lakh and Rs 15 lakh, the interest rate is 8 per cent p.a. for the first year and 8.5 per cent p.a. during the second and the third year. You can avail this loan as an overdraft with the possibility of saving interest under the SBI MaxCain scheme. This scheme is favoured by the salaried class. For customers looking at high-end properties, SBI offers the SBI Advantage Home scheme. This scheme carries

Is it prudent to fund the deficit via PSU selloffs?

“Strike a balance between social and infrastructure spend”

At times, the intentions and likely policy actions of the government can be better judged by analysing the way in which it presides over the management of public funds. The recent announcement of the government regarding partial disinvestment in profit-making PSUs needs to be seen in this context.

It is pertinent to view the context of the decision. The fiscal stimulus necessary to boost the economy is expected to impact revenues. Further, the failure to control expenditure during the UPA’s first stint and financial profligacy manifested in the many populist schemes, have led to significant imbalance in government finances. The stimulus package only aggravated the situation. As it seems, the withdrawal of fiscal sops may not be feasible immediately, as the economy is yet to take a firm upward path. In this backdrop, the disinvestment decision was inevitable and political stability derived from a fairly decisive mandate helped in speeding up the decision making.Read More

Is it prudent to fund the deficit via PSU selloffs?

“Proceeds should be diverted towards capital creation”

The government should not be treating the proceeds from the PSU disinvestment as a
revenue stream to fund its ballooning fiscal deficit. Although the country’s fiscal deficit has surpassed estimates and is a cause of immense concern at $42 billion (Rs 1.98 trillion) for the period April to September (49.3 per cent of the full year target), using the divestment vehicle as a tool for this would give no real comfort from the point of fiscal prudence otherthan providing some temporary relief.

Moreover, the move to use the earnings from disinvestment to finance welfare projects such as education, employment and healthcare could be viewed as a political compulsion. Even though the sale proceeds are to be used to fund capital expenditure of social sector projects, it is often difficult to distinguish between government expenditure spends and capital creation spends. Read More

Buoyed by strong treasury gains, banks have registered healthy profit growth. But asset quality concerns remain, especially for PSU banks

With the earnings season drawing to a close, banks have wrapped up the second quarter with positive surprises on the margins front and some blushes on the asset side. While net interest margins showed marked improvement, by 10-20 basis points sequentially, business volumes floundered as credit offtake was muted. Asset quality continued to be a matter of concern, especially for state-owned banks whose growing restructured books are showing signs of slippages.

There was a marked slowdown in advances growth in the September quarter, as banks went slow on disbursements of home, auto and consumer loans. Loan growth was only 9 per cent y-o-y. “Even top private sector banks, like ICICI Bank, are going slow on retail lending;’ says Bhavesh Kanani, analyst at Sharekhan, a local brokerage firm. “1 expect credit offtake to be somewhat muted in the third quarter, but it should revive from the fourth quarter.

Mahindra and Mahindra (M&M) launched Gio

Mahindra and Mahindra (M&M) launched Gio end-October, the excitement was palpable. Priced at around Rs 1.65 lakh, the company claimed boldly that the 0.5 tonne light commercial vehicle (LCV) will create a segment in itself, just above three-wheelers, and at a reasonable price point for a four-wheeler goods carrier.

So, why is M&M so excited? The reason is in the numbers. While the commercial vehicles (CV) segment went through a painful patch, hit by 0.5 per cent degrowth in April-September 2009, the LCV segment grew by a robust 19.5 per cent. Commercial vehicles— goods or passenger carriers — below 5 tonne capacity constitute the LCV segment and this is currently dominated by biggies Tata Motors and Ashok Leyland. Read More

Stocks: Zee News (ZNL)

1&64%
LTP: Rs 52.50
M Cap: Rs 1,259cr

Zee News (ZNL) has seen delivery volumes rise 137 per cent with 1,651,205 shares changing hands. The company recently announced a share swap ratio of 4:19 for the transfer of its regional general entertainment channels to Zee Entertainment Enterprises (ZEEL). So, for every 19 shares of ZNL held, four shares of ZEEL will be issued. Also, ZEEL will also assume debt of Rs 120 crore from total net debt of Rs 150 crore on Zee News’ books. According to Vikash Mantri of ICICI Securities, the news business’ profitability is expected to improve in the current fiscal on the back of lower losses from new initiatives due to conversion of the Tamil GEC, Zee Tamizh, into a predominantly news channel. For the September quarter, revenues grew 26.3 per cent y-o-y to Rs 161.2 crore on the back of a 26.4 per cent y-o-y and a 17.3 per cent q-o-q growth in advertising revenues. I-Sec has a ‘Buy’ rating on the stock with a target price of Rs 60, based on Rs 50 a share for the regional channels business (as per the announced swap ratio) and Rs 10 a share for the residual news business based on FYi 1 E EV/ sales of lx.

Stocks: Tata Motors

7.68%
LTP: Rs 569.95
M Cap: Rs 30,111 cr

The country’s biggest commercial vehicle manufacturer, which holds close to 65 per cent share of the market, saw delivery volumes rise 88 per cent with close to 1,561,523 shares changing hands. The company has seen one of the best monthly sales in recent time in October, with sales growing 35 per cent to 53,404 units. Passenger vehicle sales in the domestic market grew by 17.61 per cent to 20,011 units last month. The company doubled its quarterly profit to Rs 729 crore owing to softer raw material costs and a revival in vehicle sales. According to Sahil Kedia of Enam Securities, the recovery in CV sales is expected to continue in the second half of the fiscal. However, Ebitda margins will be under pressure owing to higher commodity costs.

Stocks: Suzlon

2131% Down
LTP: Rs 66.30
M Cap: Rs 10,321 cr

Beleaguered wind power supplier Suzlon saw delivery volumes jump 74 percent following news that the company had managed to get fresh dollar loans to refinance its $465 million debt payable this month. According to market sources, Axis Bank and State Bank of India will finance this loan, which will be payable at Libor-plus 550 bps within the next five years after an initial two-year moratorium. Following this transaction, Suzion will have raised its stake in Repower to 100 per cent from its present level of
91 per cent. Also in the news was that Indiabulls Financial had hiked its stake in the company to 6.38 per cent from earlier levels of 4.59 per cent following the acquisition of pledged shares. As of September 09, promoters have pledged 43.28 per cent of their stake, amounting to 23.98 per cent of total outstanding. The company still has a net debt of Rs 12,525 crore. Even after the stock having lost 21 per cent last fortnight, the outlook still remains weak.

Stocks: Shriram Transport

Tags: shriram Transport, Sriram, Stock Market, Stock Signs, Stock Watch

1.65% Down
LTP: Rs 390.40
M Cap: Rs 8262 Cr

The stock of the country’s largest commercial vehicle financier dipped a little under 2 per cent during the fortnight with a 150 per cent surge in delivery volumes. The stock was In the centre of action on November 4 as private equity firm Chrys Capital sold its 2.13 per cent stake for Rs 1743 crore. The PE firm had sold a partial stake in the NBFC last year. The Chennai’based Shriram group company saw its profit after tax rise 25,26 per cent in the September quarter to Rs 207,45-core. Revenues grew by 1741 percent to Rs 1,071.61 -crore. Total assets under martagei-nent at the end of the quarter stood at Rs 25,823.75-crore. Read More 

 According to Kotak Institutional Equities, the NBFC will deliver 24 per cent CAGR in core profit before tax (excluding provisions) between FY09 and FYi 1 and generate medium-term return on equity of about 26-29 per cent.

Stocks: Punji Lloyd

Tags: Stocks,  Punji Lloyd, Stock Market, Stock Signs,
18.48% Down
LIP:Rs 212.15
M Cap: 7.039 Cr

The country’s second’largest infrastructure major, primarily catering to the oil and gas space, was down 18.5 per cent during the fortnight ended November 6, At Rs 212.15, the stock is down 29 per cent from its 52-week high levels of Rs 299 clocked just a month ago, The company is facing challenges in the operations of its UK-based wholly owned subsidiary, Simon Carves, in terms of cost overruns and delays in the Completion of bioethanol project, which also affected its profitability In the first half of the current fiscal, Read More

Stocks: Punjab National Bank

 Tags: Stocks: Punjab National Bank, Punjab, National Bank, Stock Market, Stock Signs, Stock Watch
2.70% Up
LIP: Is 88170
M Cap: Is 28,071 Cr

The stock oldie country’s Second-largest public sector lender rose by nearly 3per cent over the fortnight with 95 per cent spurt in delivery volumes, The bank has been the talk of the town owing to Its renewed focus on International banking, post the irwjuctiori of the new chairman and managing director, KR Kamath,
Read More
who was the earlier heading Aliahabad Bank. In order to expand its presence In central Asia, the state owned lender will ac.quire a majority stake in Dana Bank based in Kazakhstan, The bank has also received RBI approval for setting up a subsidiary at Vancouver and to upgrade their representative office at Shanghai to a branch. PNB posted a net profit of Rs 926 crore in the September quarter compared with Rs 7O7crore In the corresponding quarter in the previous year Motilal Oswal has a ‘buy’ rating on the stock with a target of Rs 1,053, “We are Impressed by the sharp decline in the cost of deposits, improved yields in the quarter and traction on CASA growth. While 6 per cent restructured loan5 are relatively higher compared with BoB, Canara Bank and Union Bank. we believe our FY10 and Fyi 1 credit costs assumptions capture the likely asset quality deterioration,” states the report.
;1]

Stocks: JK Lakshmi Cement

Tags: JK Lakshmi Cement, Stocks, Stock Market, Stock Signs

2.90% UP
LTP:Rs125.40
MCap:Rs767a

Although cement may be going out of favour on concerns of a supply glut setting in next year onwards, JK Lakshmi Cement seems incredibly cheap and this could trigger some value buying in the stock. Read More

Stocks: Crompton Greaves

10.90% Up
[TP Ri 384.15
M(ap: Rs 14,082cr

The stock price of the power equipment major gained 11 per cent on the back of heavy volumes during the fortnight ended November 6, thanks to the robust 02 results announced on October 27. The company reported the highest growth In operating profit and net profit, since the past four quarters, at 43 per cent and 47 per cent, respectively. The top line grew a strong 16 per cent to Rs 1,268.60 crore. Though the stock looks a bit stretched at 18 times estimated FY11 earnings, it is worth watching the company as It has reported stable performance even in the tough quarters of December 2008 and March 2009.

Stocks: Balrampur Chini

7.12% UP
(Fortmilitiy price diangel
Last traded price (Nov 6): Rs 147.35
Market Cap: Rs 3,783 a

Balrampur Chini closed up 7 per cent in the past fortnight despite shedding some of its gains after news that the deal with Bajaj Hindusthan had failed to fructify. The latter was in talks to buy-out the company, but the deal had to be put down because of certain regulatoiy issues. The counter saw heightened activity with

Stock Market Economic Watch

$ 3 .5 bn I Foreign direct investment in July, which was 56 per cent higher from a year ago. India has been ranked third in global foreign direct investments this year, following the economic meltdown, according to a report titled World Investment Prospects Survey 2009-20 1 1 by the United Nations Conference on Trade and Development.

200 tonnes I Theamountofgoldsoldto the RB! by the International Monetary Fund, which quietly executed half of a long-planned bullion sale. The price of the deal is estimated at $6.7 billion, The deal will increase India’s gold holdings to the tenth largest among central banks.

1 3.8 % The drop in exports in September from a year ago (in dollars). Exports totalled $13.6 billion for the month. Exports for April-September were valued at $78 billion, down 29 per cent from a year ago.

98 mn The khariffoodgrain production in tonnes this year, as estimated by the Centre for Monitoring Indian Economy. The production in 2008 was about 118 million tonnes.
9 % The estimate of India’s economic growth beyond 2010, according to most experts at the India Economic Summit held from November 8 to 10.

46.39 I The value of the rupee against the dollar, the highest level it has risen to in three weeks on the back of rising Asian stocks. Expectations of further fund flows into regional stock markets are expected to keep the rupee and other Asian currencies buoyant.

9.6 % The rate of growth in bank credit for the week ended October 23 from a year ago. Credit growth has been sluggish despite low interest rates, and most bankers believe achieving the RBI credit target rate of 18 per cent will be next to impossible.

Bearish gap on the charts indicates that the Sensex may find it hard to breach 16,706 in the near term

After trading in a very narrow daily range, the Sensex is back with some really volatile intra-day moves. The recovery from the low of 15,330 to 16,677 in five sessions was much sharper than the Sensex’s fall from the highs of 17,500 in 10 sessions. As always, the question that remains is, where does the index go from current levels? Although there is no one answer to this question, one can always look out for good support or resistance levels on the charts. One such technical tool that is extensively used to find supports and resistances is thegap In technical parlance, a gap is created when the stock, or any asset class, including the index, opens lower or higher than the previous day’s closing price and remains unfilled.

For example, the Sensex opening of 13,479 on May 18, 2009 after the election results, resulted in a huge bullish gap of 1,306 points above the close of 12,173 on May 15, 2009 which remains unfilled even after a period of almost six months.

Stock Market Risks and Benfts

Assets managed by Indian mutual funds by the end of Cctober, compared with Rs 1.48 trillion seen in October 2004, according to the Association of Mutual Funds of India.

India’s merchandise exports fell for the 12th consecutive month in September. Exports during the first six months 2009-10, declined 28.5 per cent to $77.86 billion.

Redemptions from global emerging markets, Asia, Latin America and Europe, the Middle East and Africa stock funds contributed to the net outflows for all equity vehicles during the week ended November 4, according to fund tracking firm EPFR.

Look for Accelerating Quarterly Earnings Growth

My studies of thousands of the most successful concerns in America proved that virtually every corporate stock with an outstanding upward price move showed accelerated quarterly earnings increases some time in the previous ten quarters before the towering price advance began.

Therefore, what is crucial is not just that earnings are up or that a certain price-to-earnings ratio (a stock's price divided by its last twelve months' earnings per share) exists; it is the change and improvement from the stock's prior percentage rate of earning increases that causes a supreme price surge. Wall Street now calls these earnings surprises.

The Debate on Overemphasis of Current Earnings

Recently it has been noted that Japanese firms concentrate more on longer-term profits rather than on trying to maximize current earnings per share. This is a sound concept and one the better-managed organizations in the United States (a minority of companies) also follow. That is how well-managed entities create colossal quarterly earnings increases, by spending several years on research, developing superior new products,
and cutting costs.

But don't be confused. You äs an individual Investor can afford to wait until the point in time when a Company positively proves to you its efforts have been successful and are starting to actually show real earninsrs increases.

Set a Minimum Level for Current Earnings Increases

As a general guide for new or experienced investors, I would suggest you not buy any stock that doesn't show earnings per share up at hast 18% or 20% in the most recent quarter versus the same quarter the year before. Many successful money-makers use 25% or 30% äs their minimum earnings parameter. And make sure you calculate the percentage change; don't guess or assume. You will be even safer if you insist the last two quarters each show a significant percentage increase in earnings from year-ago quarters.

During bull markets, I prefer to concentrate in equities (comrnon Stocks) that show powerful current earnings leaping 40% or 50% up to 500%. Why not buy the very best merchandise available? If you want to further sharpen your stock selection process, before you buy, look ahead to the next quarter or two and check the earnings that were reported for those same quarters the previous year. See if the Company will be coming up against unusually large or small earnings achieved a year ago.

Omit a Company's One-Time Extraordinary Gains

The last important trap the winning Investor should sidestep is being influenced by nonrecurring profits. If an organization that manufactures Computers reports earnings for the last quarter that include profits from the sale of real estate or a plant, for example, that pari of the earnings should be subtracted from the report. Those are one-time, nonrecurring earnings and are not representative of the true, ongoing profitability of corporate operations. Ignore them.

Watch Out for Misleading Reports of Earnings

Have you ever read a corporation's quarterly earnings report that stated,  "We had a terrible first three months. Prospects for our Company are turning down due to inefficiencies in the home office. Our competition just came out with a better product, which will adversely affect our sales. Furthermore, we are losing our shirt on the new midwestern Operation, which was a real blunder on management's part." No! Here's what you see. "Greatshakes Corporation reports record sales of $7.2 million versus $6 million (+ 20%) for the quarter ended March 31." If you own their stock, this is wonderful news. You certainly are not going to be disappointed. You think this is a fine Company (otherwise you wouldn't own its stock), and the report confirms your thinking.

Is this record-breaking sales armouncement a good report? Let's suppose the Company also had record earnings of $2.10 per share of stock for the quarter. Is it even better now? What if the $2.10 was versus $2 (+ 5%) per share in the same quarter the previous year? Why were sales up 20% and earnings ahead only 5%? Something might be wrong—rnaybe the company's profit margins are crumbling. At any rate, if you own the stock, you should be concerned and evaluate the Situation closely to see why the earnings increased only 5%. Most investors are impressed with what they read, and companies love to put their best foot forward. Even though this corporation may have had all-time record sales, up 20%, it didn't mean much. You must be able to see through slanted published presentations if you want the vital facts.

Seek Stocks Showing Big Current Earnings Incrcascs

In our models of the 500 best performing Stocks in the 40 years from 1953 through 1993, three out of four of these securities showed earnings iricreases averaging rnore than 70% in the latest publicly reported quarter before the Stocks began their major price advance. The one out of four that didn't show solid current quarter increases did so in the very next quarter, and those increases averaged 90%! If the best Stocks had profit increases of this magnitude before they advanced rapidly in price, why should you settle for mediocre or down earnings?

Our study showed that among all big gainers between 1970 and 1982, 86% reported higher earnings in their most recently published quarter, and 76% were up over 10%. The median earnings increase was 34% and the rnean (average) was up 90%. You may find that only about 2% of all Stocks listed for trading on the New York or American stock exchanges will, at any one time, show increases of this proportion in current quarterly net iiicome.

Current Quarterly Earnings Per Share: How Much Is Enough?

What did shares of the above-mentioned microwave component manufacturer, hospital  perator, and oil Service Company have in common?
From 1977 to 1981, they all posted price run-ups surpassing 900%. In scrutinizing these and other past stock market superstars, I've found a number of other similarities äs well. For example, tradiiig volume in these sensational winners swelled substantially before their giant price moves began. The winning Stocks also tended to shuffle around in price consolidation periods for a few months before they broke out and soared. But one key variable stood out from all the rest in importance: the profits of nearly every outstanding stock were booming.

The common Stocks you select for purchase should show a major percentage increase in the current quarterly earnings per share (the most recently reported quarter) when compared to the prior year's same quarter.

Bluechip Stockspin Limited Many mysteries have unlocked

Give a deep thought otherwise you may have to repent at leisure Blue-chip stockspin Limited had come up with an open offer on the name of Jignesh Hiralal shat. The company, withoutgood reputation, had entered the  capital market with offer of 32, 50,000 shares with face value of Rs. 10 each in 1996. The company has come up with a
ridiculous offer to sell off share with face value of Rs. 10 each at a price of Rs. 2.75 each i.e. at a discount of 72.50 per cent. Many investors have inquired with us
about investment in the open offer. Shall we grab the opportunity or not was the
common question they have asked to us. We are publishing our perception about the company and its promoter in the interest of our readers. Here is the fact sheet of the company.

The Blue-chip Stockspin Limited had collected Rs. 3.25 crore from the market. But after IPO, whether the promoter of the company has ever called board meetings or not is not known. Whether promoter has called AGM or not is also not known. It is also not known that whether the promoter of the company has prepared the balance sheet or not. Has
he send the balance sheet to share holder is also not clear. Letter of open offer is the only document which indicates that the company has share holders, because all
the activities that have taken place in the company had not been passed on to the share holders of the company.

Use of Fund : - Share holders of the company are not aware of the fact that how the fund of crore of rupee’s collected from the capital market through IPO was used. How the money was spent is not known. It is believed that promoter of the company has used the fund of more than Rs. 3 crore for inter corporate deposits deposits and investment in stock market. Now the big question is that where the interest of inter corporate deposits has gone and how was the interest used? It is also believed that the money was deposited with companies in which friends were connected as promoters and directors. There is no clue of interest receipts on the deposits and principle amount. Whether the
promoters have received back the amount in cheque or cash is also a matter of investigation. There is no clear picture about the investment and its receipts.

Australian Energy Company Sujlon Acquired Contract of 42 Megvolts of Energy Suply

The Australian energy company Sujlon got the 42 Megavolts of turbine energy supply contract. The company is located in Australia having 2.1 MW wind energy turbines. After this news consolidation trend in the shares of Energy Sujlon on BSE. Today the company price is at RS 72.15 with lead of 1.05%.

Sell:Tata Motors, HCL Tech, Wipro

Tags: Tata Motors, HCL Tech, Wipro

Technical experts are saying today that should sell the Tata Motors, HCl and Wipro.

The current price of Tata Motors is Rs 650.05. It is Better to sell at a target of Rs 644 and stop loss of RS 652.

The current price of HCl technologies is Rs 339.70 and sell with target of Rs 332, stoploss is at Rs342.

Settle Dispute With Farmers and Chinese Stocks Surge

Farmers and sugar mills have been compromised after long disputes in Uttep pradesh.Sugar mills are buying the sugarcane RS 190-195 per quintal. This price is more than the Government support price. The Chairmen of Chinese Association of Uttar pradesh Ptudia c.B said that "This is a victory for the farmers of uttar pradesh. Chinese mills have agreed to their demands". After this announcement Chinese stocks looking stronge to 2.5-4%.

Due to conflict with farmers and sugar mills many mills had stopped the supply of sugarcane.In morning trade the shares of Sugar companies as follows.

Tata Comm to build new cable system in Gulf

 Tags:Bahrain Internet Exchange, Middle East to build, Nawras of Oman, new cable system, Qatar Telecom QTEL, Tata Comm to build new cable system in Gulf, Tata Communications, United Arab Emirates (UAE)
Tata Communications, leading telecoms services firm today said that it has signed agreements with operators in the Middle East to build a new cable system for the region.

The telecoms cable will connect the region to the world`s major business hubs through the company`s existing Tata Global Network.

Financial details were not disclosed. The agreements were signed with Bahrain Internet Exchange, Nawras of Oman, Qatar Telecom QTEL.QA, Mobily of Saudi Arabia and Etisalat (ETEL.AD) in the United Arab Emirates (UAE).

BHEL secures contract worth Rs 56 Billion

Tags:Bharat Heavy Electricals (BHEL), BHEL secures contract worth Rs 56 Billion, Jaiprakash Associates (JAL), Jaiprakash Group, Prayagraj Power Generation Company (PPGCL), Thermal Power Project (TPP)

Bharat Heavy Electricals (BHEL) has secured a major order for setting up the upcoming 1,980 MW Prayagraj Thermal Power Project (TPP) with Supercritical parameters in Uttar Pradesh, involving three units of 660 MW each.
Valued at Rs 56 billion, the order for the greenfield power project, located at Bara in Allahabad district of Uttar Pradesh, has been placed on BHEL by Prayagraj Power Generation Company (PPGCL), a company owned by Jaiprakash Associates (JAL), and reflects the customer’s confidence in the company`s technological excellence and capability in executing projects of this magnitude.

Shanghai composites rolled 3.45%

Asian stock markets today is a declining trend. Hong Kong's hang Seng Index opened this morning with the decline. For sometime in the early hours of trading on the green marks gone. But based on the marks could not remain. It then went on to red marks. The index declined in the last hour of trading has increased. 1.53% of the 348 points after the index closed at 22.423 with weakness. China's Shanghai index composites with 115 points to 3223 on the 3.45% was the weakness. Japan's Nikkei index 1.01%, South Korea Cospi index of 0.78%, Strait Times Index 0.64% and 0.38% of Indonesia's Jakarta composites came weakness. Meanwhile, Taiwan's Taiwan light speed Veted index was 0.36%.

Nifty closed below 5100

Indian stock market ups - and downs after the main index closed with a decline. BSE Sensex is at 49 points of weakness with 17.131. Nifty closed at 5090 with a decline of 13 points. Of 0.52% in the medium Midkap Sianaks NSE index was strong. 0.23% in BSE Sensex and BSE Midkap 0.36% of the Smolkap is bullish.
Indian stock markets early this morning began with an edge. Sensex closed yesterday down to 51 points above the level of 17.180 to 17.231 went. Nifty opened with a brief consolidation. Sensex and Nifty, but it could not stay ahead for long and both indices based on red marks left. Went below the psychological 5100 level Nifty. Then the stock market index in the two red marks on the top - are come down. Sensex and Nifty in afternoon trade on and green marks gone. Nifty again in 5100 has crossed a psychological level. But this advantage could not remain intact for long. Both indices have again seized with lipstick. Nifty below 5100 levels was rolling. In today's business on behalf of the Nifty 5113 and below the 5053 level of the data untouched, while the Sensex and the data upwards of 17.231 to 17.027 Status touched down. Sensex 0.29% and 0.25% of all Nifty closed with a decline in light.

Mutual Funds – A Good Way To Buy Stocks

Most potential investors don’t have a clue on how to go about investing in the stock market. After all, only a small percentage actually opts for investments in stocks. If you are among the novices waiting to test the waters, here’s the scoop: just hire a brilliant stock market investor. No, don’t worry. This tie-wearing expert won’t charge you a bomb for fee.

You also don’t have to pledge lakhs of rupees to hire his service. All you need is small change. Even an investment of as little as Rs 100 a month would do.

Surprised? Don’t be. We are speaking about hiring the service of a mutual fund (MF) manager to take care of your investments in stocks.

Indiabulls Power IPO fixed at Rs 45/share

Indiabulls Power IPO fixed at Rs 45/share reports CNBC TV18 quoting DJ.

Indiabulls Power’s initial public offer (IPO) received an overwhelming response from investors, especially QIBs (qualified institutional investors). The issue was subscribed 21.84 times, as per the data available on the NSE website. All bids came in at higher end of the band.

QIBs (qualified institutional investors) supported the issue with their reserved portion being subscribed over 40.49 times. QIBs are Fidelity, Nomura, Capital International, Goldman Sachs AMC, Mirae AMC, Reliance MF, SBI, IDFC, LIC MF, HSBC, Halbis, Birla MF and ICICI Pru Life Insurance.

Fund Action – Tata Motors DVR

Fund Action: Tata Motors DVR, Asian Electronics, Austral Coke

Tata Motors DVR: Tata Sons sells 10 lk shrs at Rs 475.30/sh. Tata Steel sells 10 lk shrs at Rs 480/sh. TNTBC Trustee Of Asia buys 5 lk shrs at Rs 480/sh. Pru AMC buys 5 lk shrs at Rs 480/sh.

Asian Electronics: U.S. Instruments sells 6.3 lk shrs at Rs 41.30/sh. Union Invst Luxembourg sells 1.79 lk shrs at Rs 40.80/sh. Usha S Shah sells 1.69 lk shrs at Rs 41.50/sh.

Sensex target at 20,000 for 9-12 months – IDFC SSKI

Sensex tgt at 20,000 for 9-12 mths; FY10 Sensex EPS seen at Rs 800; FY11 EPS at Rs 1032; sees continued earnings upgrade for next few qtrs; don’t see further downgrades to Bharti’s earnings: IDFC SSKI

Pathik Gandotra, MD & Head-Research at IDFC SSKI Securities said that Sensex target is at 20,000 for 9-12 months. He sees FY10 Sensex EPS at Rs 800 and FY11 EPS at Rs 1032. He sees continuedearnings upgrades for the next few quarters.

He said that the markets will do well on the back of earnings expansion. About Bharti Airtel, he said that he doesn’t see further downgrades to Bharti’s earnings. He has given neutral rating on RIL and among the banking space, his top picks are ICICI Bank, Axis Bank and SBI. Incrementally, situation is improving for Jet Airways.

He is positive on Yes Bank, IndusInd Bank and Shriram Transport. He hopes that realty companies are likely to learn from the past mistakes. Power sector got de-rating as multiple issues got listed. Investors are willing to wait for long-term in power. He expects that capex cycle is likely to rebound next year, which will drive engineering stocks.

US markets hit fresh 13-mth closing high; Asia mixed

US markets hit fresh 13-month closing highs post Bernanke’s comment, weak dollar, US retail sales. Bernanke signaled plans to leave rates low for a while leading to weakness in dollar and gain in commodities. S&P 500 closed above 1100 for the first time since October 2008. Dow Jones gained 136.5 points or 1.33% to 10,407. S&P 500 was up 15.8 points or 1.45% 1,109.3 and Nasdaq was up 30 points or 1.38% to 2,197.8. US advancing sectors were Energy (+2.5%), Materials (+2.3%) and Industrials (+2.0%). CBOE VIX ended down 2% at 22.89.

Break Down Six or Nine Month Earnings into Quarterly Percentage Changes

Suppose your Company announces that earnings for the six months that earlier (+ 25%). Your "pet" stock inust be in great shape. You couldn't ask for better results—or could you? Beware. The Company reported earnings for six months. What did the stock earn in the last quarter, the three months ended in June? Maybe in the first quarter ended in March the stock earned $1.60 per share versus $1 (+ 60%). What does this leave for the last quarter ended June 30? Ninety cents versus one dollar. This is a terrible report, even though the way it was presented to you sounded terrific. If you own common stock in a Company whose earnings had been up 60% and they came out with a Statement of $.90 versus $1 (down 10%), you had better wake up. The outfit might be deteriorating.
You can't always assume that because an earnings report appears to be rosy, everything is fine. You have to look deeper and not accept the reassuring manner of corporate news releases reported in your favorite newspaper.

What Is a Normal Stock Market Cycle?

Most bull (up) market cycles last two to four years and are followed by a recession or bear (down) market and eventually another bull market in common stocks.

In the beginning phase of a new bull market, growth stocks are usually the first sector to lead the market and make new price highs. Heavy basic industry groups such as steel, chemical, paper, rubber, and machinery are commonly more laggard followers.

Young growth stocks will usually dominate for at least two bull market cycles. Then the emphasis may change for the next cycle, or a short period, to turnaround or cyclical stocks or newly improved sectors of the market, such as consumer growth stocks, over-the-counter growth issues, or defense stocks that sat on the sidelines in the previous cycle.

Last year's bloody bums become next year's heroes. Chrysler and Ford were two such spirited turnaround plays in 1982. Cyclical and turnaround opportunities led in the market waves of 1953—1955, Requiring a company to show two consecutive quarters of sharp earnings recovery should put the earnings for the latest twelve months into,
or very near, new high ground.

If the 12 months earnings line is shown on a chart, the sharper the upswing the better. This will make it possible in many cases for even the "old dog" about-face stock to show some annual growth rate for the prior five-year time period. Sometimes one
quarter of earnings turnaround will suffice if the earnings upswing is so dramatic that it puts the 12 months ended earnings line into new highs.

1963-1965, arid 1974-1975. Papers, aluminums, autos, chemicals, and plastics returned to the fore in 1987. Yet, even in these periods, there were some pretty dramatic young growth stocks available. Basic industry stocks in the United States frequently represent older, more inefficient industries, some of which are no longer internationally competitive and growing. This is perhaps not the area of America's uture excellence.

Cyclical stocks' price moves tend to be more short-lived when they do occur, and these stocks are much more apt to suddenly falter and encounter disappointing quarterly earnings reports. Even in the stretch where you decide to buy strong turnaround situations, the annual compounded growth rate could, in many cases, be 5% to 10%.

New Cycles Create New Leaders

Each soaring new cycle in the stock market will catapult fresh leadership stocks to the attention of the market, some of which will begin to be called growth stocks. The growth record in itself, however, is only a starting point for would-be victorious investors, and it should be the first of many earnings measurements you should check.
For example, companies with outstanding five-year growth records of 30% per year but whose current earnings in the last two quarters have slowed significantly to + 15% and + 10% should be avoided in most instances.

Check the Stability of a Company's Five-Year Earnings Record

While the percentage rate of increase in earnings is most important, an additional factor of value, which we helped pioneer in the measurement and use of, is the stability and consistency of the past five years' earnings. We display the number differently than most statisticians do.

Our stability measurements are expressed on a scale from 1 to 99. The lower the figure, the more stable the past earnings record. The figures are ca^ulated by plotting quarterly earnings for the last five years and fitting a trend line around the plot points to determine the degree of deviation from the basic earnings trend.

Growth stocks with good stability of earnings tend to show a stability figure below 20 or 25. Equities with a stability rating over 30 are more cyclical and a little less dependable in their growth. All other things being equal, you may want to choose the security showing a greater degree of consistency and stability in past earnings growth.
Earnings stability numbers are usually shown immediately after a company's five-year growth rate, although most analysts and investment services do not bother to make the calculation

EARNINGS GROWTH RATE (STABILITY) RANK
1983-87        + 31%                          6
1981-85         + 19%                         8
1979-83         + 19%                         8
Earning* stability rank

If you primarily restrict your selections to ventures with proven growth records, you avoid the hundreds of investments having erratic earnings histories or a cyclical recovery in profits that may top out as they approach earnings peaks of the prior cycle.

How to Weed Out the Losers in a Group

When you investigate a specific industry group, using the five-year growth criteria will also help you weed out 80% of the stocks in an industry. This is because the majority of companies in an industry have lackluster growth rates or no growth.
When Xerox was having its super performance of 700% growth from March 1963 to June 1966, its earnings growth rate averaged 32% per year. Wal-Mart Stores, a discount retailer, sported an annual growth rate from 1977 to 1990 of 43% and boomed in price an incredible 11,200%. Cisco Systems growth rate in October 1990 was an enormous 257% per year and Microsoft's was 99% in October 1986, both before their long advances.

The fact that an investment possesses a good five-year growth record doesn't necessarily cause it to be labeled a growth stock. Ironically, in fact, some companies called growth stocks are producing a substantially slower rate of growth than they did in several earlier market eras. These should usually be. avoided. Their record is more like a fully matured or nearly senile growth stock. Older and larger organizations frequently show slow growth.

Insist on Both Annual and Current Quarterly Earnings Being Excellent

We prefer to see current quarterly earnings accelerating or at least maintaining the trend of several past quarters. A standout stock needs a sound growth record during recent years but also needs a strong current earnings record in the last few quarters. It is the unique combination of these two critical factors, rather than one or the other being outstanding, that creates a superb stock, or at least one that has a higher chance of true success.

Investor's Business Daily provides a relative earnings ranking (based on the latest five-year annual earnings record and recent quarterly earnings reports) for all common stocks shown in the daily NYSE, AMEX, and OTC stock price quotation tables.

More than 6000 stocks are compared against each other and ranked on a scale from 1 to 99. An 80 earnings per share rank means a company's current and five-year historical earnings record outclassed 80% of all other companies.

The earnings record of a corporation is the most critical, fundamental factor available for selecting potential winning stocks.

How Price-Earnings Ratios Are Misused

Many Wall Street analysts inspect the historical high and low price-earnings ratios of a stock and feel intoxicating magic in the air when a security sells in the low end of its historical P/E range. Stocks are frequently recommended by researchers when this occurs, or when the price starts to drop, because then the P/E declines and the stock appears to be a bargain.

Much of this kind of analysis is based on questionable personal opinions or theories handed down through the years by academicians and some analysts. Many "green" newcomers to the stock market use the faulty method of selecting stock investments based chiefly 011 low P/E ratios and go wrong more often than not.

This system of analysis often ignores far more basic trends. For example, the general market may have topped out, in which case all stocks are headed lower and it is ridiculous to say "Electronic Gizmo" is undervalued because it was 22 times earnings and can now be bought for 15 times earnings. The market break of 1987 hurt many value buyers.

The Wrong Way to Analyze Companies in an Industry

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Another common, poor use of price-earnings ratios by both amateurs and professionals alike is to evaluate the stocks in an industry and conclude that the one selling at the cheapest P/E is always undervalued and is therefore, the most attractive purchase. This is usually the company with the most ghastly earnings record, and that's precisely why it sells at the lowest P/E.

The simple truth is that stocks at any one time usually sell near their current value. So the stock which sells at 20 times earnings is there for one set of reasons, and the stock that trades for 15 times earnings is there for other reasons the market already has analyzed. The one selling for seven times is at seven times because its overall record is more deficient. Everything sells for about what it is worth at the time.

If a company's price level and price-earnings ratio changes in the near future, it is because conditions, events, psychology, and earnings continue to improve or suddenly start to deteriorate as the weeks and months pass.

Eventually a stock's P/E will reach its ultimate high point, but this normally is because the general market averages are peaking and starting an important decline, or the stock definitely is beginning to lose its earnings growth.

High P/E stocks can be more volatile, particularly if they are in the high-tech area. The price of a high P/E stock can also get temporarily ahead of itself, but so can the price of low P/E stocks.

Why You Missed Some Fabulous Stocks!

While these figures are merely averages, they do strongly imply that if you were not willing to pay an average of 20 to 30 times earnings for growth stocks in the 40 years through 1993, you automatically eliminated most of the best investments available!
P/Es were higher on average from 1953 to 1970 and lower between 1970 and 1982. From 1974 through 1982, the average beginning P/E was 15 and expanded to 31 at the stock's top. P/Es of winning stocks during this period tended to be only slightly higher than the general market's P/E at the beginning of a stock's price advance.

High P/Es were found to occur because of bull markets. With the exception of cyclical stocks, low P/Es generally occurred because of bear markets. Some OTC growth stocks may also display lower P/Es if the stocks are not yet widely owned by institutional investors.

Don't buy a stock solely because the P/E ratio looks cheap. There usually are good reasons why it is cheap, and there is no golden rule in the marketplace that a stock which sells at eight or ten times earnings cannot eventually sell at four or five times earnings. Many years ago, when I was first beginning to study the market, I bought Northrop at four times earnings and in disbelief watched the outfit decline to two
times earnings.

Arc Price-Earnings Ratios Important?

Now that we've discussed the indispensable importance of a stock's current quarterly earnings record and annual earnings increases in the last five years, you may be wondering about a stock's price-to-earnings (P/E) ratio. How important is it in selecting stocks? Prepare yourself for a bubble-bursting surprise.

P/E ratios have been used for years by analysts as their basic measurement tool in deciding if a stock is undervalued (has a low P/E) and should be bought or is overvalued (has a high P/E) and should be sold.

Factual analysis of each cycle's winning stocks shows that P/E ratios have very little to do with whether a stock should be bought or not. A stock's P/E ratio is not normally an important cause of the most successful stock moves.

Our model book studies proved the percentage increase in earnings per share was substantially more crucial than the P/E ratio as a cause of impressive stock performance. During the 33 years from 1953 through 1985 the average P/E for the
best performing stocks at their early emerging stage was 20 (the Dow Jones Industrial's P/E at the same time averaged 15). While advancing, these stocks expanded their P/Es to approximately 45 (125% expansion of P/E ratio).

Some High P/Es That Were Cheap

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It should be remembered that in a few captivating smaller-company growth situations that have revolutionary new product breakthroughs, high P/E ratios can actually be low. Xerox sold for 100 times earnings in 1960—before it advanced 3300% in price (from a split-adjusted price of $5 to $170). Syntex sold for 45 times earnings in July 1963, before it advanced 400%. Genentech was priced at 200 times earnings in the over-the-counter market in early November 1985, and it bolted 300% in the next five months. All had fantastic new products.

Don't Sell High P/E Stocks Short

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When the stock market was at rock bottom in June 1962, a big, heavyset Beverly Hills investor barged into the office of a broker friend of mine and in a loud voice shouted Xerox was drastically overpriced because it was selling for 50 times earnings. He sold 2000 shares short at $88.

After he sold short this "obviously overpriced stock," it immediately started advancing and ultimately reached a price equal to $1300 before adjusting for stock splits. So much for amateur opinions about P/E ratios being too high. Investors' personal opinions are generally wrong;markets seldom are.

Some institutional research firms in recent years published services and analyses based on the principle of relative P/E ratios for companies, compared to individual company earnings growth rates. Our detailed research over many cycles has shown these types of studies to be misleading and of little practical value.

The conclusion we have reached from years of in-depth research into winning corporations is that the percentage increase and acceleration in earnings per share is more important than the level of the stock's P/E ratio. At any rate, it may be easier to spot emerging new trends than to accurately assess correct valuation levels.

In summary: Concentrate on stocks with a proven record of significant annual earnings growth in the last five years. Don't accept excuses; insist the annual earnings increases plus strong recent quarterly earnings improvements be there.