Unitech

Infosys

http://www.thehindubusinessline.com/iw/2008/06/15/stories/2008061550200903.htm

Tata Steel

Kaveri Seed Company : Buy

http://www.thehindubusinessline.com/iw/2008/06/15/stories/2008061550701100.htm

KSK Energy Ventures IPO : Avoid

http://www.thehindubusinessline.com/iw/2008/06/22/stories/2008062250641100.htm

Somi Conveyor Beltings — IPO : Avoid

http://www.thehindubusinessline.com/iw/2008/06/22/stories/2008062250631100.htm

Fixed Maturity Plans: Optimizing risk

http://www.thehindubusinessline.com/iw/2008/06/22/stories/2008062250300800.htm

Vishal Retail: Book Profits

http://www.thehindubusinessline.com/iw/2008/06/22/stories/2008062250571100.htm

Maruti Suzuki : Buy

http://www.thehindubusinessline.com/iw/2008/06/22/stories/2008062250561100.htm

State Bank of India

http://www.thehindubusinessline.com/iw/2008/06/15/stories/2008061550200901.htm

Reliance Industries

http://www.thehindubusinessline.com/iw/2008/06/15/stories/2008061550200900.htm

Tata Elxi : Buy

http://www.thehindubusinessline.com/iw/2008/06/15/stories/2008061550711100.htm

BGR Energy Systems: Buy

http://www.thehindubusinessline.com/iw/2008/06/15/stories/2008061551360100.htm

How to open a demat account

The Hindu BusinessLine had a good article on how to open a demat account. Some excerpts:

A demat or ‘dematerialised’ account holds shares in electronic form, thus saving you the bother of holding shares in paper form. Possessing a demat account is now a prerequisite for stock market investments.

Demat services are provided by banks, financial institutions and stock broking houses. The broking houses in such cases also act as DPs (depository participants) intermediating between the depositories — CDSL or NSDL and the investor. To open a demat account, you have to make an application to a DP and submit required documents. Once you have a demat account to your name, you can open a trading account with a broker of your choice.

The following steps would help you open a demat account:

1. Look out for a DP
There are several institutions that offer DP services. You have two options. Either you choose a bank/financial institution or a stock broker who could provide you the DP services as well. The factors that guide your selection should be the charges and locational convenience.

Though the rates change, the charges normally go under the following heads:

Account opening fee

Annual maintenance fee

Transaction fee

Besides the above, depository participants also charge service tax as applicable. A bank or other DP may sometimes waive the initial account opening fees.

2. Get the documents in place
For opening a demat account one needs to provide a set of documents to the agent. They are:

Duly completed account opening form and passport size photos;

A copy of PAN card as proof of identity;

Personalised cheque/Copy of the bank passbook

A copy of passport/voter ID/ ration card as a proof of address

Signing of the DP-investor agreement.

On giving the above papers, the agent would complete the other formalities with the depository and facilitate opening of the account. You would then be given a unique account number (BO ID- Beneficiary Owner Identity), which would serve as a reference number for all further transactions. After that you, must also collect delivery instruction (DI) slips from the DP. A DI slip has to be filled and sent to the DP on every delivery (sale of shares) you make. DI slip is an instruction to the DP to debit your account and credit the broker’s account with the specific stock.

Reading between the lines of Analyst-speak

The Hindu BusinessLine caught up with Mr Siva Nathan, Associate Professor in the School of Accountancy of Robinson College of Business, Georgia State University, US for an interview. The author of ‘The Effect of Investment Banking Relationships on Financial Analysts’ Earnings Forecasts and Investment Recommendations', he speaks to The Hindu BusinessLine on how analyst calls can be biased. Check the full article here: http://www.blonnet.com/iw/2008/01/06/stories/2008010650801300.htm .

Some excerpts:

In the US, most sell-side analysts work for full-service brokerage firms (FSBFs) such as Merrill Lynch, Goldman Sachs, Morgan Stanley, etc. These firms have three major departments:

The research department, where the analyst works.

The investment banking (IB) department, which does the IPOs (initial public offers), bond issues, seasoned equity offerings (firm is already public but is issuing more shares), and M&A (merger and acquisition).

This department is very profitable and the dollars involved are huge.

The trading department, which buys and sells shares on behalf of the brokerage firm’s customers and earns brokerage commission.

My research focused primarily on the relationship between the research department and the investment banking department of the firm.

I found that sell-side analysts working for the firm were more optimistic about a company (relative to other analysts following the same company) both in terms of earnings forecasts and investment recommendations when their brokerage firm had an investment banking relationship with that company.

The analysts were optimistic because they were rewarded based on getting investment banking business for their firm.

The companies the analysts are following will give such business to that firm only if that firm’s analyst is optimistic about that company.

A lot of the blame for the collapse of the Internet firms in the US was traced to the over-optimism of the sell-side analysts working for brokerage firms.

Overall, an analyst has incentive to be optimistic for three reasons:

First, being optimistic keeps an analyst in the good books of management. Why would management talk to an analyst who is negative about the company?

Second, issuing buy recommendations generates more trading commission for the brokerage firm than sell recommendations.

Third, being optimistic generates investment banking (IB) business for the brokerage firm.

Advice to investors:

An analyst’s pessimistic outlook is more trustworthy than his/her optimistic outlook.

Also, an individual investor should not try to trade based on information that has just been released, because it is too late.

That information has already been released privately and the market has probably adjusted before the individual investor can trade.

Ground rules for investing

Chanced upon a very good article on Value Research Online that gave a couple of very logical rules to follow when investing. They include:

1. Develop a Plan
2. Keep It Simple
3. Ignore the hot stocks and funds
4. Invest Regularly
5. Buy and Hold
6. Start Early

Read the explanation to the points here: http://www.valueresearchonline.com/story/h2_storyView.asp?str=10055

Investment Nuggets: George Soros

George Soros, founder of Quantum Fund is one of the most successful hedge fund investors ever and is one of the top billionaires of the world. The Hindu BusinessLine carried a piece on his strategies. Check it here: http://www.blonnet.com/iw/2008/03/02/stories/2008030250721501.htm

George Soros was a short term investor and sought to make a killing whenever an opportunity arose. His to investment tenets include:

The first priority is preservation of capital.

Be risk averse.

Develop a personal investment philosophy, an expression personality.

No two highly successful investors have the same approach.

Develop a personal system for selecting, buying, and selling investments.

Diversification is for the birds.

Do everything possible to legally minimize taxes.

Only invest in what is understandable.

Do not make investments that do not meet personal criteria. Learn to effortlessly say no.

Always search for new investment opportunities that meet personal criteria, and engage in research.

A few of his advice:

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

“The prevailing wisdom is that markets are always are right. I take the opposite position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. This line of reasoning leads me to look for the flaw in every investment thesis. Also, when there is a discrepancy between my expectations and the actual course of events, it doesn’t mean that I dump my stock. I re-examine the thesis and try to establish what has gone wrong. I may end up actually adding to my position rather than dumping it. But I certainly don’t stay still and I don’t ignore the discrepancy.”

Time to invest in broking firms?

Priya Kansara has a good story on the valuations of stock broking firms. She believes that it is time to selectively accumulate broking stocks with a long term perspective, because of the sharp U turn in valuations of stock broking firms ever since the mid-January market crash.

While companies such as India Infoline and IL&FS Investsmart are down by 55 per cent and 33 per cent, respectively in 2008 till date, newly listed companies such as Motilal Oswal, Edelweiss Capital and Religare are not far behind with their stock having tanked by 52 per cent, 49 per cent and 26 per cent, respectively from the closing price of their listing day (between September and December 2007).

She also follows it up with some company specific analysis:

India Infoline

India Infoline has the most de-risked revenue model with a little over 55 per cent of the total revenues coming from the equity brokerage business—the least among listed broking companies. This is probably one reason for the company being the best pick among most mutual fund managers.

Thanks to its diversified portfolio, the company bucked the trend and reported a sequential rise of about 25 per cent in its operating income and a marginal one per cent increase in net profit in the March 2008 quarter. The growth in FY08 was largely driven by its institutional broking business, financing income and better utilisation of its branch network, which has grown rapidly in the past few years.

Indiabulls Securities

Indiabulls Securities got listed on April 2, 2008 after the de-merger of the stock broking business from Indiabulls Financial Services, which now operates the financial services business. Since its listing, the stock has bucked the overall trend and has gained about 12 per cent.

IL&FS Investsmart

IL&FS Investsmart, held by strategic investors like IL&FS (30 per cent) and USA-based, E*Trade (about 44 per cent), provides a variety of products such as retail broking, online trading, distribution of financial products, portfolio management services, commodity trading, insurance broking, institutional equity, loan syndication and investment banking through its 300-odd offices across the country.

Excluding India Infoline, the company witnessed least downside in its operating income on a sequential basis compared to other broking players, which reinforces its advantage of having a well diversified portfolio of products and services.

Motilal Oswal Financial Services

While institutional and retail broking contribute significantly to the revenues currently, its share is coming down–equity brokerage as a percentage to total income came down from 88.5 per cent in FY07 to 84.7 per cent in FY08.
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Strong management, diversification in revenues and superior research capabilities instil confidence in the company's growth prospects. The stock trades at an attractive valuation of 7 times and 6 times based on estimated FY09 and FY10 earnings, respectively.

Edelweiss Capital

The company is among the largest in the institutional broking segment with 9 per cent market share and is a leader in the derivatives segment with more than a 13 per cent market share।

Like Motilal Oswal, Edelweiss is making attempts to have a well-diversified portfolio to include finance against shares, asset and wealth management, insurance and third party distribution from the current brokerage and arbitrage activities.

Amid this scenario and compared to its closest peer in terms of size, India Infoline, Edelweiss stock looks rightly priced, and will look attractive on some declines.

Religare Enterprises

Though the company is increasingly diversifying its revenue profile, it will continue to significantly depend on retail broking (about 90 per cent of total revenues) and margin finance (broking volumes are backed by its large margin finance book) business for growth and earnings for the next few years.

Thus, taking these factors into consideration, the company's valuation of about 20.5 times and 17 times its estimated FY09 and FY10 earnings, respectively looks stretched.

Emkay Share and Stock Brokers

However, the company is currently predominantly dependent on its brokerage business (85.7 per cent of consolidated revenues in nine months ended December 2007) and scaling up of insurance and commodity broking businesses will take some time. This makes the stock relatively risky given the competitive nature of brokerage industry and Emkay's smaller scale of operations.

Geojit Financial Services

The company recently formed 50:50 joint venture with BNP Paribas Securities Asia for the institutional broking business. The company plans to leverage its network and NRI client base for distribution of third party products and also take advantage of fund management expertise of BNP Paribas to scale up its PMS services.

All these efforts should lead to a successful de-risking of revenues and greater profitability. However, as compared to its peers and size of operations, the stock looks a little overpriced.

Read the entire article here: http://business-standard.com/common/storypage_c.php?leftnm=10&autono=323319

Fundamentals of Money Market in India

A good presentation by Amit Ranjan that gives a clear picture of the Indian Money Market. Always good to start from the basics, to get an idea of the various options available. This presentation targets the novice with all the required jargon to understand and decipher monetary policy.

A few excerpts he had given:
* CRR (Cash Reserve Ratio) is the amount of cash that commercial Banks have to keep with the RBI. This has been raised by over 175 basis points over the year. The idea is to drain excess liquidity. This in turn should work to contain inflation.
* Reverse repo rate(6%) is the rate at which RBI absorbs liquidity and the repo rate(7.75%) is the rate at which it injects liquidity.
* The call money market should theoretically operate between these two rates.
* The other ways of soaking liquidity from the market is Market Stabilization scheme (MSS) and buying Dollars.

Why Islam

A very well presented video on what Islam is really about. Pray that you watch the whole video, and understand clearly the true message of islam. I get all these weird questions, rather remarks from people, which I just could not properly answer. Mostly because I myself have insufficient knowledge to truly explain what Islam is all about. A good effort by Baba Ali to put up this simple video. Hope it dispels some of the confusion around.

The Ummah Films channel on Youtube is by Baba Ali, who creates videos on Islamic messages, primarily targeted at Muslims. Though 'Why Islam' is a normal video, most of his videos poke fun at unislamic Muslim practices and are humorous in nature.

What I need to give to this person and his videos were that his humorous videos kindled my thirst for Islamic knowledge and inspired me to think and seek further knowledge. Insha Allah, may Allah give him the reward for that and purify his intentions.

My favorite videos in the channel are(in no particular order):

Looking for a Spouse online

Who hijacked Islam?


Muslim characters at Work

Fisibilillah Discount

The Haram Police

Videos that non-Muslims could also learn from and appreciate:

The Art of Complaining

Racism and Pride

Escaping the Holiday party

Looking for a Spouse online

If you have a question yourself, go ahead and submit it to the Ask Baba Ali series at: http://www.askbabaali.com/.

See the entire Youtube channel here: http://www.youtube.com/profile?user=ummahfilms.

A couple of pple have also come together under the Ummah Films banner to make a film, Tommorrow Never Comes
. Not much, but has a pretty good message to it.

Investment Nuggets: Benjamin Graham

The Hindu BusinessLine published a column on the strategies of Benjamin Graham. Read the full article here: http://www.blonnet.com/iw/2008/05/04/stories/2008050450401302.htm

Graham advised investors to keep their equity exposure within 75 per cent of their net assets. For the more adventurous investors, a 100 per cent exposure to equity could be considered in case the investor met the following guidelines:

Keep enough cash to take care of 12 months of your family expenses.

Do not panic and sell stocks but actually buy more stocks of solid stable companies as prices continued to slide during the bear markets.

You understand and are able to differentiate between hope and hype.

“While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”

“Many sceptics, it is true, are inclined to dismiss the whole procedure (chart reading) as akin to astrology or necromancy; but the sheer weight of its importance in Wall Street requires that its pretensions be examined with some degree of care.”

“The individual investor should act consistently as an investor and not as a speculator. This means…that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.”

The power of Compounding

My net monthly salary is Rs. 28,000. I plan to invest Rs. 8,000 every month
through SIPs (Rs. 5,000 in ELSS and Rs. 1,000 each in three equity funds). My target is to build a corpus of Rs. 1 crore
after 20 years. Please suggest in regards to the ELSS fund and three equity
funds that I should invest in to achieve my goal. -Ved Prakash Mishra

Find out how Value Research Online helped Ved with his goals here.