Stock You can buy for decent gains - LIC Housing Finance Ltd

LIC Housing Finance Ltd has strong fundamentals. Long-term investors can accumulate the stock at its current level.

The company is one of the best-managed non-banking finance companies (NBFCs) in the country and longterm investors can accumulate the stock at its current level.

BUSINESS:

LIC Housing Finance provides housing loans mainly to individuals. It is the second-largest housing finance company in the country after Housing Development Finance Corp (HDFC). Its balance sheet size has nearly trebled in the five years from FY03-08. During this period, it has been one of the fastest growing NBFCs. This is due to the strong economic growth seen in India and the rising level of disposable incomes, which has fuelled the demand for housing loans.

 

Also, since last year, LIC Housing Finance has stepped up its promotional activities, which has improved its share in housing loans from 5% to 7%. This is commendable as much larger players like HDFC and commercial banks, which have a significant presence in housing loans, dominate this market. Since the beginning of the current financial year, the financial sector has been facing the brunt of rising interest rates and slow disbursements. LIC Housing Finance has been able to weather the storm, which is visible from its growth in interest income. The company’s interest income grew by more than 30% year-on-year for the six months ended September ’08. In fact, even its disbursements were up 30% during this period, which is in line with its performance last year.

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NBFCs typically face delinquency risks, which surface during times of a slowdown, when borrowers are not able to make the interest payments (EMIs) on their loans. LIC Housing Finance’s net non-performing assets (NPAs) stood at less than 1% of its net advances as of end-September ’08, compared to 1.65% a year ago. This shows that the company’s quality of loan book has improved tremendously in the past one year and it has been efficient in managing delinquency risks.

The company is also efficient in managing liquidity risks. This is evident as the proportion of assets maturing in one year is similar to the proportion of liabilities maturing within one year. This aspect is extremely vital as NBFCs which have financed long-term assets through short-term sources of finance face tremendous pressure in a scenario of tightening liquidity. Hence, it is clear that LIC Housing Finance has been able to efficiently manage all kinds of risks during testing times.

VALUATIONS:

The stock is trading at a price-to-earnings (P/E) multiple of 3.9 times. Hence, the stock appears to be cheap considering its high earnings growth, as its net profit in the past 12 months has grown by more than 40%. Though it is a known fact that in the case of finance companies, the stock trades at a lesser multiple than earnings growth, we feel this is overdone in the case of LIC Housing Finance, as the P/E multiple is just a fraction of its earnings growth.

The market has already factored in a worst-case scenario for all NBFCs, including LIC Housing Finance. The company’s current low valuations appear to be attractive for long term investors, as LIC Housing Finance’s stock price has fallen as much as that of other NBFCs, even though its fundamentals are much better than theirs.

Source: Economic times

Solar power - Huge Earning Opportunities for companies

Globally, energy is fast emerging as a critical issue, especially as existing power generation options have limitations in terms of growth potential and long-term sustenance. solar power is fast emerging as the most viable and eco-friendly power generation option for tomorrow—with no moving parts, no noise and zero emissions.

With the Sun supplying 10,000 times the amount of energy needed by Earth every year and with technological breakthroughs fast lowering harnessing and distribution costs, solar power is fast emerging as the most viable and eco-friendly power generation option for tomorrow—with no moving parts, no noise and zero emissions.

Solar Market grew by 35% over in the last 20 years. In Year 2006, the global market for PV energy was 2 GW, grew by 41% compared to the previous year. Market is projected to grow from $15.6 Billion in 2006 to $69.3 Billion by 2015. Further California Solar Initiative should add another incremental $13.2 Billion cumulatively.

Two companies we know well and have potential to become Photo voltaic segment leaders and so the future Multi bagger stocks are:

MOSER BAER INDIA LIMITED & XL TELECOM & ENERGY LTD.

The PV space is expected to grow five-fold to a global market size of Rs 300,000 crore ($70 billion) by Year 2015 as per Clean Edge Energy research. As the group is one of the early entrants in this space, and having exposure to domestic and international markets since 1994, Saptashva is well-positioned to leverage this explosive growth curve.

UBS’s global demand estimate is for solar electricity to grow from 5GW in 2008 to 22GW by 2012 (a 46% CAGR). It expects Spain, Italy, and France to increase to 35% by 2012 (up from 27% in 2007) of the global market and drive solar growth in the near term. Its estimate for global solar demand in 2010 is 10GW, which is the base case scenario. The aggressive case assumes faster adoption of solar PV in key growth markets of Spain and the US, with the approval of higher feed-in tariffs in Spain and passage of an energy bill in the US, which includes the extension of Solar Investment Tax Credits with removal of the residential cap and utility exemption.

Given the uncertainty of solar in the US market in 2009 and 2010, UBS believes it is more prudent to assume the conservative scenario. However, if the US Energy Bill passes with the solar investment tax credits included, UBS believes the more likely scenario would be closer to its aggressive case of 13GW by 2010.

The conservative scenario assumes a five-year CAGR of 30%, resulting in 5.5GW by 2010, and the aggressive scenario assumes a five-year CAGR of 55%, resulting in 13GW in 2010. The conservative scenario is based on sustaining the 2002-07 solar CAGR of 30%. Global solar demand reached 2GW in 2006, and UBS believes demand could grow by 70% in 2007 to reach 3.4GW lead by demand growth in Spain and Germany. It estimates that global demand will grow at a steady rate above 40% year over year until 2011, as solar PV generated electricity cost approaches grid electricity in regions with high retail electricity rates and high solar irradiance.

The 10 Most Valuable Companies in BT 500

Rankings in BT 500 are based on average market capitilisation for April - October period. It serves handy as barometer India Inc.'s perofrmance in tough times.

For the sixth year in a row, Mukesh Ambani’s Reliance Industries (RIL) grabbed the top slot of India’s most valuable company. Despite the carnage on Dalal Street, its average market cap increased by a handsome Rs 32,400 crore. Younger brother Anil, who took another company to the stock exchanges this year, Reliance Power, wasn’t so lucky, in taking over his elder brother in terms of market cap. The Reliance Power listing was expected to polevault Anil into a bigger league, but that didn’t quite happen.

The biggest surprise, however, came courtesy the public sector pack, where the overall market cap for the 50 companies in the list increased by almost Rs 1 lakh crore; in percentage terms that works out to a 10 per cent increase. The biggest contributors to the massive rise in the value of the state-run companies were NMDC and MMTC, whose combined market cap increased by over Rs 1.3 lakh crore. Although the floating stock of these companies is less than 2 per cent, the increase in their share price shows that the market sees value in them (considering there is hardly any operator-driven activity in state-run companies).

The sentiment on the Street is clearly bearish, and analysts feel the market has some way to go before it finds its bottom. In a technical analysis report, Enam Securities expects the Sensex to bottom-out in the region of 7,150-6,150. Now’s the time when the men in the BT 500 will be separated from the boys. This rough patch will provide an opportunity for cash-rich players to consolidate their positions, and result in shakeout of relatively weak players.
Sourced From: Businesstoday.in

Investment Guru Rakesh Jhunjhunwala*––**Who creates wealth? Who destroyed wealth?*

Investment Guru Rakesh Jhunjhunwala, Raamdeo Agrawal of Motilal Oswal and Sanjoy Bhattacharya, Founder and Partner, Fortuna Capital, spoke to BSE and NSE member Ramesh Damani and tried to find the answer to an important question*––**Who creates wealth? Who destroyed wealth?*

Damani introduced the discussion thus - "There is a Chinese symbol that consists of two characters, the top character has danger, and the bottom character has opportunity. Too often, when one focuses on danger, one forgets the opportunities present. The question before the panel and the house today is that in this current fall in the market, one of the great lifetime opportunities to load up on bargain, blue-chip stocks for the next 10-20 years or is the market blinking red and going into a deep freeze. That is the theme – the good, great and gruesome companies that we will select.*" *

According to Agrawal, while tapping a company as a good investment opportunity, "What is important with great companies because the longevity of these companies are perpetual - 50-100 years; what is important is not to buy them young or mature, but to buy them at the right price – at an attractive or reasonable price not at a throwaway price. You will never get it. So, it is not important to catch them young. Once it is demonstrated that they are great then later it can be made part of the portfolio at any point if you can find them at a reasonable price."
Bhattacharya is reasonably sure that India will have an aggregate output growth at something in double-digits for the next ten years, unless something goes seriously wrong. "Even if America goes into a recessionary environment for the next 3-4 years, and that is much more than what people think right now –– people don't think that it is going to last till 2011-2012 and despite that, India will have the ability for a number of reasons, which are very well known- like demographic, domestic, consumption number of things. I see aggregate demand here growing at 12-13%. It is given that it is going to grow at 12-13%; I don't think there is a need to be obsessed with those. I think the one thing that I would for is cash flow."

Jhunjhunwala said, "I always say it is important what you buy and it is not important in what size you buy. India is (one of) those who (would) see humongous growth for the next twenty-five years. So if you pick up some companies who are going to cater to Indian markets and you have some business superiority and you feel available at reasonable valuations, I think this is the opportunity in that time when it is the darkest and everybody is so pessimistic that you get the best investment opportunities."

*Here is a verbatim transcript of the exclusive interview with **Rakesh Jhunjhunwala, Raamdeo Agrawal and Sanjoy Bhattacharya* *on CNBC-TV18. Also watch the accompanying video.*
**

*Q: Great, good and gruesome as you put it. What are the characteristics of great companies?*
*Agrawal*: A great company, to put very aptly, is like a bank account where you get very high rates of interest, and that is say 55-60%. That is the kind of productivity of capital, which is very high. Once it starts with that, over the years, it keeps increasing. So the entry barrier or competitive advantage or popularity of the product keeps increasing over a period of time, and doesn't remain static. That is called a great company. So, profits are high and profitability keeps growing over a period of time. That is a great company.

*Q: But great companies have to be caught young otherwise they give mediocre returns. For example buying Lever in 1993?*

*Agrawal*: What is important with great companies because the longevity of these companies are perpetual - 50-100 years. What is important is not to buy them young or mature, but to buy them at the right price – at an attractive or reasonable price not at a throwaway price. You will never get it.

So, it is not important to catch them young. Once it is demonstrated that they are great then later it can be made part of the portfolio at any point if you can find them at a reasonable price.
*Q: But the fall as such that we have had globally and in India, you would be able to find a lot of great companies now, because stock prices are down 60-80% on average?*

*Agrawal*: The first thing is, great companies are not that many that you can come across every day. There are I would say, out of 500 companies about 50% on tangible assets not on their declared return on networth. There are only 10 companies that are more than 50% return on tangible assets.

So, going by Buffett's example of See's Candies, there are only 10 companies that can be today be called as acknowledged great companies. So, all those companies where I have looked at their valuations are definitely much more reasonable than what they used to be 10 years back, but are nowhere at a throwaway price at which we could buy See's Candies at about 7-8 P/E multiple or 20% earnings on his purchase price. Right now you get dividend at best 3 or 4%. I think the best you can get is – Hero Honda is about 13 times, which is 7-8% earnings yield, and Glaxo at about 5%, HUL at about 4%.

*Q: One thing that startled me about the study was that growth is not necessary for a great company, it is the cash flow, it is the dividend, it is the return on equity.*

*Agrawal:* Yes because once you have started a great machine of earnings and dividends because what happens is whatever is earned for example 1,000 crore is earned or 500 crore is earned, it doesn't need even a penny of that to grow into the future. Even if it grows at 10%, entire 500 crore can be given back to you by way of dividend like Hero Honda. It doesn't need any capital for growing. So all the profit they make 1200-1300 crore, technically they can pay it out to the shareholders. What more you want, why do you need the growth? The issue is that the extreme of dividend – it literally becomes a growing bond maybe growing at 8-10%. The issue is, are you able to buy it at a reasonable price.

*Q: So the trick is to find a great price?*

*Agrawal:* Yes.

*Q: You were talking about how you visualize great companies, can you summarize them for us?*

*Jhunjhunwala:* I think the first thing is that there should be huge untapped market because I don't agree that – See's Candies would be one example out of 1,000 companies which have given great returns to investors I think 999 would have grown. Second thing I feel is that the great companies are very much returned to the capital profile of a company what is the capital investment - the capital investment they need everyday in order to grow their earnings and also their working capital profile because Nestle and Lever have partly been able to get this kind of return on capital employed because they are able to squeeze their suppliers and they are able to sell everything on cash. So the working capital profile.

Secondly, I think that every great company has some kind of a business superiority, it could be a brand - I think in Bharti's case it is marketing, so there is some kind of a business superiority - from title also it is marketing. So there has to be entry barriers into that business.

See's Candies is selling for forty years because See's Candies has some loyalty from its customers and that loyalty cannot be recreated by another client otherwise there would have been a capital society or where somebody will compete and some will create it.

I always say it is important what you buy and it is not important in what size you buy, so it is not great buying of bond at 25 times earnings 4*% *yield and I personally feel that maybe it is three-four or five or fifteen-twenty years but India is (one of) those who (would) see humongous growth for the next twenty-five years. So if you pick up some companies who are going to cater to Indian markets and you have some business superiority and you feel available at reasonable valuations, I think this is the opportunity in that time when it is the darkest and everybody is so pessimistic that you get the best investment opportunities.

When I bought Titan, its marketcap was above 125 crore and its debt was 600 crore. Today its turnover will be 4,000 crore this year and its debt will be less than 600 crore and I envisage it everybody is going to buy watch ten years later, everybody is going to buy jewellery and everybody is going to wear these things. So there is going to be huge demand.

So I think this is a real time and it is very easy to read about Mr Warren Buffet and his great accomplishments which undoubtedly are but to find those circumstances in which we can recreate what he has done is extremely dismal because those circumstances will not exist and secondly we don't have the discipline. What Indian investor lands up doing is buying multinational companies who have the worst corporate governance in this country, Satyam is nothing.

*Q: What would you look for in a great company?*

*Bhattacharya:* It is very difficult to add to what they said and to directly address your question, he made this point - we live in a country where growth is bound to be there, why this obsession with growth in a country where nominal GDP is growing at 12.5-13% anyhow and will grow. I think there was and the will there is an interregnum here and that interregnum should not be treated as hanging* *permanently.

So, I think yes you are right that this year it may not but if you look at a broader sweep of India's economy- we can argue about the numbers. But I am reasonably sure that this country will have aggregate output growth at something in double digits for the next 10-years, unless something goes seriously wrong, which I simply cannot visualize right now.

*Q: Globally also you do not visualize anything wrong?*

*Bhattacharya**:* Which affects India- I don't think that even if America goes into a recessionary environment for the next 3-4 years, and that is much more than what people think right now. People don't think that it is going to last till 2011-2012 and despite that India will have the ability for a number of reasons, which are very well known- like demographic, domestic, consumption number of things. I see aggregate demand here growing at 12-13%. It is given that it is going to grow at 12-13%; I don't think there is a need to be obsessed with those. I think the one thing that I would for is cash flow.

To answer your question there must be a tremendous focus on cash flow. I think the lesson of 2008- if I may and have never able to expect it, as well as Mr. Jhunjhunwala would have expressed it but I'll give this a shot is to focus on cash flow rather than newsflow - I think that is the big difference. People I don't think they have ever looked at cash flow.

I think the other thing, which is very important and I am surprised it hasn't been brought up so far. But to my mind it has primacy- if you want to buy great companies and being reflective of the Indian investor this is not something important, we keep on paying tribute to Buffet and great investors but we don't seem to recognize this. It is very important that capital allocation is rationa -- if capital allocation is irrational; then no matter how good the business, no matter how much cash flow it generates, it is not going to be a great investment.

I don't want to get into specifics but there is a business in this country; it is a fabulous business, first in the country to get into it, absolute money machine, doesn't require any incremental capital employed, had a great start, they generate a large amount of free cash flow but they just blow it up. They buy fixed assets, they buy a building for themselves to live in rather than rent it. They invest in bonds and debentures, they find ways to deal with the cash flow rather than pay dividend and that is what has prevented that company from achieving great business. It has greatness thrust upon it but could not get there.

*Q: A stock you have often mentioned – Bharti – good, great or gruesome?*

*Agarwal*: It's at the high end of good and yet it hasn't achieved greatness, because they have not paid a single penny, yet. There is huge cash flow; operating cash flow is more like 15-20%. But they have huge capital expenditure ahead and it's a debt free company. In fact take pride that they don't pay dividend so.

*Q*: Telecom same business, Bharti becomes a great company and TTML you say is a gruesome business why?

*Agarwal*: *TTML is a gruesome company, the underlying business is mobility and both of them have same business underlying. *

*Q*: *What did TTML do wrong*?

*Agarwal*: We have seen it all in the last five years. But they missed the first mover advantage, they got into wrong technology.

*Jhunjhunwala*: Bharti paid no price for the Delhi license. They paid a heavy price for the Bombay license.

*Agarwal*: TTML has only one circle which is very limited access which is Maharashtra and Goa, so they have very limited access and they have Sigma which is a handicap technology at least to start with. So everything went wrong with that company and this business requires a lot of capital, they kept on pumping capital and one good thing is that they had the Tata name.
*Jhunjhunwala*: So it was a bad thing that they would go and keep pumping capital. Putting good money on a bad thing.

*Agarwal*: They are so nice that they kept pumping capital we were so good that when they asked for a rights issue at Rs 21, we again gave them. So instead of getting dividends, we have been giving them money. And I wished them all the best.

*Q*: *The macroeconomic environment in India is improving considerably, isn't it?*

*Jhunjhunwala*: Improving? I don't know maybe next year there will be no oil subsidy, I don't know what the government is saying. As per my calculations if today Oil is 45/bbl, Indian Basket is 40/bbl, oil companies today are making a profit after providing for subsidy of at least Rs 50,000 crore at 47 to the dollar. What was said in June that there was a loss of Rs 2.45 lakh crore. So, Rs 3 lakh crore is going to come in, this country is going to be saved, this has such consequential effects, sulphur has gone from USD 800 to USD 90. I don't think there will be a fertilizer subsidy more than what they have provided for in the budget in this year.
Cumulatively they estimated at the peak fertilizer and fuel subsidy was going to be about 3 lakh and eight thousand crore. Next year it maybe not needed at all. This will have a very big effect on the value of the rupee, on government

 finances<http://www.moneycontrol.com/india/news/market-outlook/rakesh-jhunjhun...>, it will have a very big effect on liquidity because someone in the country had to pay this 3 lakh eighty thousand crore. The government may not have included in the budget but IOC had to get that money from somebody, if they don't get from government bonds then from government banks. So if you don't pay out Rs 3 lakh eighty thousand crore out of this country what will happen to the liquidity?

After that there are interest rates, one thing is that you have reduced excise duty across the board by 4%, commodity prices have halved. If I say that commodity prices constitute 50% of every product sold in this country, even if you pass on 40% of the benefit that is going to come to the producers, if commodity prices will sustain you will see a reduction in prices between 20-25%. And no manufacturer in his right mind today is going to look at volumes, at price he is going to look at volumes. After that if interest rates crash and I am buying an asset with interest rates, it will give me a cushion of 5-7% to 10% over the life of the asset in any asset that I buy. This is not Japan nor is it America.

*Q:* *This is not a corporate holiday for profits. If commodity prices, interest costs going down why should there be a holiday for corporate profits? *

*Agarwal*: I am not talking about individual group of companies. In aggregate, when you talk about India Inc, in 2003 the India Inc made – I am talking about all listed companies –about Rs 30,000 crore. In 2007-08, they made 3 lakh 11 thousand crore on a GDP of about Rs 40 lakh crore. This year say Tisco made a profit of about 10,000 crore, last quarter itself they made about Rs 5,000 crore. To replace Rs 10,000 crore you need many midsize companies.
*Jhunjhunwala*: In your study for earnings growth, you said you had 17% compounded growth over the last 15 years. But you have 12% normalised GDP growth. So to expect the corporate sector not to have growth of more than 5% and in between you have to exclude the companies who have been newly listed. In 1993, ONGC was not listed; today ONGC's profits are Rs 15-20,000 crore. So as a percentage of GDP the profits have also gone up because of the newly listed companies. So the profit growth that we have had over a period of time has not been anything out of the extraordinary. When you have 12% normal GDP growth and it is the efficient and large companies which are listed. So I don't think it is anything exemplary which is not sustainable.

*Agarwal*: 17% is not a problem but in the last five years you had more than 25% of earnings growth for the entire India Inc, 10 times in 5 years, at aggregate level. I am not disputing what Titan can do. *Q: Commodity prices are going down; globally we are heading into deflation – what are the risks of that? * *Bhattacharya*: I don't think that people will produce oil if it stays at USD 25 per barrel. I don't know why it is taken for granted that oil will remain at this price for ever.

*Q: Because Saudi Arabia and Venezuela need money to finance their own budgets? * *Bhattacharya:* But it is cartel.

*Q: And cartel as we know has never worked. * *Bhattacharya*: But in oil if the OPEC decides for some reason and this is a recessionary environment, the demand for oil is coming down and let's not forget that United States of America is the largest…

*Jhunjhunwala:* But no one is predicting. 88 million barrels is the daily consumption and they are going to cut 4 million, no one is predicting a fall of more than one million next year. So it's peculiar we don't know anything of the commodity market we should ask the Mr. Jim Rogers, he knows best.

*Bhattacharya:* I think all predictions are a complete waste of time, neither of us knows what is going to happen in the next 6 months. So I don't think we should get too carried away with forecasting. The value of forecasting is mainly to provide entertainment which is the part of the reason we are here but I don't think we should get carried away with the idea of forecasting.
Mr Agrawal has a very valid point and this is proven across economies, across the world, across economic environment there is mean reversion in* *corporate profits. This is a truth, nothing grows to the sky. If profits are grown at 25% for the last 5 years and taking Jhunjhunwala's point if that they can grow at 17-18% because you have a nominal GDP growth of 12%, that 25% to grow for 25 years we will have to have a period when it grows at 5% for the next 5 years and that is the period we are unfortunately looking at because they have grown 25% in the last five years. So its like heads and tails, it is very unlikely though you can have it..

*Q: Are you predicting? *

*Bhattacharya: *No, not predicting I am pointing out something that people learn in statistics which sadly in this country people have not had much exposure to, useful statistics. You can have 10 heads in a row equally you can have 10 tails in a row but the distribution of heads and tails, suggestthat those are outliers, so we shouldn't bank on outliers to make our judgment come right.

*Q: So flip a coin since you don't like prediction - 7,700 on Sensex will hold? * *Bhattacharya*: I think that is completely irrelevant to what you need to do today.

*Q: Which is what? * 

*Bhattacharya: *Basically buy, There are bunch of really high quality companies and even Rakesh has made this point, a bunch of really good companies available at very attractive prices, unless you are thinking about next 3 months what is the scare about buying these companies? If you have a 12-18 to 24 month outlook, you can buy high quality, really great businesses. And I will get to the level because I am no where near greatness, so I will talk about less great companies which are available at stunning prices. Take a company like Blue Star it is available at a stunning price in relation to what it has done - contracting, project, core air conditioning, heating etc it has compounded seven years return on capital employed of 37%, it has grown profits in excess of 27%. It has never had in the last 10 years a year in which absolute profits have grown and there has been no dilution in the last 10 years.

*Q: Just for disclosure of Sebi you have an ownership?*

*Bhattacharya: *Yes I do have a ownership*.*

*Q: Will 7,700 on Sensex hold? * 

*Jhunjhunwala:* I don't know about 7,700 because if commodities dip, we have very high weightage for the commodities but I think the broad market is going to hold and that is what the bond market is showing for the simple reason that I have never seen such pessimism in my life, I have never seen such depression in my life.

*Q: Have you seen such optimism like we saw in January?*

Jhunjhunwala: I have seen the 1992s one – this one is nothing. In 1992 it was worse. 1992 was 60 times earnings and fortunately there was no scam this time. That was the only difference. There optimism in 2001 – McKenzie said Indian software industry will grow 100%. Infosys profits will double every year. I have never seen such kind of optimism. I don't think we are anywhere near that kind of optimism and the Indian economy and India as a nation and we as a market had far greater places for this bull market in 2008 although there was a lot of excesses then what we had in 2000 or 1992.

*Q: 50 Indians own 40% of the GDP – that's pretty optimistic in terms of valuation. But your call is 7700 will hold – that's what you said in your study?*

Agarwal: I am pretty certain to the extent that's why I have put the word probably because still one could be wrong 5-10% but 90% probably 7700 as a bottom.

*Q: Is that generally in historical terms – great periods of wealth creation are followed by wealth destruction? *

*Agarwal*: This has been characteristic of Indian stock market<http://www.moneycontrol.com/india/news/market-outlook/rakesh-jhunjhun...>. I though a year or two back that this particular bull market is the first bull market led by earnings growth. So the foundations are solid. But again the story is the same because this time though you have solid earnings but the PE multiple came back all the way down from 30 to 10. The masses look at the price and not the value and that's where the problem is.
* *

*Jhunjhunwala*: People talk about deflation, lower inflation – they compare us with Japan, America, and Europe – they're all over 80s, we have just had puberty, we are young economy. Here my driver if he gets something cheaper, he increases the amount of shirts he buys or he increases the amount of foods he eats. So price deflation in India according to me is going to be a big spur to consumption. One of problem

*Q: Jim Rogers was quoted on television saying that equities is going to be an impaired asset class over the next 5-10 years. What would you say to that? * *Bhattacharya*: I think he was referring to the western world. But I read Mr. Rogers' comments in the light of what is happening in Western Europe and America because there your fundamental problem is that demand has been seriously impaired. The ability to stimulate demand is the challenge.

*Q: So, India will be an island? * *Bhattacharya*: I don't think we'll be an island. But I think what is very important, very fundamental and I would say it applies to large parts of Asia – I wouldn't say even India – I would venture to say there are many countries in Asia and that includes countries like China, Korea, I think what is going to happen is that increasingly we are going to see these countries become far more competitive in terms of their abilities to displace other manufacturers and providers of services. That increased competitiveness is what is going to lead eventually to a change in the way that these companies prosper in terms of their corporate profit, in terms of their ability to gain dominant positions and eventually the way they are valued.
**

Source : Moneycontrol.com .. Video Link -http://www.in.com/active18/watchnow/watchvideo_mc.php?autono=371778
-- Regards

Buying stocks? Take a bite of ETFs

Exchange Traded Funds don the role of a good teacher for lay investors, who have appetite for the equity market. They offer the best of both worlds — benefits of mutual fund and the convenience of stocks.
Index funds are for those who’d like to avoid choosing from a confusing spread of stocks and funds.
S. Hamsini Amritha
Tempted by the present “attractive” Sensex levels? Are you one of those convinced that this is a good time to enter the equity market? If yes, read on.
If you are not technically qualified to understand the nuances of a company’s financial statements, then the easy way to buy stocks is to invest in companies that are well-known — blue-chip companies traded on the stock exchanges for decades. There are two ways to do this. Buying large-caps
Based on the value of a company’s outstanding shares, companies are broadly categorised as large-, mid- and small-cap companies. Companies such as Reliance Industries, Infosys, Hindalco or, for that matter, any of the Sensex constituents (the large caps) are scrips that have withstood the test of time.
Though the prices of these stocks too have been beaten down since January, the fall in mid-cap and small-cap stocks is much higher than that of the Sensex.
While the latter shed 55 per cent during this period, mid-caps and small-caps registered a loss of over 60 per cent each. This is because large companies are expected to weather any economic slowdown better than their smaller peers.
Even within sectors, Sensex stocks have performed better than the mid- and small-cap stocks. For example, in the IT sector (whose performance in the stock market has been wobbly since January), while Infosys lost more than 30 per cent since January, HCL Technologies and Hexaware shed about 63 per cent and 75 per cent, respectively.
The same is the case with some other sectors such as power generation, telecom and capital goods. NTPC, a blue-chip scrip, lost about 32 per cent while the mid-cap Neyveli Lignite Corporation lost over 50 per cent.
Such trends are visible across most sectors, making the case stronger for first-time investors to stick to large-caps. Welcome to EFT!

How do you choose which Sensex stock to buy when it is a collection of India’s best-known names and each looking lucrative in its own way? To step-side this problem, you’ll need to buy the entire Sensex basket. But won’t that require a lot of money? Confused?
Welcome to ETFs, or Exchange Traded Funds! They are funds that mimic baskets of securities in an index, and are traded like individual stocks on an exchange. In India, there are now six ETF options. Table shows the popularly traded ETFs.
ETF Vs MF
These funds may be look-alikes of mutual funds but actually have two major differences. One, they are ‘passive’, unlike mutual funds, where fund managers actively choose which stocks to buy. The movement of the ETF is almost a mirror image of the respective stock market index.
Two, in contrast to MFs, one buys and sells ETFs through the market and not through a fund house. This means you may buy and sell an ETF at any point during a trading session, just as you trade in shares. All you need to buy and sell these funds is a demat account.
Many mutual fund houses also offer investors open-end index-based funds. But these funds may not be fully invested at all times. They do hold back some portion as cash to meet redemption.
This leads to a “tracking error” error (difference between ETF returns as against that given by the index it tracks) where such funds may not completely replicate indices. The fact that Nifty BeES and S&P CNX Nifty are now trading 52 per cent below their respective January levels is a good indicator of how closely the ETFs track the indices.
Just like how an investor may be confused about which stock to pick, he may be confused about which MF to invest in as well!
The reason is fund houses often offer products across diverse sectors such as infrastructure, power, realty and so on. Sometimes, a particular sector may not participate in a market upswing and your money may go for an absolute toss. So, an investor is expected to apply reasonable judgement in selecting the fund(s). If that be the case, a beginner might as well put his money directly into the equity market, why MFs? ETFs offer a solution by picking the whole basket and thereby minimising the risk of wrong choice. Advantage ETF
To wrap up, ETFs are a good bet for more reasons than one. Statistics show that, in the long term, equity returns have surpassed that of every other asset class.
Since ETFs invest in securities that form a part of a particular index, their returns are more or less in line with index returns (though it is not expected to outperform the index, which individual stocks may).
Their low-cost structure makes ETFs more economical than MFs. The Nifty BeES, for instance, has a cost structure of around 0.50 per cent, much lower than what conventional mutual funds levy (around 2.5 per cent). But the ultimate advantage is the real-time trading, which allows you to buy or sell at the exact time of your choice.
ETFs don the role of a good teacher for lay investors, who have the appetite for equity market. Once you are comfortable with trading in ETFs, you are all set to make the big plunge. In short, for a rookie, ETFs offer the best of both worlds — they give benefits of mutual funds and the convinience of stocks.

Market News of the Day

Unitech, Ranbaxy Laboratories, Jaiprakash Associates may see actionITC, hotel chain Accor, and some high net worth individuals are in the race to acquire six hotel properties owned by realtor Unitech. However, the report suggested that Unitech's managing director denied any direct talks with ITC.

Meanwhile, Unitech has reportedly finalised a deal for the sale of its budget hotel in Gurgaon for Rs 270 crore to a high net worth individual.

Ranbaxy Laboratories is reportedly planning to sell three of its manufacturing units in China, Vietnam and Malaysia as part of a strategy to rationalise its business portfolio and cut costs.
The board of Jaiprakash Associates will meet today, 22 December 2008 to consider scheme of amalgamation.

State Bank of India will slash its lending rate by 75 basis points, with effect from 1 January 2008. The prime lending rate, or the rate that it charges its top customers now stands at 12.25%, the bank said.

Housing Development Finance Corporation has cut its retail lending rates by 50 basis points, effective today, 22 December 2008. Rates on new home loans up to Rs 20 lakh will drop to 10.25%, while those on bigger loans will attract a rate of 11.25%, it said in a statement.
The government is reportedly considering reimposing 10% countervailing duty on steel bars and structurals to safeguard domestic companies in the wake of rising imports.

The founders of Subex have decided not to exercise the warrants allotted to them last year. They had been issued 22.3 lakh warrants at the purchase price of Rs 630.31 a share and were to be exercised by 18 December 2008, Subex said in a statement to the stock exchange.
Fortis Healthcare is reported to be in advanced stages of finalising the pricing and other technicalities for an Rs 1800 crore - Rs 2000 crore rights and warrants issue to fund expansion.
Delhi International Airport, a GMR Infrastructure-led consortium that operates New Delhi's Indira Gandhi International Airport, has reportedly told the civil aviation ministry that work on the modernisation of the airport may come to a halt in the next 45 days if the consortium is unable to raise funds.

The Indian government is reportedly planning to provide infrastructure companies with subordinated debt with a maturity of around 10 years through state-run India Infrastructure Finance Company in a bid to provide long-term capital to these cash-strapped firms. Source: Capital Market--

Some wise words from wise men - 'Sh. Padmanabhan ji'

Dear Investors,

What the financially challenged don't know…

*1. They don't know how to get into the money flow.* The crucial
distinction between sportsmen and spectators is not that the sportsmen
play and the spectators watch; it's that sportsmen get paid, while
spectators pay! To get paid you need to be inside the lines, on the
field of play. As long as you're the one settling debts, you're a
spectator. You're investing in someone else's game.

*2. They don't know how to create value.* To get into the money flow
means creating value, and value is created automatically when you're
in your own flow, when you're doing what comes naturally to you.
Warren Buffet is in his flow - buying undervalued stocks. He has an
eye for spotting opportunities in great business opportunities, which
he buys. He has become second richest person in the world. Donald
Trump is in his flow buying and selling property. He has an eye for
spotting opportunities in buildings, which he buys and sells. He has
become one of the biggest property tycoons in America.

*3. They don't know the difference between good debt and bad.* When
you buy a luxury car or a fancy electronic gadget, you're buying a
liability. Any purchase that does not put cash in your pocket is a
liability. Good debt buys assets that bring in cash. If you take a
loan to buy an apartment building that will produce revenue, that's
good debt. You can also borrow against your mortgage to acquire more
assets.

*4. They don't know how Rs100 saved can be turned into Rs1000
invested. *When you're spending everything you earn just to survive
and pay off debt, you normally think you don't have much left to save.
But the truth is you don't need loads of cash to start saving, a few
hundreds saved can be used to raise finance to buy an asset that will
generate thousands. You can start with as little as Rs1000.

*5. They don't know how to use other people's resources.* Take a look
at any wealthy or successful person. Are they operating alone, or do
they have a team of supporters?
The gung-ho, lone-ranger approach simply does not work. The first step
to getting on to the field is putting the right team together. You
don't have to know how to do everything, you only have to know who can
do it for you.This is a key to your success.Have an asssociation with
the right team of mentors,advisors,partners & workers.

*6. They don't know how to control their emotions. *Starting your own
business is risky. So is any investment. The single most important
factor is not knowledge, but being able to manage your own emotions.
Most people don't invest or don't start their own business or manage
an investment, not because they don't know how, but because they're
afraid. which leads to errors of judgment. Emotional maturity is
absolutely crucial.

*7. They don't know why they want to be rich.* Most people just have a
vague idea that they'd like to be rich. They don't know why. They
don't know what they'd do with it once they get it. If you don't have
a good enough reasons you should find one now.

Hope you found this article useful.

Happy Investing
Padmanabhan