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.

Here is how it works.

An MF actually collects money from a pool of investors and puts the money in stocks on their behalf for a small fee (1.5-2% annually). An investor has the option of a variety of debt schemes (that invest in fixed income instruments) and/or equity schemes (that go for stocks).

The only difference is that unlike in a portfolio management scheme, where one has the option of setting his or her own parameters, here an investor has to choose a scheme with pre-set parameters that will match his investment objective.

According to experts, investing in an MF scheme is a win-win situation for the retail investor as most of them are not well-versed in the working of the stock market.

“For most people, the stock market is still an unsolved puzzle. They get scared when the market goes up and they are equally scared when there is continuous slide,’’ says a wealth manager in a bank.

“Also since most people don’t have the expertise or time to monitor stocks on a regular basis it is better to give the responsibility of taking the investment decisions to a professional fund manager. This will ensure that emotions don’t dictate the buying and selling of stocks,’’ he adds.

Another reason why you should opt for an MF scheme is that it is the most effective way to diversify your portfolio. Sure, one can argue that these days there is a choice of buying a single share of a company and so it is easy to diversify across stocks and sectors. Experts believe that MFs do a better job of it.

“There is no point in diversifying if you really don’t have a proper view. A fund manager would be in a better position to take a call on various sectors as he has a large team of research professionals to help him,’’ says a certified financial planner.

The most important aspect of investing via MFs is the convenience. For example, one can start investing with as little as Rs 100 a month in an equity scheme. Also, one can enter and exit a scheme at any time, as most of them (called open-ended schemes) permit that.

Additionally, they also offer tax benefits. For example, if you hold equity schemes for over a year, you qualify for long-term capital gains tax, which, at present, is nil. “Always check the reputation of the fund house first. The next should be to review the performance of the scheme at least for three years,’’ says the wealth manager.

“Make sure that the scheme has performed well during the boom as well as bear phase. This would give you a fair idea about the investing skills of the fund manager,’’ he adds.

Some of the very well known and good performing mutual fund companies are: ICICI Mutual Fund, SBI Mutual Fund, Reliance Mutual fund, HDFC Mutual Fund, Sundaram BNP Paribas Mutual Fund, LIC Mutual Fund, Kotak Mahindra, Fidelity, Tempelton.
Ref: EconomicTimes

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Promoters Buying Stocks

There are few companies available at attractive valuations and promoters of those companies are buying stocks of own ocmpanies from open market. Of the 2,023 companies which filed shareholding pattern for the quarter ended March 2009, as many as 549 companies have seen an increase in shareholding of the promoter group. At the same time, few of the promoters are selling stocks and reducing their stakes.

“The increase in promoters holdings is a clear signal of the value present in companies after the correction witnessed in their stock prices over the last few quarters,” said Hitesh Agarwal, head (Research) at Angel Broking.

Sebi rules allow promoters to increase their stake through the open market by as much as 5% every year. In some cases, stakes could have gone up due to a merger or a share buyback. Therefore, any shareholding increase of more than 5% means there has been an extra activity during the quarter like a merger or a share buyback.

According to a data collated by CMIE, a number of companies has seen promoters hiking their stakes between 2% and 4% in the quarter. “In the case of Avery, the promoters increased their holding by 20% through to a public offer. Besides, a lot of promoters increase their stake to have a stronger holding in the company,” said K Ramakrishnan, executive director and head (Investment Banking) at Spark Capital. Companies like SREI Infrastructure Finance saw its promoters hike stake by 4.97%, Adlabs (3.68%), M&M (2.71%) and Zensar 2.72%.

“Sometimes promoters have had to increase their holdings to ward off takeover threats in wake of the low valuations. Nonetheless, generally, the act of increasing promoter holding in a company points to greater faith of the promoters in the company and also boosts shareholders’ confidence,” said Agarwal of Angel Broking. “

However, it is important to keep track of the fundamentals of the company and check the quantum of the hike and ensure that it is not merely a window dressing act.”

Of all the companies which have filed the shareholding pattern, 1,314 companies did not see any change in their promoter holdings, while 160 companies saw a dip. The promoters of Karuturi Global dropped stakes by 7.11%, Bank of Rajasthan (-3.6%), Punj Lloyd (-2.78%), and scam-hit Pyramid Saimira saw its promoters holding drop by 14.99%.
Source: TimesBusiness

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Best Value Stocks For 2009

A closer look at the Indian equity market reveals that more than 170 stocks in the BSE500 index still quote at market prices which are well below their book value. Which means that one-third of the stocks in the BSE500 universe continue to remain undervalued. The reasons for a high number of stocks quoting at attractive valuations are many. And so there are ample opportunities to buy stocks with good intrinsic hidden value and fetch good returns on investments. Since 2008 beginning, market sentiment has remained weak. Let's see some the best value stocks for 2009 from this pack.

While metals got impacted after the global meltdown last October , banks’ valuation suffered owing to financial crisis in the West. Even the shipping and IT sectors had taken a beating due to the downturn.

These scrips have a price-to-book ratio of less than one which indicates low valuation. For starters, P/B ratio is calculated to compare a stock’s market price to its book value.

Recommendations: SMC GLOBAL

Allahabad Bank (P/BV of 0.54):
The bank posted an annual business growth of 18% during FY09 and targets a business growth of 21% by FY10E. At present, the stock is trading at distressed valuations.

The company also raised capital to meet the capital adequacy norms as per Basel II and is adequately capitalised.

Central Bank of India (P/BV of 0.55):
The government has approved infusion of funds in the Central Bank of India to enable it to meet the capital adequacy requirements as per Basel II.

The net interest income registered YoY growth of 38% during 9MFY09. CAR was recorded at 10.02 % during 9MFY09.

Jindal Stainless (P/BV of 0.31):
The company is India's largest and only integrated stainless steel manufacturer cornering a market share of 35%.

The company is expected to be the key beneficiary of upside in steel prices and increasing domestic and international demand.

Therefore, JSL is expected to register revenue growth coupled with better profitability.

Bharti Shipyard (P/BV of .33):
The company has set up two greenfield projects at Dabhol and Mangalore, thereby increasing the capacity by seven times the current turnover capacity.

Also, it has a strong order book and offshore vessels’ orders comprise 70% of the order book.

MTNL (P/BV of 0.38):
The company corners a prominent market share in the fixed line and also owns 33 and 34 land plots in Delhi and Mumbai, respectively.

The telecom player is trading at a low P/BV vis-a-vis its peers such as Reliance Comm and Idea.

Recommendations: Invest Shoppe

Tata Steel (P/BV of 0.75):
The company is among the top six steel makers globally with a consolidated capacity of 30 mt post acquisition of UK-based Corus Group. The consolidated cash position was quite strong at Rs 9,400 crore as on February 2009.

Its consolidated revenues are expected to be around Rs 100,000 crore and Rs 1,40,000 crore during FY10E and FY11E, respectively . The stock presents a very good upside potential in the long term. Currently, the stock is quoting at around 4.4 times and times of its trailing earnings and book value respectively.

GE Shipping (P/BV of 0.58):
Great Eastern Shipping is India's largest private sector shipping company. It has a committed expansion plan of Rs 6,200 crore between FY09 and FY12. It has a track record of distributing handsome dividends for the past five years.

The company’s huge cash reserve coupled with fleet assets makes it financially sound.

The sum of fleet assets value and net cash after excluding debt is Rs 5,000 crore. The current m-cap of Rs 3,200 crore appears quite low in comparison and makes it an attractive bet.

Gujarat Industries Power (P/BV of 0.58):
The company is in the growth mode and is increasing generation capacity that will add to earnings from 2009-10 . The existing generation units are stabilising and improving their operating efficiencies.

Gujarat has a 8.5% energy deficit which goes up to 13.6% during peak hours. Given this large deficit, GIPC’s power will be consumed even at marginally higher prices.

Tata Chemicals (P/BV of 0.99):
Though the stock valuations have been battered due to the commodity meltdown, the company continues to hold good growth prospects in its soda ash and fertiliser businesses. A diversified global presence, a relatively strong soda ash cycle and the prospect of higher margins on the fertiliser business, suggest that the company may easily exceed the growth expectations reflected in its current stock price.

The low valuation and high dividend yield (5.5%) provide protection against protracted downside.

On the consolidated basis, the company is expected to grow its topline and bottomline by 40% and 15%, respectively, over the next two years.

Checkout before you buy stocks
Check out other financial details such as net cash/m-cap , P/E ratio, net assets value, dividend yield and EV/EBITDA.

Study company specific and sector specific risks associated with such stocks. Try to gauge the reasons for these stocks trading so undervalued.
Source: EconomicTimes

Checkout Value Stocks To Buy Section

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Bring Home Gold Mutual Funds (Gold ETF) This Akshay Tritiya

BUYING gold on the day of Akshaya Tritiya is considered auspicious. So, this year bring home gold either in the form of Gold ETF. Traditionally, your only option when it comes to buying gold was in the physical form. But with the launch of Gold Mutual Funds (Gold Exchange Traded Funds or ETF), you can, now, buy gold in the demat form.

Ask two questions before you go shopping:

1. Should I invest in gold?

2. If yes, then which is better -- physical gold or gold ETF?

The answer to the second question is easier, so let's look at that, first.
If your shopping is purely for investment purposes, then Gold ETF scores over physical gold. Here's why.


1. Low cost
When you buy Gold ETF you have to pay only the brokerage charges, which is usually around 0.5 per cent vis-�-vis shelling out between 10 and 20 per cent as premium and/or making charges if you buy physical gold. To store physical gold, you may incur locker and insurance charges. For ETFs, you pay the annual fund management charges of approximately 0.5-1 per cent.

2. Transparency
For ETFs, the rates are pretty transparent as they are linked to international prices. But there's no consistency in gold prices across various jewellers or banks, even within the same city.

3. Purity:
You need not be concerned about the purity of gold in the case of ETFs.

4. Security:
No one can steal your Gold ETF units!

5. Capital Tax Gains:
In case of physical gold, the long term capital gain tax becomes applicable only when the holding period exceeds three years. The limit is one year for Gold ETFs.

6. Wealth Tax:
Physical gold attracts wealth tax whereas Gold ETF is exempt from wealth tax.

7. Convenience:
Call up your broker and your job is done. You don�t need to visit the nearest jeweller with loads of cash.

Also Read: Gold Investment

Read More on Gold-ETF

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Wealth Management - Creating Wealth

Wealth creation is a long-term exercise, and choosing products for wealth creation is an integral component of the whole exercise. Interestingly, the intermittent boom runs in different asset products make many believe that timing is more crucial than the investment process. However, history and the recent events in the global markets have once again reiterated the fact that wealth creation is a mere scientific process which requires endurance and patience.

Wealth Creation Is An Long Term Exercise
For instance, the recent short bull run in the domestic stock markets would have benefitted those who picked their stocks after the October crash. Some of their stocks have managed to offer three-digit returns. The same can't be said of those who chased shortterm profits on the belief that the markets are in a trading zone more than in an investment zone.

Choose right kind of assets
Coming back to the topic of wealth management & creation, it is worth focusing on the fact that besides the right process, an investor also needs the right kind of assets to build his wealth. Interestingly, the choice of assets need not be static as newer products emerge at regular intervals and the choice itself varies in line with the changing needs of the investor.

For instance, a decade ago, a fixed deposit was the primary option for an investor looking at riskfree returns. Today, the list has expanded with new entrants such as arbitrage funds, floaters and liquid funds. Hence, besides focusing on the process of investment , an investor also needs to track the emerging options in the marketplace.

Read: How To Make Money In Stock Markets?

Ideal Condition For Building Wealth
Many young investors often ask the question what is the ideal situation for building wealth? Should it be taken up right at the beginning with smaller amounts or should the whole exercise begin when the investor is free of his commitments and has the ability to enjoy better cash flows. The answer lies in the comfort of the investor, though earlier the better is the general consensus. While no doubt an investor should begin the process of investing at an early stage in life, the greater focus has to be on its review.

For instance, an investor who signs up for a systematic investment plan of Rs 2,000 per month cannot afford to continue with the same amount, irrespective of the changes in his earnings pattern . Such investors, in fact, would be required to review their savings potential every second year to build the corpus. That brings us to the other important component of wealth creation - creation of goals.

Motivation Is A Very Much Necessity
It is always much easier to chase a known target as it inspires the individual to go after it. The same logic can be extended to wealth creation as it motivates the investor to stay committed.

Those who find the task of goal-setting tedious or challenging can take comfort under short and medium terms as their achievement spurs the investor to commit fresh investments.

For instance, it is hard to motivate a 22-year-old to set aside a sum for retirement planning for a period of 35 years, whereas he can be easily cajoled to save for a new car for a period of 2-3 years.

Allocating Funds With Caution
Once the goals are in place, the allocation of funds into different instruments is a lesser challenge. An investor, building a portfolio over 2-3 decades, is unlikely to be perturbed by short-term events. On the other hand, he has to be cautious with his fund allocation for expenses which could come up in the next 12-18 months.

As pointed out earlier, portfolio creation is a culmination of classification of goals and creation of the right set of products for the fulfilment of those goals.
Source: EconomicTimes

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Guide To Stocks - Beginner's Guide To Investing In Stocks

When it comes to accumulating savings for retirement, there is still nothing to beat capital markets. If the economy were to have a sustained 8% growth, there is no way equity markets can remain down for long. With agriculture and public sector expected to continue growing sluggihsly, private industry will be the major growth drivers and equity markets will be the beneficiary of this growth.

Given the roller coaster ride that markets have been through in recent months, charting an investment strategy becomes even more difficult. Here is a seven point guide to guide a smooth entry in the game.

Investing in stocks should be a long-term affair
Only invest money that you dont need for at least 5 years. Rather put your money only if you can lose ‘all’ of it. A holding period of more than one year not only reduces the possibility of loss, but also ensures that you will be treated better on tax front, as there is no tax on capital gains if the holding period is more than one year.

Study, research on stocks and invest
Not knowing about the possible outcomes of your actions is the true risk of investing in equities. Never invest on tips. Try to find information on the stocks and mutual funds you intend to invest in. A good track record across market cycles, while not a guarantee of future performance, reduces possibilites of future underperformace.

Direct investments (buy stocks) or indirect (mutual funds)
Should I invest on my own? The answer is no – if you do not have the time, expertise and inclination to research into ‘investment opportunities’ and if investing is not a full time activity for you. In such circumstances, it makes sense to hire an expert and invest through them. The transactional costs – such as demat charges, brokerage - are a deterrent for those with a a small investment corpus. This is where mutual funds come in as they start as low as Rs 500 and in some cases even at Rs 100 per month in the form of micro SIP.

SIP route
Systematic investment plan (SIP) is one of the better options for investing in the stock markets. Exposure at various time intervals helps reduce the risk associate with the market timing.

Index fund
In a rising market, the first to rise will be the front rung stocks. Index funds that track Nifty and Sensex help you to tap the opportunity. You just have to ensure that the fund will have least tracking error and minimal cost of the offering.

Equity linked saving scheme (ELSS)
Those who want to invest in equities and avail of tax breaks, equity linked saving schemes are the option. A scheme such as Franklin Templeton Index Tax can offer you a channel to invest in index while you enjoy a tax break.

Pitfalls to avoid
New fund offers (NFO) are best avoided if there is a lack of track record. Unit linked insurance plans are good only for those who typically have a term of more than 20 years on mind. If your investment horizon is three years mutual funds are better options. Do not get swayed by the online advisory services that claim to have 100% success ratio in day trading. Only god or a liar can claim a 100% success ratio.

There is no ‘one shirt fits all’ solution here. You have to assess your financial needs and your resources in the light of the markets. Portfolio rebalancing from time to time will further enhance the quality of the returns.
Source & reference: EconomicTimes

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Reliance Infrstructure - Buy Stocks Report From Equity Research House

Arihant Capital Markets has initiated coverage and recommended buying stocks of reliance Infrstructure. The stock looks good for next 12-18 months.

"At CMP, Reliance Infrastructure is trading at 14.5xFY10 standalone EPS of Rs 48.9 and 15.4xEV/EBIDTA for FY10. We have valued the power and various infrastructure business of the company separately and arrived at the price target of Rs 1070 for period of 12-18 months. This comprises Rs 196 - Mumbai power business, Rs 38 - Delhi business, Rs 105 - EPC business, Rs 117-Infrastructure segment, Rs 17-power transmission (WRSS), Rs 207-cash and cash equivalents and Rs 391- Investment in R Power. We recommend to Buy stocks," the report said.

Stable growth in power business:
Reliance Infrastructure Ltd’s (R Infra) power business (distribution licence in Mumbai and Delhi) with limited generating capacity (941 MW) is a constant cash flow generating business as increase in power and fuel purchase costs are pass through.

The T&D losses in both the Delhi distribution companies (BRPL and BYPL) have reduced substantially and the management expects both of these to come under incentive zone this year thereby improving the cash flows. We expect revenues from this business to grow at CAGR of 33% in FY08-FY10E.

Robust growth in EPC business:
Current outstanding order book of the EPC business stands at Rs.21510 cr to be executed over next 4 years. Out of this, Rs 15670 cr are internal projects which include 2 projects from Reliance Power – Sasan 3960 MW and Butibori -300 MW and a Western Region System Strengthening transmission project.

All contracts are on fixed price basis and margins are booked after project crosses the threshold revenue levels. With the projects of Reliance Power projects to be implemented in phased manner, the EPC contracts for the same could trickle down to R Infra thereby improving the visibility of future order inflows. We expect revenues from this segment to grow at a CAGR of 68.2% for FY08-FY10E.

Diversification into new businesses:
From being a pure power company, R Infra has surfaced as a diversified player with presence in infrastructure segment and currently has 11 projects under implementation. These projects are undertaken by various SPVs where R Infra will participate in the equity to the extent of their stake and the debt will be raised at SPV level without any recourse to R Infra.

No guarantee will be provided by R Infra and debt repayment will be linked to cash flow from projects. This insulates the core business of the company from funding related project risks. Inspite of the current liquidity crisis and tough market conditions, the company has been successfully able to raise funds on individual project basis.

Net cash and cash equivalents at Rs 206/share:
As on 31st Dec’09, R Infra had cash and cash equivalents of Rs 9898 cr of which Rs 5000 cr were parked in the debt mutual funds and the balance were invested in preference shares and inter-corporate deposits.

At net level this turns out to be at Rs.206/share. This along with continuous cash generation from the core business of power and EPC will suffice the funds required for equity investment in SPVs.

Award of road projects, financial closure for WRSS and Sasan UMPP in Q1FY10 - short term triggers:
R Infra has emerged as the sole bidder/L1 in 3 road projects which includes Eastern Peripheral Expressway (135 kms), Krishna –Walajpet project in South India (150 kms) and Western Freeway Sea Link Project connecting Bandra to Haji Ali (10 Kms, total cost Rs 5300 cr).

Apart from this, the financial closure for the Rs 1400 cr Western Region Strengthening Scheme (WRSS) and Reliance Power’s Sasan UMPP is awaited where R infra is an EPC player. Announcement of award of road projects as well as financial closure for the above 2 projects could trigger stock price in the short term.

Investment in Reliance Power (R Power) – Value accretive:
R Infra currently holds 44.96% stake in R Power. Assuming a 30% discount for holding company at the current market price, this turns out to be at Rs.408/share of R Infra. With the cash inflow from first project of R Power to start from next financial year this would only enhance going forward thereby increasing the valuation of R Infra.

Concerns for the company:
Execution Risk: R Infra is relatively a new player in the infrastructure segments and the pioneer one to undertake development of metro projects in the private sector. Inexperience in executing such projects can lead to delay in commissioning of the projects thereby impacting our forecasted revenue stream and cash flows.

However, since the company has partnered with qualified foreign players in executing these projects the risk is minimized.

Delay in financial closure of projects:
The current global economic crisis has dried up the liquidity in the international and domestic markets. This has increased the risk perception of bankers and they have become more cautious while lending to big infrastructure projects.

However, R Infra has been able to achieve financial closures for its scheduled projects during tough market conditions. Also due to sufficient liquidity in its balance sheet, the company can upfront commit the equity amount required for projects which makes its easier for the bankers to lend for the debt portion at favorable rates.

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How To Make Money In Stock Markets?

The million dollar question always is, “How to make money?” It’s not an easy task in the bear markets. Market strategies have to be well thought out; those that worked in the past may not work this time.

There is no single strategy that can give you profits, but a combination of tactics and ploys that will win you this ‘Investment Game’. Have a look at 10 strategies that may be used in isolation or in combination to come out with a winning plan that will make money in stock market:

Accumulate fundamentally good stocks
Thriving on chaos, it’s a panic situation and many fundamentally strong scrips are experiencing a bear hammer.

A good way to judge if the stock is under valued is if it is quoting near its 52 week low.

A stop loss at the 52 week low would be desirable to restrict downside risk.

Price Volume data
If you are an active trader and open to taking short term positions.

A thorough tracking of the price volume data will be worth your while before entering sectors and stocks where a significant rise in volumes is being accompanied by a positive price movement.

These trading calls can sometimes make you earn a fast buck.

Sell out of money calls of stock
Sell out of money calls of stock that you hold Markets are likely to remain range bound for sometime.

This strategy restricts the upside potential but generates good, consistent returns in a bear market.

Buy out of money puts and sell out of money calls of Nifty
This strategy helps to protect downside risk of portfolios when there is uncertainty about the future direction of the markets.

This strategy can also generate profits if Nifty falls rapidly and there is panic in the markets as we saw in January, March and then in June this year.

Selling calls would help you in financing the cost of the puts.

Sell deep out of money calls and puts near the expiry
Selling calls and puts which are deep out of money can provide you with a limited profit when sold near the expiry date.

Only time value exists in these options but to earn limited profit you have to block money in the form of margins and though a rare chance but you could end with an unlimited loss.

This, needless to say, is not a very good strategy for risk averse investors.

Trading in Futures
For short term and active traders it may be better to trade in futures instead of buying stocks and holding in depository account.

This is because one has to wait for delivery to come on T+2 so as to sell those stocks. Eg.

If somebody bought 100 shares of Reliance on 10th August 2008, then he has to wait till 13th August 2008 to sell them back to the market, otherwise there exists a risk of auction in case of short delivery.

Book profits, when you can
This is a bear market. Buy and hold strategy is not likely to work.

It is better to book your profits as and when you earn.

This is not the time to be greedy.

The 'Options' option
For risk averse investors it is better to trade in Options in order to minimise risk.

Buy calls of stocks or Nifty if you are bullish on some particular shares or the market as a whole in the short term.

Conversely buy puts of stocks or Nifty if you are bearish. Unlimited profits can be earned by incurring limited cost with no risk in this strategy.

Money calls and Puts
If the markets are volatile a useful strategy is to buy both At Money calls as well as puts.

Whichever direction the markets take in the short run, you are quite likely to make good returns in the short run.

Over trading can spoil the party
Do not overtrade and take extra risks. Remember cash is king in uncertain times. You are likely to continue getting panic situations going ahead, where cash can be very gainfully deployed.

Based on the risk appetite and investment capacity one may use the above in different permutations or combinations.

To conclude these strategies are not cast in stone but one has to be flexible and take into consideration the prevailing market scenario and the future outlook that is emerging from the analysis.

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How To Buy Stocks In Difficult Times?

Currently, the stock markets are in a state of confusion and lack a convincing direction. There have been many actions and huge economic stimulus packages announced by almost all nations. Analysts and large investment houses are watching the developments, and their impact on consumer and investor confidence. Let's understand how to buy stocks in such difficult times when many of the stocks are highly volatile.

Buy stocks with good fundamentals & intrinsic value
In the short term, the markets will be primarily driven by news (global as well as local), and as a result, could be quite volatile. However, analysts are optimistic on the long-term (4-6 quarters and more) investment and business scenario.

Therefore, long-term investors should not worry much about this short-term volatility and use the current market conditions as an opportunity to pick fundamentally-sound stocks for their portfolios.

Checkout: Stock Market in 2009 - Stocks to Buy

The best way to identify fundamentally-good and outperformer stocks is based on understanding and anticipating the changes in the global economic conditions, its impact on various sectors , and then identifying the companies and stocks that have high quality characteristics and are trading at attractive valuations in the market.

All this requires a deep understanding of various concepts and access to the right information. It is not easy for individual investors to compile all the required data and analyse it to identify the right stocks to invest in.

However, small investors should try to understand the logic of any tip, either from their stock broker or news source, to the best of their ability. This will help them in taking better decisions. Here are some tips to help you identify and pick potential stocks, and build a balanced portfolio.

Read: How to buy stocks ? Buy stocks with confidence

Go for long term
First of all, be prepared to invest for the medium to long term in the stock markets - at least one year or more.

Currently, many blue chip stocks are available at quite attractive prices in the markets. But investors should analyse the available information and arrive at why a company will benefit and grow in the future.

Smart investors develop the ability to study the relevant information and form a basis for their investments.

Follow Systematic investment plan for buying stocks
In volatile market conditions , it is difficult to predict the short-term directions of the market or stocks. It is advisable to stagger your entry or exit. Identify fundamentally-good stocks and invest in a systematic pattern by buying in small lots so that you get a good average entry or exit price.

Repeat your analysis periodically on selected stocks based on the availability of more information. If the plan to invest in a stock is reconfirmed by repeated analysis then you can hold on to your investment and accumulate more. On the other hand, look at exiting from the stock if you think the performance prospects are not good in the future.

Have patience - It is the key of long term investing
It is advisable to create a well-diversified portfolio of 6-8 fundamentally-good stocks. Investors should review the performance of their portfolio every two weeks and change the allocation as required.

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Rakesh Jhunjhunwala Portfolio - Latest As In December 2008

Rakesh Jhunjhunwala have been buying stocks and making big money. His portfolio holdings are latest based on BSE / NSE data. Remember that his holding period is 5-10 years on an average and he has invested his money to buy stocks of Small and Mid caps only, so anyone who is buying stocks (good small cap & Mid caps) and holds it for 5-10 years, has better probability to create such huge amount of wealth.

Trading stocks / stock trades are best to be avoided for retail investor. Online stock trading and buying stocks online have made it very easy for retail investors to trade stocks at fingertips very frequently. Learn how to buy stocks Rakesh Jhunjhunwala way. Buy stocks wisely!!! Investing in stock should be a long term affair & do not indulge in frequent stock trades.

This list would be updated whenever I would find a change or new information. Bookmark this page so you could visit this list later on for updates. You may subscribe to E-Mail updates to receive IndianStocksNews updates.

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Rakesh Jhunjhunwala's View- Investors Should Avoid Markets After Elections

April 16 (Bloomberg) -- Rakesh Jhunjhunwala, ranked a billionaire by Forbes magazine last year for his holdings of Indian stocks, says investors should avoid the markets after nationwide elections until a new government is formed.

The Bombay Stock Exchange Sensitive Index plunged 11 percent on May 17, 2004, the most in more than a decade, as investors feared a government formed by Sonia Gandhi’s Congress Party and communist allies would slow the pace of reforms.


“My advice is to stay away from the markets between May 16 and May 30 as there will be volatility in the markets post elections,” Jhunjhunwala, 48, said in an interview in his Mumbai office yesterday.




Checkout:
Effects Of General Elections On Indian Stock Market
Rakesh Jhunjhunwala Portfolio - Latest One

The markets more than tripled since 2004, before dropping 52 percent last year after a global credit crisis wiped out more than $30 trillion from the value of equities. India’s benchmark index, also known as the Sensex, fell 0.2 percent to 11,261.70 as of 10:19 a.m. in Mumbai, the first drop in nine days.

“The pace, breadth and volume of the market suggest this could be more than a bear market rally,” said Jhunjhunwala, who has pictures of investors including Warren Buffett on the walls of his Mumbai office.

Buffett of India

Forbes named Jhunjhunwala the Buffett of India after he turned a $100 investment into $1 billion over two decades. He predicted Indian stocks would fall two months before the Sensex peaked in January 2008, and the benchmark measure has gained 17 percent since his Dec. 11 prediction of a bull run. The MSCI Asia Pacific Index rose 1 percent during that time.

The Sensex has crossed its 200-day moving average and if it remains above that level over the next 10 to 15 days, the rally may be sustained, he said. Still, he doesn’t see the markets forming new lows. The moving average is a technical tool used by some analysts to predict the direction of the market.

Investments by Indian insurance companies will be the biggest drivers of the equity market, Jhunjhunwala said. Insurers could invest about $50 billion a year in the next two- three years, he said.

Read: 2010 Stock Market - How Would Stocks Perform?

“The scope for disappointment is not much,” Jhunjhunwala said. “There are no positive expectations from the election results. Markets may not tank this time round even if the result is something that the market may not like.”

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Unfaithful Promoters - Selling Stocks In Market

What began as a downturn in the capital markets has now catapulted into a global economic slowdown. The end result is that investor’s sentiments are hurt so bad that there seems to be no hope of a revival anytime soon. There are few promoters in the market who are buying stocks back from the market and at the same time selling too!

In midst of this, companies which are confident of their prospects, does not believe that their current share prices reflect the intrinsic value of the company.

Hence, they are trying their best to somehow prop-up the stock prices. They are busy trying out the tried and tested method of buying back their own shares at the prices they would ideally like to see their stock trade at.

At present, there are 24 companies offering buyback in the Indian stock markets. However, the twist here is that while on one hand these companies have announced buyback offers, on the other hand, few promoters are selling their shares in the open market.

In as many as five companies, promoters have sold their shares, as per the December 2008 figures, compared to December 2007.

So at this time when economy is in daldrum, when promoters themselves are selling stocks, what should common investor do? Avoid invesing in these companies for time being. Checkout the list.

Leading this list is DLF, the realty giant, it is offering a buyback of mammoth Rs 1,100 crore. With mounting inventories and falling real estate prices, the company is at its wits end to stop the free fall in its shares prices. But with promoters themselves selling out the nearly three lakh shares since December 2007, there is ample reason for the shareholder’s to scorn at buyback plan. Hence even after the announcement of buyback offer the stock has fallen over 46 per cent (since Oct 17, 2008).

SRF started the buyback of Rs 70 crore in July 2008. But with company’s promoters having sold nearly two lakh shares (since December 2007) and 32 per cent of promoters holdings is pledged, nothing seems to be working for this company. Its share price has lost around 60 per cent since December 2007 and 38 per cent since the start of the buyback.

Similarly, HEG, a manufacturer of sponge iron and steel billets, has seen a reduction of interest from its promoters as well, who have sold around six lakh shares. The stock price has plummeted over 80 per cent since December 2007 and nearly 29 per cent since the start of the buyback on 2nd July, 2008.

Maestros Mediline Systems, a manufacturer of medical equipments, are also buying back their shares and has been fairly successful so far. Its stocks have gained around 18 per cent since the 18th November, 2008, when the buyback was started. But the promoters themselves don’t seem to leading from the front, having sold off nearly four per cent of their shares.

Lastly, Valiant Communications has seen a decline of 1.59 per cent in its promoter’s holdings. This telecom company has witnessed a 53 per cent fall in its share price since December 2007. However, with the announcement of buyback, the company’s share has recovered partially and is up by 14.76 per cent.

Well, whatever might be the reasons behind the promoters selling their stakes, they need to understand that if they themselves don’t show faith in their company, how can they expect investors to?
Source: Valuresearch

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ELSS Fund - Choosing Good Income Tax Saving Fund

ELSS Mutual funds has been a good choice in past few years for many people who want to save income tax and at the same time be part of stock market growth. There are hoards of funds from mutual fund houses. Out of these, Magnum Taxgain and Sundaram BNP Paribas Taxsaver are two of the best performing ELSS funds. Let's compare these two on the basis of their track records in past few years.

One thing to consider before buying mutual funds is the track record of fund. It is better to stay away from new funds as they do not have a performance history. Now coming to comparison between Magnum Taxgain and Sundaram BNP Paribas Taxsaver, let’s take a detailed look at both of them.

Both funds have track records. If we compare their annualized five-year trailing returns as of February 28, 2009, Magnum scores over Sundaram with 25 per cent returns while the latter has delivered 22 per cent. But if we come to recent performances, Magnum has been shedding more than Sundaram in the one year, two year and three year trailing returns. In the market meltdown of 2008 too, Magnum has shed 55 per cent while Sundaram has shed a lesser 48 per cent.

One can opt for Sundaram Taxsaver as it has come out to be a more stable offering while Magnum Taxgain’s performance has been sliding down in the recent past.

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Buy Stocks For Short Term - National Fertilizer

National Fertilizer Limited
NSEMumbaiBull equity research team has recommended buying stocks of National Fertilizer. National fertilizer could be one of the beneficieries of RIL gas pricing resolution.

Buy shares of "National Fertilizer Ltd " @ CMP.

Target within few weeks is Rs. 50 /-

Scrip Name : National Fertilizer Ltd
BSE Code : 523630
NSE Code : NFL

Checkout news in EconomicTimes: RIL Gas and it's impact on Indian fertilizer industry.

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Indian Stock Markets May Correct 15% After Elections

Over the next 6-8 weeks, Merrill Lynch expects concerns of a hung Parliament post-election and expected slowing in corporate earnings will likely worry the market. “We believe this could lead to a 15% correction in Indian stock markets,” the investment bank says in a report.

15% correction in BSE SENSEX translates to a target of 9000 for stock index in BSE.
It is not advisable buying stocks for long term investments before elections. Let the elections happen, let the government be in place and then one should buy stocks for long term horizon. Meanwhile one should spot the investment opportunities to take the decision.

Checkout: Interesting SENSEX Analysis

On the elections, the brokerage believes
(a) there will likely be a hung Parliament i.e. none of the three combinations - Congress-led UPA, BJP-led NDA and the Third Front - will be able to come to power

(b) post-election results new alliances are likely -regional parties like BSP and AIADMK will be important

(c) the probability of a Third Front government coming to power is still low but increasing in its view.

“Our best case scenario would be a Congress government but with the Left being a key ally in it,” it adds.

According to ML, most of the present alliances are fluid and many parties would be willing to reconsider their alliances post-elections. “We think 2 regional parties - Mayawati’s BSP and Jayalalita’s AIADMK would play a crucial role in deciding the Government. The role of the Left parties, though weakened, should also be important,” ML says.

Despite the break-down of seat sharing with Mulayam Singh’s SP in Uttar Pradesh and Laloo Yadav’s RJD in Bihar, ML thinks both will continue to be part of the Congress-led UPA. The investment bank thinks the UPA still has a slight edge since they can get Left support again. The BJP-led NDA, on the other hand, could need the support of BSP, Jayalalita’s AIADMK, Naidu’s TDP as well as its old ally BJD.

Commenting on the Third Front, Merrill Lynch says, “We think it would be extremely implausible that a Third Front government is formed without the support of Congress or BJP, because Congress plus BJP should gain nearly 50% of the total seats. However, if the Congress/BJP can’t form a stable Government, they may support a Third Front Government. While we think this is a lower probability event, the possibility has been increasing past few weeks.”

The brokerage also expects that Third Front government will be negative for the Indian stock markets.

“We think a positive scenario for the market is a BJP or Congress led government without the Left parties but has a low probability event in our view. Historically, markets have been edgy ahead of elections. We think concerns of a hung Parliament could lead to a 15% correction in markets this time,” the report adds.

“We would buy stocks defensively (Buy stocks of Hero Honda, Bharti) in the run-up to elections. We think infrastructure would be a priority for all Governments - Jaiprakash associates could be a gainer in the post-election scenario & therefore a stock to buy. We believe a Congress or BJP government without the Left could lead to reforms in
(a) privatization and oil reforms
(b) banking reforms
(c) FDI in retail, aviation, insurance etc,” ML said.
Source & Reference: Economictimes

Read: Stock Market in 2009 - Stocks to Buy

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GOLD ETF - Mutual Funds Are Planning GOLD ETF Funds Due To Rising Gold Prices

MUTUAL FUND houses are rushing to cash in on the opportunity offered by rising gold prices and investor interest.

While Kotak Mutual Fund is launching its second gold related scheme, Sundaram BNP Paribas AMC and SBI Funds Management are looking to add gold fund products to their kitty SBI launched its ETF late last month and Sundaram plans to launch its offering after June as the elections would be over by then and there would be no volatility realting to it, said TP Raman, managing director, Sundaram BNP Paribas AMC.

Kotak Mutual Fund filed its offer document to launch its Gold ETF fund of funds while it already has an ETE Fund houses am of fering such products because it is the only asset class generating returns, said Keyur Shah, associate director, World Gold Council.

With stock markets down and gold having generated close to 20 per cent in the last one year, fund houses that did not have a gold fund in their kitty are looking to have one.

"While we are looking to complete our bouquet of offering by introducing it, gold as an asset class stands a good chance as an investment mode, since equities will no longer generate returns similar to what they produced earlier, said Raman.

Checkout:
Gold Investment
Gold Deposit Scheme From State Bank of India (SBI)
Gold Price - Where would it go? Why Should You Buy Gold Now?

"We want to add gold to our investment portfolio," added Ritesh Shah, gold fund manager, SBI Funds Management.

Fund houses also claim to have received demand for launching gold funds through market research and inputs received from brokers.

Even though gold prices softened over the last one month, the outlook for gold remains positive, said Shah from World Gold Council.
Source: Hindustan Times

Read more on Gold/ETF

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Real Estate News - Residential Property Prices May Fall by 35%

Realty brokers expect India property prices (residential properties) to settle down at a 25-35% discount on the current listed prices over the next couple of months i.e. by June 2009, according to a recent survey.

The demand for homes remained muted in the otherwise busy season of January-March, the findings of the nationwide property brokers’ poll, conducted by financial services company Edelweiss, indicate. The only projects selling are those priced at least 25-30% lower as against the ongoing market rates, while real estate companies reluctant to slash prices are struggling to clear inventory.

“Customers are coming back for deals. Prices have begun to consolidate at 30-35% discount to the list prices,” realty company Orbit Corp’s corporate strategy head Ram Yadav says.

Some aggressively priced new projects, including Lodha’s project in Thane, HDIL’s in Andheri and Nirman Lifestyle’s Mulund project, are doing well in Mumbai. “HDIL’s Rs 7,651/sq ft at Andheri is a good price as compared to Rs 6,000/sq ft at which the state housing development authority MHADA is selling its flats in a similar area,” says Santosh Naik, MD and CEO of Disha Direct, a real estate marketing company.

Read More:
Real Estate Sector Still In Downtrend
Stocks Affected Due To Real Estate Downtrend
Buying Stocks In Real Estate Sector - Stock Market Report

Property dealers, the report says, don’t see a recovery in the domestic realty market any time soon as buyer sentiment is expected to remain subdued due to the weak economic environment.

According to the survey, 76% of the brokers expect prices to decline over the next three months and about 53% of them see the trend continuing over the next one year.

City wise, Bangalore is the least pessimistic with 32% of the brokers surveyed having a negative price outlook over the next one year, while Chennai is the most bearish with 73% expecting a decline in realty value.

Sales during the January-March quarter are expected to be much lower (less than 50%) than what they were in the corresponding quarter last fiscal.

India’s largest real estate companies DLF and Unitech are faced with unsold inventory and increasing interest costs. Things do not seem to be getting better for at least another year for either of these developers.

Considering all these factors, buying stocks of realty developers is not advisable for time being. Property rates are falling and are going to fall more in future due to slump in real estate demand, sales has already fallen, financial numbers for these developers are not going to be as they use to be in past, atleast in near future. If anyone would like to invest for long term duration, one may consider to buy stocks of big developers like DLF, but only at deeps in current stock market.
Source: EconomicTimes

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Hindustan Unilever (HUL) - Best FMCG Stock - Latest Report With Target

FMCG major HUL implemented price cut of 4%-20% on select brands and product categories. The price cuts are implemented either directly (20% price cut on Wheel Active Blue) or indirectly through weight changes (4.2% weight increase in Lifebuoy and 6.7% - 8.3% weight increase in Wheel Green). What would be the implications of these price cuts? What do these price cuts translate into for shareholders? Can we buy stocks of this one of the very good and safe FMCG stocks?

Considering above mentioned price cuts on select brands, total blended price reductions is approximately 1.2%. This translates into net cost saving of Rs5,301 mn compared to Rs7,637 mn. earlier and additional EBITDA margin of 2.9% versus 4.1% earlier.

Recent price reductions ratify our call that consumer staple companies will retain some savings to improve margin profile and intensify advertisement activities and utilize the balance for price reductions to benefit consumers. The recent price reduction on select brands is in-line with expectation. Despite adjusting the above price actions, HUL can implement incremental price reductions of 3.1% without impacting FY10E earnings estimates and intensify advertisement activities.

Checkout: Best FMCG Companies - Stocks to Invest in 2009

Safety cushion still exists
Despite the above price reductions Drawing reference to our earlier report ‘Material Gains’, HUL is riding on net savings of Rs7,637 mn or additional margins of 4.3%. The report highlighted the magnitude of savings and re-iterated our call on partial retention of savings and partial pass through to the consumers. Considering above mentioned price cuts on select brands, total blended price reductions is approximately 1.2%. This translates into net cost saving of Rs5,301 mn compared to Rs7,637 mn earlier and additional EBITDA margin of 2.9% versus 4.1% earlier. Despite adjusting the above price actions, HUL has enough safety cushions to introduce further pricing actions (upto 3.1% blended price reduction), make aggressive spends on advertisement and enough arsenal to combat price competition.

Market Cap: 52,491.42
EPS (TTM): 9.64
P/E: 24.98
P/C: 23.27
Book Value: 16.24
Price/Book: 14.83
Div(%): 900.00
Div Yield(%): 3.74
Market Lot: 1.00
Face Value: 1.00
Industry P/E: 22.94

Maintaining earning forecasts; reiterate our ‘BUY’ recommendation
We had highlighted in our previous reports ‘Drawing Parallel’ and ‘Material Gains’ – that consumer staple companies will retain some savings to improve margin profile and intensify advertisement activities and utilize the balance for price reductions to benefit consumers. Thus, recent price reductions ratify our call and clearly vindicate our observations that consumer companies have unutilized savings benefits through decline in input costs and reduction in excise duty. The recent price reduction on select brands is in-line with expectation. Based on our calculations, HUL can implement incremental price reductions of 3.1% without impacting FY10E earnings estimates. Our earnings forecasts for CY09E remain unchanged at Rs11.7/Share. We maintain our BUY STOCKS rating with target price of Rs305..
Download Stock research PDF
Source: Stock report from EMKAY securities

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Pfizer India - Healthy Stock To Invest In From Pharmaceutical Sector

Pfizer India Ltd has a market share of 2.2%, and is currently ranked 14th (ORG-IMS MAT Dec. 2008) after the divestment of 4brands of the Consumer Health portfolio to M/s. Johnson & Johnson Ltd.

The company has reported earnings results for the full year ended November 2008. For the year, the net sales grew marginally from Rs.6726.6 million in the previous year to Rs.7006.1 million. The company has achieved growth despite the sale of four Consumer Healthcare Brands to M/s. Johnson & Johnson Limited. The Com-pany has achieved a net profit of Rs. 2991.2 million as compared to Rs.3389.3 million for the previous year showing a decline of 11.75%. This decline is due to the impact of other income and exceptional items in the pre-vious year and the year under review respectively.

The company posted excellent financial figures for the quarter ended Febru-ary 2009. The net sales for the company gone up by 26.51% to Rs 1902.40 million for the Q1FY09 as against the net sales of Rs 1503.70 million for the Q1FY08. The company posted the EBITDA of Rs 436.40 million for the Q1FY09 as against the EBITDA of Rs 315.70 million for the Q1FY08 with the growth rate of 38.23%. The operating profit margin for the company stood at 22.94% for the Q1FY09 as against the operating profit margin of 20.99% for the Q1FY08, clearly showing the strength of the company.

The net profit for the company rose to Rs 390.10 million for the Q1FY09 in comparison to net loss of Rs 192.90 million for the Q1FY08. The net profit margin stood at 20.51% for Q1FY09. The EPS for the company stood at Rs 13.07 for the quarter ended in February 09 versus the negative EPS of Rs 6.46 for the quar-ter ended February 08. The EPS on TTM (Trailing twelve months) stood at Rs 48.67 for the company.

Market Cap: 1,792.72
EPS (TTM): 48.67
P/E: 12.34
P/C: 11.46
Book Value: 301.45
Price/Book: 1.99
Div(%): 125.00
Div Yield(%): 2.08
Market Lot: 1.00
Face Value: 10.00
Industry P/E: 12.28


Valuation
The company has posted the compounded annual growth rate of 48.42% in bottom line in last four years and is expected to maintain its growth in coming years. The company was well placed to benefit from the growth of Indian Pharmaceutical market, that is expected to grow at 11- 12%. It is expected to be valued at $20 billion by 2015. Pfizer current portfolio includes some of India’s best known brands within the pharmaceutical industry. These brands have stood the test of time and even today are growing from strength to strength.

In addition, the Company has in-creased focus on launching new brands. Four new brands were launched in 2008 viz., Champix, Cyclokapron, Acupil and Trulimax. A new indica-tion of Lyrica in Fibromyalgia was also launched. Focus on Institutional and Retail sales has also considerably increased. This would significantly improve its financial performance over the next few years. The stock at the current market price of Rs 597 will trade 12.27 times to its earnings of Rs 48.67 (TTM) and 1.90 times to its book value of Rs 314.52 and is ex-pected to provide huge upside potential in long – term.

We initiate a ‘BUY’ signal on the stock at the current levels with a target of Rs 935 in the long -term investment horizon with an appreciation of 56.62%.

Download stock report PDF.

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Gujarat NRE Coke Ltd (GNCL) - Buy Stocks Report On Valuations

Gujarat NRE Coke Ltd (GNCL) is the largest independent producer of metallurgical coke in India, having a coke manufacturing capacity of 1 Mtpa, which is getting increased to 1.25 Mtpa by March 09. Here is a buy stocks report on current and future valuations of the company.

Investment Rationale
It is also the only Indian company to have acquired captive coking coal mines outside India. GNCL has already started the mining in Australian mines and is expected to produce around 1 million MT of coking coal for FY09E and slowly scale up to over 7 million MT by 2013E.

The domestic demand for coke has to be fulfilled through imports from Australia, Canada, USA, or China as India does not have reserves to that extent. And, taking into consideration various other issues, Australia seems to be the most suitable location to import coking coal.

IMPORTANT STATS

52 Week H/L: 175/17
Shareholding Pattern
Promoters: 45%
DII’s: 5%
FII’s: 20%
Others: 30%

Market Cap: 1,149.12
EPS (TTM): 5.82
P/E: 4.18
P/C: 3.86
Book Value: 23.48
Price/Book: 1.04
Div(%): 25.00
Div Yield(%): 10.27
Market Lot: 1.00
Face Value: 10.00
Industry P/E: 9.83


After its Australian mines become fully operational, the company would be using nearly 80‐90 percent of its coal requirement from the mines for coke business and the remaining would be sold in the open market. This will improve the margins of the company as the Australian coking coal business has better margins than the Indian coke business.

We have valued Gujarat NRE Coke Ltd on the EV/EBITDA based methodology. The stock is presently trading at an EV of 2.4 (x) FY10E EBITDA. We have given a target EV of 3.5 (x) FY10E EBITDA and recommend buying stocks of Gujarat NRE Coke Ltd with a target price of Rs 37.

The stock price has fallen due to concerns regarding the falling coking coal and coke prices, all the negatives have been discounted in the stock price and the stock looks very attractive at current levels. A better than expected rise in coking coal and coke prices may lead the stock to even higher levels. The company’s captive coking coal mines and captive power plant will help it in sustaining the slowdown in the economy.
Download stock report PDF

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Stock Dividends ....

Stock dividends, many people believe in buying stocks of high dividend yielding companies for fixed steady income from stock markets. Usual risk still remains but dividend paying stocks are at little lesser risk than growth stocks. Let's understand what is dividend and how dividend paying stocks perform in stock markets.

DEFINITION:
A dividend paid as additional shares of stock rather than as cash. If dividends paid are in the form of cash, those dividends are taxable. When a company issues a stock dividend, rather than cash, there usually are not tax consequences until the shares are sold.

So now that we have understood what is dividend let's see in what conditions company gives dividends. As the definition explains, when a company have extra cash with it earned as profits, it pays dividend. Normally dividend paying companies have one business model with limited scope for growth in it's vertical. If a company have any plans to grow the business, company should re-invest the cash surplus in business and propel the growth for company rather than paying the dividends. In returns, investors would get the returns in terms of stock price appreciation.

Paying dividend management shows they do not have any growth plans and that they do not want to re-invest the money earned. Many of the promoters use this path to get profits out from company in the form of stock dividends and use it to invest in other businesses where they could generate more returns than existing business but only for themselves. Though investor gains dividend, he looses out the growth opportunity.

CHECKOUT:
Time To Invest For High Dividend Stocks
High Stock Dividend Yield Companies

o If the company's ROE and ROCE are above the normal rate of return, the company should use the excess cash to expand business rather pay off dividends.

o In case the opportunities for business expansion are limited and not forthcoming then one should not be invested in that stock because the market pays for growth only

o Companies that pay off a one time hefty dividend accept that there is no opportunity for expansion for at least a couple of years down the line. The Markets may take the stock up but after a while the price retraces.

o History shows that dividend yield acts only as a floor to a stock price but is never powerful enough to create market cap.

o "Far more stocks giving a bad performance come from high dividend paying companies rather then the low dividend paying group . An otherwise good management that increase dividends and thereby sacrifices worthwhile opportunities for reinvesting increased earnings in the business is like the manager of a farm who rushes his magnificent livestock to the market the minute he can sell them rather then raising them to the point where he can get the maximum price of above his costs. He has produced a little more cash right now but at a frightful cost" - Philip. A. Fisher

Your thoughts are welcome...

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Long Term Investment Opportunity - Indian Hotels - Best Hotel Stock

Technical Analyst, Sudarshan Sukhani is of the view that one can look at Indian Hotels as an long term investment opportunity.

Indian Hotels broke out after a very long period of congestion. I think that is a stock that an investor could look at and say if I am prepared to put money in the market let me buy it and forget about it - probably it is bottoming out, building a base that also means that the lows may well be defined, even if the Nifty were to fall more. So, I am now looking at the stock as an investment opportunity, I don't think it is a stock that you can actually trade in but Indian Hotels seems good.
Source: Sudarshan Sukhani on CNBC TV18

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Stocks To Invest In - Stocks Available At Bottom Prices

Many people are believing that Indian stock market have made a bottom and the recent rally is an strong indicator of the same. Some of the FII's and mainly the mutual funds have been buying stocks in this rally. Some of the stock market experts are continuously saying that this is only a bear market rally and nothing more than that.

Anyways, markets would not remain at these levels forever so we should be ready for stock investing to fetch good investment returns. There are many stocks hammered in past few months by market but have a good intrinsic value. Money today runs a series of article explaining "how to invest in stock". Recently they have published a list of basement bargains (stocks to invest in due to their high networth value). Best way to invest money in stocks could be, find such basement bargains in these turbulent times, buy stocks and wait for good times. Stock markets would appreciate your decision and stocks too!

Banks are natural proxies for economic growth and pain, so it is no surprise to see a number of PSU banks being hammered. But some of these are at price points that represent good bargain stocks to invest, especially in conjunction with their recent performance and steady position among peers.

As the second largest PSU bank, the Punjab National Bank is not getting the respect it deserves after posting an inspiring third quarter result. Its net interest income rose 38% and the fee income (that bug bear of PSU banks) grew 40% YoY. The net profit was up 40%, while the bank earned a superlative 3.85% net interest margin. With a loan book of Rs 1,41,000 crore, PNB is growing faster than its peers, and at Rs 343, it’s available at a 22% discount to adjusted book value (the criterion used universally to value banks). Should we include this large and under-rated gem in Safe Wealth instead?

The Corporation Bank and the Oriental Bank of Commerce (OBC) are among the smaller PSU banks sadly unnoticed by serious investors. OBC is growing furiously (advances are up 28% YoY) and continues to post recoveries from the acquired asset book of the Global Trust Bank. The bad news is that they have low CASA ratios (percentage of low-cost deposits) and operate in the sub-3% NIM bracket. But, I think, it’s adjusted in the price. OBC is available for over 55% discount to its adjusted book value for the 2008-9 estimate. The Corporation Bank has a very low operating cost structure, low net NPAs (0.33%) and a strong loan growth (30% up YoY in December 2008), while its negatives are low CASA and small size. Perhaps that’s why it’s available for bravehearts like me for Rs 168 when its expected book value should hit Rs 340 by March 2009.

Read more on banks here

A unique company in the technology space that keeps coming up in readers’ suggestions is Bartronics. Originally a player in bar-coding systems, Bartronics has rapidly evolved into a complete solution provider in the Automatic Identification and Data Capture (AIDC) space. It has set up India’s first and only chip-based smart card manufacturing unit, and has acquired AIDC companies in the US and Singapore. Bartronics should cross Rs 550 crore in revenues and Rs 75 crore in net profit in 2008-9. Given the visibility it garnered from the Delhi government’s e-governance project, ESIC’s orders and a strong bid pipeline, growth should not be a problem for Bartronics. If it keeps the working capital monster at bay, this niche player can grow at 50-60% YoY for the next three-four years. Its current market cap: Rs 220 crore, translating into a rock bottom PE of 2.2 on estimated 2009 10 earnings.

It’s a little strange to see midcap companies from two branches of the Birla tree in our list, but such is the battering that these stocks have received that bottom fishing is called for. Especially when you consider that the core capabilities of our two mini-gems, Orient Paper and Kesoram, are intact and flourishing. B.K. Birla’s Kesoram (CMP: Rs 115) has aggressively added capacities in cement and tyres over the past two years and will now have to contend with sagging demand. The tyre division’s segment profits took a nosedive in the December quarter, while a national cement glut seems to be in the making.

This should not deter the astute, long-term buyer today. My sum of the parts (SOTP) for this diversified company is: assign a distress case enterprise value (EV) of $50 a tonne (against replacement cost of at least $100 a tonne) to its expanded 6.2 million TPA cement capacity to get Rs 1,550 crore. Add at least Rs 300 crore for the tyre business (Kesoram has recently invested more than Rs 650 crore in new tyre capacities) to get Rs 1,850 crore of the total EV. Subtract the estimated net debt of Rs 1,050 crore as on April 2009 to get a fair market cap of Rs 800 crore. This makes Kesoram’s current market cap of Rs 514 crore look like it’s hiding a 55% upside.

Like Kesoram, the G.P./C.K. Birla-promoted Orient Paper has expanded its cement capacity from 2.4 MTPA to 5 MTPA, along with a 50-MW captive power, by June 2009. The total spend: Rs 600 crore against a benchmark cost of Rs 900 crore, at least. This is the key value driver at a time when the cement industry is afflicted by falling margins and potential oversupply. Another Rs 120 crore is being spent on a tissue paper plant addition (15k TPA) to the paper mill at Amlai and a small expansion in the fans unit.

Orient’s cement division is among the most cost-efficient in India and has delivered a PBIT of Rs 1,100 a tonne in the third quarter, well above the industry averages. I would still value Orient’s 5-MTPA cement capacity at a discount to industry peers at a distress-like EV of $40 a tonne (against $90 replacement cost), translating into Rs 1,000 crore. Add Rs 200 crore for the rest of the business (paper, fans) to get Rs 1,200-crore fair EV. Subtract Rs 400 crore of estimated debt as on March 2010, and you will get a fair market cap of over Rs 800 crore versus today’s Rs 380 crore, suggesting more than a 100% upside. Orient Paper completed a 3:10 rights issue at Rs 36 a share about a year ago. An entry at Rs 19 allows for almost a 50% discount to the rights price.
Source & Reference: Money Today

Checkout: 2010 Stock Market - How Would Stocks Perform?

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ICICI Bank Reduces Home Loans Lending Rates

ICICI bank has reduced their home loan rate for existing customers. As it is clear, it would benefit only existing home loan borrowers. It is not going to be applicable to new customers who would wish to buy home in current market scenario. Government recently has asked banks to lower the interest rates. Indian banks are not doing it across the board for all types of financial products. Home loan rates for new customers, personal loans, auto loans are still at much higher interest rates.

All these rates can play crucial role of liquidity and easy credit for consumers resulting in higher consumer spending which could provide a boost to economy. Unless this happens, economy and so the stock markets are going to reel under slowdown/depression pressures. Let’s understand what this fresh home loan interest rate cut from ICICI Bank means for consumers.

When the State Bank of India (SBI) offered new home loans at 8 per cent interest (for the first year), HDFC upped its switching fees to 3 per cent to prevent the exodus of its customers.

Now, in a move to retain old customers, ICICI Bank is offering attractive home loan swaps for existing customers. If you have already taken a home loan from ICICI Bank at a higher rate of interest, you could now book yourself at 9.75 per cent floating interest rate by paying 0.5 per cent as switching fee on your existing loan. And, you need to decide if you want to switch by April 30, 2009.

In such a scenario, Wealth explores if these are indeed deals to grab. CEO of Apnaloan.com, Harsh Roongta advices, "If the current rate on your loan is 11 per cent, by switching you will be saving a considerable amount - a difference of 2.25 per cent this year!"

As a thumbrule, Roongta suggests that if the interest rates on your new loan and is even 0.5 per cent lower than the old one, you stand to gain by shifting.

The fine print:
Experts say that limited period offers are called teaser loans. And typical features of teaser loans are that you might have to pay a high charge if you decide to pre-close the loan or you will have to bear high interest rate at the expiry of the teaser schemes.

Though that does not mean the current slew of schemes would adopt such practices, it pays to be aware and stay vigilant.

So before you sign the dotted line, make sure you read all the terms and conditions in your agreement, especially with respect to the prepayment penalty clause and the interest reset clause.

Interest rate offered for new customers
For a loan amount of Rs 20 lakh, you can get a home loan for 20 years at the following floating interest rate:

SBI Special Home Loan Scheme: 8%
LIC Housing Finance Limited: 8.75%
ICICI Bank: 9.75%
HDFC: 9.75%

Unless Indian banks reduce the home loan lending rates for new customers, real estate sector will not take off. People willing to buy homes are still waiting for interest rate cut as well as property prices correction. Unless both these things happens, realty company stocks would find it difficult to see any upward direction in near future. It is very much advisable to not buy stocks of realty sector companies for some more time. Real estate sector has not yet bottomed out.

Checkout: Real Estate Sector Still In Downtrend

Stock ideas from real estate: Stocks Affected Due To Real Estate Downtrend

Read more on realty/infrastructure

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Tanla Slutions - Buy Stocks Rating From Religare Securities

Religare has advised buying stocks of Tanla Solutions anticipating positive value creation and a stock price rerating over the longer term investment duration, triggered by the some of the important factors.

In its stock report, the brokerage said, “We anticipate positive value creation and a stock price rerating for Tanla Solutions over the longer term, triggered by the following factors:
a) the acquisition of Openbit – a mobile payments company,
b) centralisation of its proprietary CREAT platform in tax-haven Dubai, which would bring capex, opex and tax benefits,
c) appointment of KPMG, one of the big 4, as the auditor for Openbit,
d) the tie-up with Zed, and
e) the launch of 3G services in India in which TSL has rich experience.

TSL has witnessed severe price deterioration over the last six months due to a confluence of several negatives:
a) Regulatory changes in the UK, which impacted operations in Q3FY09,
b) a depletion of cash balance on account of the Openbit acquisition, and higher capex and working capital requirements,
c) impact of the Satyam scam on all Hyderabad-based entities, and
d) the overall decline in the markets.”

According to the report, “TSL is currently trading at historical lows of 1x FY09E and FY10E earnings (net of cash of Rs 15/share as on December ’08). We expect the stock to outperform the broader market over the next 9–12 months, and hence maintain our Buy rating with a target price of Rs 80 based on 4x FY10E earnings.”

Tanla Solutions has tied-up with Spain-based Zed as an equal joint venture partner, with a proposed joint investment of €10mn (Rs 630 million). Zed is a leading global player in mobile valued added services (VAS) in terms of revenue and geographical footprint. The company develops and markets entertainment and community products for mobile phones and the internet, with operations in 54 countries and tie-ups with 130 wireless operators across the globe. It posted a turnover of US$ 545million in 2007 and ~US$ 870 million in 2008.

Religare has maintained buy stocks call on Tanla Solutions and expects a target price of Rs 80 per share on the stock, an upside of 133 per cent from its current market price of Rs 34.30.

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Nucleus Software Exports Ltd. - Buy Stocks of Smallcap Multi Bagger From IT Sector

Nucleus Software Exports Ltd. is a Delhi based company with over 20 years experience of Software development for the Banking & Financial Services industry. The company is focused on Banking, Financial Services and Insurance sectors (BFSI). when you think of a software company catering to the Banking & Financial Institution sector, the first thing which comes to an investors mind is US and the crumbling Banks, Financial Institutions and Insurance companies there – a closer scrutiny of the company shows that contribution from US is just about 1% of the total revenues of the company. And so buying stocks of this undervalued IT sector company is advisable.

The company has a 5 acres State of the Art Development Centre in Noida and employs over 2000 people. Besides Noida, the company has development centres in Singapore, Pune and Chennai.

In the mid to late nineties and early two thousands, when most players in the software industry were focusing on low risk service model focusing mainly on the US markets, Nucleus Software chose to take the High Risk model of Product Development and focused on markets in Asia and Far East, the rewards of which have been accruing to the company over the past few years. Infact, the company’s products like FinnOne and Cash@Will command leadership positions in their respective product categories, with FinnOne becoming the world’s largest selling product in its product category.

Nucleus has offices and subsidiaries across the globe – in Japan, Australia, Singapore, Netherlands, UAE, Hong Kong,Philippines and Korea. The company has four development centres globally. The company has a client list comprising of who’s who of the Banking & Financial sector.

The company has been getting various accolades and awards from time to time, recent ones being :-

a) The company’s product FinnOne has recently been ranked as World’s No.1 Selling Lending Software product by International Banking Systems (IBS), UK for the fourth consecutive year.

b) The Annual Report and Accounts of the company for year ended March 31, 2008, have been adjudged as the BEST under the category 'Information Technology, Communication and Entertainment enterprises' of the 'ICAI Awards for Excellence in Financial Reporting', by the Institute of Chartered Accountants of India (ICAI). A Gold shield will be awarded to the Company by ICAI.

c) For the third consecutive year in 2008, the Company has been selected as one of the “Top 25 Companies Adopting Good Corporate Governance Practices”, by the Institute of Company Secretaries of India (ICSI).

d) For the second year running, the Company has been listed among “Top 15 Exciting Emerging Companies to Work For” by NASSCOM. Your Company has also been recognized under “Best Practices” for Performance Management System by NASSCOM for the year 2008.

Financials:
The financials of the company are given as under :-

Investment Rationale:
Strong Order Flow inspite of Economic Slowdown – Inspite of the slowdown being witnessed across the globe, order flows for the company in the recent times have been strong and the company has added new customers. Nucleus bagged 8 new product orders and acquired 6 new customers for implementing 20 product modules of the FinnOne Suite & Cash@Will in the third quarter of year 2008-09. Product orders were bagged from leading financial institutions in Middle East, South East Asia, India & US. Consolidated for nine months ending December 31, 2008, Nucleus has won 20 new customers and 25 new product orders for implementing 84 modules of FinnOne and Cash Management Suite. The order flow continues in the Jan-Mar 09 quarter too as is evident from various announcements made by the company to the Stock Exchanges in recent months. Despite global recession, the company has not lost any clients.

Insulated from US Markets - The company derives just about 1% of its total revenues from the US markets and is largely insulated from the happenings in the US Financial markets. The company thus may not get significantly impacted by the collapsing Banks & Financial Institutions in the US.

Cash is King – The company has Cash and Bank Balance of over Rs 100 cr. The total market cap of the company currently is about Rs 170 cr. The core business is thus going at very attractive valuations. Moreover, the company carries no secured or unsecured loans on its balance sheet and is totally debt free.

The stock of Nucleus Software has fallen from a high of Rs 600 witnessed in 2007 to a current price of around Rs 50. Even though, the slowdown in the world economy and the margin pressure being witnessed by the company may be some of the factors which have taken a toll on the stock price, we feel that the stock of Nucleus Software has been battered primarily on account of the perception factor – when you think of a software company catering to the Banking & Financial Institution sector, the first thing which comes to an investors mind is US and the crumbling Banks, Financial Institutions and Insurance companies there – a closer scrutiny of the company shows that contribution from US is just about 1% of the total revenues of the company.

Besides the pressure on margins being witnessed by the company, one of the reasons for lower profits was Forex losses of Rs 9 cr in the 9 months of the current FY, which may not be of recurring nature. The company has actively taken cost cutting measures and rationalization of resources, the impact of which we believe will show in the coming quarters.

We believe that this debt free company, having Cash and Bank Balance of over Rs 100 cr available at a market cap of Rs 170 cr is attractively valued at the CMP.

Total shareholding of Promoter and Promoter Group: 59.55%
Foreign/Institutional Investors: 14.54%
Total Public shareholding: 25.91%

Investors can choose to buy stocks at the current price and add on declines.
Source: Multi Bagger Recommendation By Ashish Chugh(Investment Advisor) on Poweryourtrade.

Checkout other Multi Bagger stocks to buy here.

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Gold Price - Where would it go? Why Should You Buy Gold Now?

For several years now, gold analysts have told investors pretty much the same thing. They said ‘buy gold’ when the price was Rs 7,700 per 10 gm in January 2006. They again said ‘buy gold’ when it touched Rs 9,200 in 2007, and then Rs 10,700 in January 2008. Last month, the price of gold touched an all-time high of Rs 15,700 per 10 gm and these analysts were still parroting the same advice.

It seems they will be proved correct once again. Gold is the only asset class that can hold out the assurance of value at a time when most other assets are being devalued by falling markets or inflation. This is the reason most analysts are bullish about the prospects of the yellow metal and expect prices to cross Rs 18,000 per 10 gm by the end of 2009.

This article is from Money Today authored by Babar Zaidi who spoke to a range of experts and came up with four reasons why you should consider investing in gold even at these stratospheric rates.

1. The global economy will remain in the doldrums
The world economy is in serious trouble and is likely to remain so in the coming months. The IMF has forecast that global growth in 2009 will be just 0.5%. This is the slowest growth recorded by the global economy since 1945 and far lower than the 2.2% estimated by the IMF in November 2008.

In these difficult times, gold becomes the automatic choice for investors who are searching for a safe option to park their money. “The global uncertainty and financial crisis don’t seem to be ending, which underpin gold’s role as a safe haven,” says Devendra Nevgi, CEO and CIO of Quantum Mutual Fund. True, investors are buying gold as if there is no tomorrow. Don’t go by the lack of retail interest in physical gold. The real action is in the commodity markets and ETFs.

The holdings of the world’s largest gold ETF, the US-based SPDR Gold Trust, ballooned to a record 1,029 tonnes on 19 February, up 250 tonnes or 32% in just 50 days in 2009. “If this trend continues, we could see a breakout in gold prices. The uptrend should continue till we see the financial crisis softening,” says Renisha Chainani, research analyst with Anagram Comtrade.

Will things improve in 2009? Unlikely. In India, the third quarter of 2008-9 was one of the weakest in recent times. But experts believe that there could be more aftershocks in the coming quarters. Also, the $700-billion bailout package announced by the US may not be enough. On 23 February, the Dow Jones dropped to a 12-year low. “If the global outlook continues to deteriorate, we could see a rally in gold. So maybe Rs 17,500 is possible much before year-end,” says an analyst with Kotak Commodities.

2. Dollar may depreciate against major currencies
The price of gold and the value of dollar have an inverse relationship. If the value of the dollar drops, more dollars would be required to buy the same amount of gold. So, the value of gold stays unchanged but the devaluation of the dollar pushes up its price. If the dollar declines against other currencies, it will also weaken against gold. This negative correlation may not be evident on a daily or weekly basis, but is almost always true over longer periods.

When the dollar was falling in the first half of 2008, gold was rising. But the abnormal market conditions over the past six-seven months have belied this principle. That’s because across the world a lot of dollardenominated debt is being purchased, increasing the demand for the dollar and pushing up its value against other currencies, even as gold prices have continued to climb. Experts say the current rise in the dollar is an aberration and it is ultimately expected to decline.

Also, some analysts fear that the US may resort to printing more money in the coming months to tide over the financial crisis. This would fuel inflation in the US and cause the dollar to slide. “Liquidity infusion by global central banks would create hyper-inflation in the next couple of years. Gold would emerge as an alternate currency for preserving wealth,” says Lakshmi Iyer, head, fixed income and product, Kotak Mahindra AMC

3. Crude prices could bounce back to $65 a barrel
Gold and crude oil prices move in tandem. At least that’s the general rule because high oil prices lead to high inflation, which in turn makes gold attractive as an investment. But we saw this correlation break down in the black swan year that was 2008. Crude oil prices touched an all-time high of $147 per barrel in July 2008, and then slipped, while gold continued its northward journey. The fall in crude prices was led by a huge drop in demand in the second half of 2008. Opec scaled down production, but the price fell to $30 in December 2008.

Crude prices are hovering around the $40 mark, but analysts expect them to rise in the coming months. “If the US government’s stimulus package works, global demand for crude will rise. Crude prices might touch $65 a barrel by the end of 2009,” says Naveen Mathur, head of commodities and currencies, Angel Broking.

That puts gold in a sweet spot. It will be a good hedge against deflation if the economy doesn’t improve. And it will be a good investment to counter inflation, if it does. Either way, gold’s value will go up. “We are very bullish on gold. By the end of 2009, Rs 17,500 doesn’t seem a very high price for gold,” says Mathur.

4. Global demand for gold would exceed supply
Adam Smith’s invisible hand will also push up gold prices in 2009. While the demand for gold is on the rise, gold mining companies have been cutting production for the past three years. The South African gold output declined by 14% last year, while the US production was down 2%. With a 3% growth, China was the leading producer in 2008. Also, the total gold sold by global central banks dropped by 42% to 279 tonnes in 2008. This has been the lowest level since 1996. These cutbacks on production and sales are gold-friendly and would enhance the value of gold.

But don’t buy right away. Experts expect a correction due to profit booking at higher levels. Others point to a certain seasonality in the long-term price trends. Gold prices tend to peak in March and then fall a bit before resuming the uptrend. So, buy just 10-15% of your planned purchase and wait for the correction.

Also, gold should not have an inordinately large allocation in your portfolio. As always, the principle of asset allocation should apply. While the exact figure depends on an individual’s financial profile, experts advise that you should allocate around 10-15% of your portfolio to the precious metal.
Source: Money Today

There is another thought to this, a contratrian view about Gold prices. Read it here. Gold - Has The Bubble Built? Will It Burst Soon?

Read more on Gold here.

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