Financial planning plays a very important and crucial role in our life. Financial planning can be described as ``Long term process of wisely managing your finances so that you can achieve your financial goals & dreams.``
We all see many dreams for our children`s for their higher education, marriage and their future prospects and also set many goals for us, like buying a dream house, new car, vacation abroad. We surely know our goals and dreams but never make serious attempt to fulfill the same. In reality all our goals and dreams remain on paper only.
Financial planning can solve our many problems in life. Generally it is seen that when time comes for any function or occasion people redeem their money from such investment which was planned for some other purpose. Actually we become helpless when some emergency comes and take some instant decision which can definitely spoil our financial planning. Today it is the need of the hour because of the fact that, we are moving from joint family to nuclear family. Secondly, household, education and other personal expenses are going up every day. The loans and credit cards are becoming more and more common and we don`t understand the impact of interest which is taking away major part of our income.
Financial planning brings discipline in our saving and investment. It helps us to know which of our financial need is immediate, short term or long term. We can easily reach to our destination safely and timely if we set some basic rules for our life and invest accordingly. Most of us are not aware of priorities in our life. We all invest but without understanding our financial goals, risk involved and time horizon. The lack of proper financial planning will add to the problems rather solving it. Life insurance, health insurance and disability insurance are the basic of financial planning. In India today also less than 10% are insured and even those who are insured are also underinsured.
Living short is always a major problem for the family but nowadays living long is also becoming more and more problematic. The average life of an Indian is 63 years at present and is increasing because of the advancement of science and technology. Retirement planning and estate planning will also form part of our financial planning which is also been not addressed by many. Less than 1% prepares their WILL and this leads to litigations in court of law for the years. We have to think very seriously for all this aspects in our life if we want to live happily.
There is other side of every investment which a common man does not understand like, economic growth, equity as asset class, inflation, tax implications and asset allocation. Today we are surrounded by many agents/advisors who come to SELL the particular product such as life insurance, mutual funds, PPF, NSC, postal schemes, FDs and direct trading account. The most of the sells happens without understanding the needs of the clients. We all buy one or other product which may or may not fulfill our desired financial goal. No product is good or bad but more important is, it should match with our financial expectations. Financial planning is the process where product comes after the need analysis. This is the recent trend in India, where in planner charges fees for making the financial plan and does not push the product to earn the commission.
Proper financial planning is the only solution which can help us in fulfilling our financial dream & goals.
This entire process is done in following six steps:
> Establishing relationship with client
> Gathering client data and determining goals
> Analyze clients` objectives, needs and financial situations
> Presenting the financial plan
> Implementing the financial plan
> Monitoring and reviewing financial plan
We mostly plan everything in our life, so why not finances?
Saturday, June 19, 2010
A `travel money` portfolio
Long-distance travel is a booming business. In fact, the World Tourism Organisation estimates that last year, more than 880 million people travelled to a foreign country. And in light of both the upturn in international tourism figures and overall economic indicators in recent months, UNWTO forecasts the growth in international tourist traffic to be 3-4 per cent in 2010.
But greater distances require greater planning, especially when it comes to having ready access to funds while on the road. With the ubiquity of charge and credit cards and ATMs, many people often overlook the risks they face on long journeys. They can be easily lulled into a false sense of security.
Diversify
Our experience shows that travellers, especially those who plan to be away for a week or more, must consider taking along, what may be called, a `portfolio` of payment options. Just as you wouldn`t invest all your savings in one stock or bond, you don`t want to tie up all your travel money in one form of payment.
Each form of payment has its advantages and together they can help create worry-free travel.
Among suggestions for a balanced travel money portfolio are charge and credit cards, debit cards, travellers cheques, and cash.
Charge and credit cards provide a convenient form of payment that is readily accepted the world over. They also allow the traveller to defer payment and, depending on the financial institution, often provide favourable exchange rates.
However, while some financial institutions can replace a card quickly — usually within 24 hours — it may be difficult to get a card replaced if the traveller is in a remote location, or the issuing financial institution doesn`t have a local branch. It`s therefore important to check on card replacement policies before you leave home.
Debit cards
Debit cards are also another good addition to a travel funds portfolio. In most cases, they allow travellers access to cash machines linked to their accounts at financial institutions.
The downside? Lost or stolen cards, cards not compatible with local ATMs or networks, forgotten PINs (personal identification numbers), not enough funds in the linked account and, in some cases, special fees for international transactions. And, they are technology-dependent.
ATMs are great, but they occasionally run out of cash or are out of service — that can be especially troublesome in a new place. It is therefore advisable that travellers check on the availability of compatible ATMs in a destination — especially if travel is to a remote area —- and fees charged by the traveller`s local financial institution for international transactions.
Travellers cheques
We find that a lot of seasoned travellers use travellers cheques as an innovative, low cost way of hedging against the risk that travel funds won`t be available. Here, you get a physical, tangible store of value. Something you can hold on to, that`s usable without a PIN, and is not subject to telecommunications breakdowns, or computer failures or ATM availability.
Better still, it allows travellers to budget their money. You can look at your wallet or purse and see what you`ve spent and what`s left. Travellers cheques can also be easily replaced.
American Express, which is a leading issuer, promises replacement of lost or stolen travellers cheques virtually anywhere in the world usually within 24 hours. And you don`t need to worry if you have leftover cheques at the end of a trip since they don`t have an expiry date. You can keep them, cash them or put them back into your bank account.
Travellers cheques come in a number of currencies, though US dollar cheques are widely accepted at banks.
Finally, there`s cash. Travellers should always keep a small amount of local currency on hand for taxis and buses and tips. And some of their home-country currency as well that they will need on their return home. But carrying large amounts of cash is certainly not desirable. It`s the one form of money that`s not replaceable. It doesn`t have the traveller`s name on it.
Just as you wouldn`t invest all your savings in one stock or bond, you shouldn`t tie up all your travel money in one form of payment.
The author is Director, GlobalPrepaid, American Express.
Retirement portfolios: Need for monthly cash flows?
Investment portfolios are constructed to meet future liabilities. Such liabilities range from buying a house and paying children`s tuition fees to creating endowments and meeting post-retirement lifestyle. Several investors in the recent past have asked us about post-retirement portfolios. The question is: How should one create a post-retirement portfolio that generates monthly cash flows?
This article discusses the retirees` need and the desire to generate monthly cash flows. It also explains investment avenues available to non-pensioners to generate income that replicates pension payoffs.
It is true that retirees have to match their expenses with appropriate income. But it is moot if they necessarily require monthly cash flows from the investment portfolio to enjoy their desired post-retirement lifestyle.
Suppose an investor receives a pension of Rs 5,000 a month. This approximately equals receiving cash flows of Rs 65,000 a year on a deposit of Rs 8.60 lakh carrying 8% interest. Essentially then, those who receive pension income already have bond-like cash flows. Creating a portfolio that generates monthly income would only mean even greater exposure to bonds as an asset class.
This is not true for non-pensioners. They have to generate some monthly cash flows to replicate pension payoffs. Their portfolios have to, therefore, carry sufficient bond assets to generate the required monthly income.
Now, asset allocation is essential for lifecycle investment. This means that even retirees should have some allocation to equity-like cash flows to generate higher returns. Otherwise, their portfolio will suffer from inflation risk. This is because bonds pay nominal interest rate and, hence, do not protect the retiree-investors from rising price levels.
It is important to understand that a post-retirement portfolio should contain assets that generate income as well as capital appreciation. The monthly cash flows would then come from interest, dividends and through sustainable withdrawals from the investment portfolio.
Investors have several ways to creating a portfolio generating monthly income. Many prefer Post Office Monthly Income Scheme (POMIS) offered by the Government. The problem is that POMIS by itself cannot provide the required total monthly cash flow because of an investment cap of Rs 0.45 million for each account. The investment cap translates into approximately Rs 3,000 a month based on the interest rate of 8% a year.
Investors can consider annuities along with POMIS. Such products can be purchased from insurance companies, which entitle the annuitant to receive stable cash flows through their life time. Of course, annuities are priced off the interest rate prevailing at the time of purchase; higher the interest rate, higher the cash flow that the investor will receive for the amount paid to purchase the annuity.
Besides, investors have Monthly Income Plans (MIPs) offered by asset management firms. Such funds predominantly invest in bonds and money market instruments to make monthly payments. These funds will be exposed to price risk to the extent the portfolio has exposure to short-term and long-term bonds and to equity.
This article discusses the retirees` need and the desire to generate monthly cash flows. It also explains investment avenues available to non-pensioners to generate income that replicates pension payoffs.
It is true that retirees have to match their expenses with appropriate income. But it is moot if they necessarily require monthly cash flows from the investment portfolio to enjoy their desired post-retirement lifestyle.
Suppose an investor receives a pension of Rs 5,000 a month. This approximately equals receiving cash flows of Rs 65,000 a year on a deposit of Rs 8.60 lakh carrying 8% interest. Essentially then, those who receive pension income already have bond-like cash flows. Creating a portfolio that generates monthly income would only mean even greater exposure to bonds as an asset class.
This is not true for non-pensioners. They have to generate some monthly cash flows to replicate pension payoffs. Their portfolios have to, therefore, carry sufficient bond assets to generate the required monthly income.
Now, asset allocation is essential for lifecycle investment. This means that even retirees should have some allocation to equity-like cash flows to generate higher returns. Otherwise, their portfolio will suffer from inflation risk. This is because bonds pay nominal interest rate and, hence, do not protect the retiree-investors from rising price levels.
It is important to understand that a post-retirement portfolio should contain assets that generate income as well as capital appreciation. The monthly cash flows would then come from interest, dividends and through sustainable withdrawals from the investment portfolio.
Investors have several ways to creating a portfolio generating monthly income. Many prefer Post Office Monthly Income Scheme (POMIS) offered by the Government. The problem is that POMIS by itself cannot provide the required total monthly cash flow because of an investment cap of Rs 0.45 million for each account. The investment cap translates into approximately Rs 3,000 a month based on the interest rate of 8% a year.
Investors can consider annuities along with POMIS. Such products can be purchased from insurance companies, which entitle the annuitant to receive stable cash flows through their life time. Of course, annuities are priced off the interest rate prevailing at the time of purchase; higher the interest rate, higher the cash flow that the investor will receive for the amount paid to purchase the annuity.
Besides, investors have Monthly Income Plans (MIPs) offered by asset management firms. Such funds predominantly invest in bonds and money market instruments to make monthly payments. These funds will be exposed to price risk to the extent the portfolio has exposure to short-term and long-term bonds and to equity.
It is important to note that fixed deposit with banks is not considered, as they do not provide investors with monthly cash flows. Some investors even take exposure to high dividend-yield stocks to generate monthly income. The problem is that such investments suffer high downside risk, unlike POMIS.
Conclusion
The urge to receive monthly cash flows from investment portfolio is high among retirees. This article shows why pensioners should resist this urge, as pensions have bond-like cash flows.
Non-pensioners should consider annuities, POMIS and MIPs as part of the investment repertoire to replicate pension payoffs. The proportion of the portfolio to each product would depend on investors` desired post-retirement lifestyle and risk tolerance level.
Even post-retirement portfolio should carry optimal allocation to equity and bonds, if not other asset classes. Such a portfolio would help retirees enjoy inflation-adjusted post-retirement lifestyle.
The urge to receive monthly cash flows from investment portfolio is high among retirees. This article shows why pensioners should resist this urge, as pensions have bond-like cash flows.
Non-pensioners should consider annuities, POMIS and MIPs as part of the investment repertoire to replicate pension payoffs. The proportion of the portfolio to each product would depend on investors` desired post-retirement lifestyle and risk tolerance level.
Even post-retirement portfolio should carry optimal allocation to equity and bonds, if not other asset classes. Such a portfolio would help retirees enjoy inflation-adjusted post-retirement lifestyle.
Will your investments continue to grow lifelong?
Imagine that returns on your investments are continuously rising and majority of the analysts predict a strong uptrend for your securities. You would be elated that your investments would surely give voluminous returns in the months to come. However, just assume if a proportion of analysts say otherwise? Wouldn`t it have a pinching effect. ``Mean to reversion`` theory exactly means the same.
Investopedia defines mean reversion as follows, ``The mean to reversion strategy is based on the mathematical premise that all prices will eventually move back towards the mean or average return.``
Thus, if a stock is underperforming, its price will move towards its average value when the market rebounds. How does this work in case of gold - the safe heaven of many and India`s benchmark index, the 30-share index - BSE Sensex? On comparing average yields of Sensex v/s that of gold from 1980 to 2010, we observed that the index gave a return (min avg yield) of 19% while yellow metal provided returns of merely 2%. However, while the index has touched a whopping 17K plus in 2010, the prices of gold have touched closed to USD 1250 an ounce. Will the prices continue to rise?
Let`s test the ``Mean to reversion`` theory and find out. To study the theory, we took smaller bracket years from 1995-2010 (15 yrs), 2000-2010 (10 yrs) and 2005-2010 (5 yrs). We observed that in each of the years, the yellow metal had provided absolute returns of 306.59% (while its average annualized yield is 15% p.a.); 306.59% (while its average annualized yield is 15% p.a); and 62.95% (while the average annualized yield was 21 %.). The average (mean) of the returns (yield) turns out to be 12.25%. Now if reversion to mean theory is applicable, the gold prices which have been steadily rising since 2002 is likely to witness a down trend and come back to its mean return of 12.25%. Let`s see if the same is applicable in our index - BSE Sensex. We studied the prices of Sensex during the same years. From 1995-2010 the Sensex gave an average annualized yield of 12%. Meanwhile from 2000-2010 and 2005-2010 the yield was at 15% and 12% respectively. The average of the three turns out to be 13%. This shows that after a rising uptrend in the returns of 15% the index gave returns of 12% which was less than its average returns of 13%
How about a public provident fund? In the case of this government security, returns come out at 12% in 1995, 11% in 2000, 11% in 2005 and 8% returns in 2010. The average returns would be 10.50%. Meaning, in the last 15 yrs, PPF has given average returns of 10.50% and more likely that the returns will increase over the years.
The above analysis shows that as there is an uptrend in the returns of the investments over a period of time, the prices return to the average price. With the help of the theory, one can predict the timing in the stock market. Like if we know the average annualized returns of the investments we know at what rate the price will go down near the mean if it is falling or go up near mean if it is in a declining trend. If recent returns have been below average, we can forecast above average future returns, and change our portfolio to allocate a higher portion to stocks.
The drawback!
What we studied, was the historical returns of the prices of investments going back to 1995 and we had the data already available with us, an in sample test which helps to time the market. However, if we go back to the period and take the information only available to us during that time, it would be practically difficult to time the market.
Investopedia defines mean reversion as follows, ``The mean to reversion strategy is based on the mathematical premise that all prices will eventually move back towards the mean or average return.``
Thus, if a stock is underperforming, its price will move towards its average value when the market rebounds. How does this work in case of gold - the safe heaven of many and India`s benchmark index, the 30-share index - BSE Sensex? On comparing average yields of Sensex v/s that of gold from 1980 to 2010, we observed that the index gave a return (min avg yield) of 19% while yellow metal provided returns of merely 2%. However, while the index has touched a whopping 17K plus in 2010, the prices of gold have touched closed to USD 1250 an ounce. Will the prices continue to rise?
Let`s test the ``Mean to reversion`` theory and find out. To study the theory, we took smaller bracket years from 1995-2010 (15 yrs), 2000-2010 (10 yrs) and 2005-2010 (5 yrs). We observed that in each of the years, the yellow metal had provided absolute returns of 306.59% (while its average annualized yield is 15% p.a.); 306.59% (while its average annualized yield is 15% p.a); and 62.95% (while the average annualized yield was 21 %.). The average (mean) of the returns (yield) turns out to be 12.25%. Now if reversion to mean theory is applicable, the gold prices which have been steadily rising since 2002 is likely to witness a down trend and come back to its mean return of 12.25%. Let`s see if the same is applicable in our index - BSE Sensex. We studied the prices of Sensex during the same years. From 1995-2010 the Sensex gave an average annualized yield of 12%. Meanwhile from 2000-2010 and 2005-2010 the yield was at 15% and 12% respectively. The average of the three turns out to be 13%. This shows that after a rising uptrend in the returns of 15% the index gave returns of 12% which was less than its average returns of 13%
How about a public provident fund? In the case of this government security, returns come out at 12% in 1995, 11% in 2000, 11% in 2005 and 8% returns in 2010. The average returns would be 10.50%. Meaning, in the last 15 yrs, PPF has given average returns of 10.50% and more likely that the returns will increase over the years.
The above analysis shows that as there is an uptrend in the returns of the investments over a period of time, the prices return to the average price. With the help of the theory, one can predict the timing in the stock market. Like if we know the average annualized returns of the investments we know at what rate the price will go down near the mean if it is falling or go up near mean if it is in a declining trend. If recent returns have been below average, we can forecast above average future returns, and change our portfolio to allocate a higher portion to stocks.
The drawback!
What we studied, was the historical returns of the prices of investments going back to 1995 and we had the data already available with us, an in sample test which helps to time the market. However, if we go back to the period and take the information only available to us during that time, it would be practically difficult to time the market.
Investing in tough times: Some tips
Are we in a slowdown or in a recession? Well, nobody has an answer to this question. When we see the media hysteria we keep wondering how `shriller` can the voices become?
If you are in the middle portion of your life and surrounded by EMIs for your house, children`s education, car payments the situation will of course be scary. And we in the media business love to write about `negative things` rather than positive things. The current state of the economy could be a worry. What should you do in such a slow down? Here is some generic advice that might help.
Your goals still standIf you are a scientific investor, most of your investments will be towards a specific goal. So unless you are sure that a particular goal is not important (and your spouse also feels the same way) do not touch the amounts set aside for a specific important goal. Early withdrawals from insurance and life insurance plans can be very expensive in terms of costs and taxes. Perhaps more importantly if the equity market looks up even a little your investments could recoup very well. Howsoever tempting, do not touch moneys to which you have given direction and momentum.
Many eggs in 3-4 baskets
All types of financial assets - life insurance, mutual funds, savings bank accounts, bank fixed deposits, provident fund schemes, government securities, equities, etc. all of them have a role in life. Each asset class (real estate, debt and equity) - perform differently in different economic climates. Stop chasing media headlines. This is a time when you will hear statements like `Cash is King`, `Stay away from equities` - just ignore them. There is no permanently correct investment advice. Today there are people who can manipulate data for long periods of time and come up with `newsletters` - ignoring most of it has its advantages too!
Track changes in your lifeIf you did your risk profiling 5 years back, do it again. Do not take on too much risk when the markets are rising and cut equity exposure when markets are down. Realise that `risk` is largely counter intuitive. If you feel there was no risk, risk may be at its maximum and vice-versa! However if you are closer to some event for which you are saving, then you may still find it worthwhile to sell. In the last 5 years you have built some assets, you son has started working, your EMIs are over, your car loan is paid off… if all this has happened you may need less insurance. But if the goals are valid, the savings and investments are not enough to fill the gaps, keep your term life insurance valid and in force. If you are dependent on your company`s group insurance - life and medical - take an individual policy and keep it live. In case of a job loss it will be vital.
Think Long Term, not next quarter
Markets are cyclical! It is only the media which should be worried about quarterly results. You should not be so short term `ish` in your thinking. So it should call for long periods of inaction. Warren Buffet says at Berkshire Hathway we think of this as a good habit. Markets fall, and then they go up - the broad index is wavy, ALWAYS over the long term. Rather than react to the market, it makes sense to create a carefully considered long-term strategy, especially when it comes to your long-term needs. Frankly if you are saving money for your daughters post graduate education, and she is 3 years of age - how does it matter that the markets will take 6 months to recover? You should be worried about the corpus size only when your daughter is 3-4 years away from graduation.
Use the Knowledge of Your Advisor / Relationship Manager, if any!
If any - was meant for the advisor, not his knowledge! Unfortunately most life insurance companies and mutual funds chase only the `potential` new customer with all kind of freebies. The existing advisors and investors are not helped at all - either in the form of guides or teaching aids. It is imperative that you learn and understand on your own - and know the art of wealth creation and for most of my clients` - wealth preservation!
If you are in the middle portion of your life and surrounded by EMIs for your house, children`s education, car payments the situation will of course be scary. And we in the media business love to write about `negative things` rather than positive things. The current state of the economy could be a worry. What should you do in such a slow down? Here is some generic advice that might help.
Your goals still standIf you are a scientific investor, most of your investments will be towards a specific goal. So unless you are sure that a particular goal is not important (and your spouse also feels the same way) do not touch the amounts set aside for a specific important goal. Early withdrawals from insurance and life insurance plans can be very expensive in terms of costs and taxes. Perhaps more importantly if the equity market looks up even a little your investments could recoup very well. Howsoever tempting, do not touch moneys to which you have given direction and momentum.
Many eggs in 3-4 baskets
All types of financial assets - life insurance, mutual funds, savings bank accounts, bank fixed deposits, provident fund schemes, government securities, equities, etc. all of them have a role in life. Each asset class (real estate, debt and equity) - perform differently in different economic climates. Stop chasing media headlines. This is a time when you will hear statements like `Cash is King`, `Stay away from equities` - just ignore them. There is no permanently correct investment advice. Today there are people who can manipulate data for long periods of time and come up with `newsletters` - ignoring most of it has its advantages too!
Track changes in your lifeIf you did your risk profiling 5 years back, do it again. Do not take on too much risk when the markets are rising and cut equity exposure when markets are down. Realise that `risk` is largely counter intuitive. If you feel there was no risk, risk may be at its maximum and vice-versa! However if you are closer to some event for which you are saving, then you may still find it worthwhile to sell. In the last 5 years you have built some assets, you son has started working, your EMIs are over, your car loan is paid off… if all this has happened you may need less insurance. But if the goals are valid, the savings and investments are not enough to fill the gaps, keep your term life insurance valid and in force. If you are dependent on your company`s group insurance - life and medical - take an individual policy and keep it live. In case of a job loss it will be vital.
Think Long Term, not next quarter
Markets are cyclical! It is only the media which should be worried about quarterly results. You should not be so short term `ish` in your thinking. So it should call for long periods of inaction. Warren Buffet says at Berkshire Hathway we think of this as a good habit. Markets fall, and then they go up - the broad index is wavy, ALWAYS over the long term. Rather than react to the market, it makes sense to create a carefully considered long-term strategy, especially when it comes to your long-term needs. Frankly if you are saving money for your daughters post graduate education, and she is 3 years of age - how does it matter that the markets will take 6 months to recover? You should be worried about the corpus size only when your daughter is 3-4 years away from graduation.
Use the Knowledge of Your Advisor / Relationship Manager, if any!
If any - was meant for the advisor, not his knowledge! Unfortunately most life insurance companies and mutual funds chase only the `potential` new customer with all kind of freebies. The existing advisors and investors are not helped at all - either in the form of guides or teaching aids. It is imperative that you learn and understand on your own - and know the art of wealth creation and for most of my clients` - wealth preservation!
Classification of Commodities
AGRICULTURAL COMMODITIES:
PLANTATION: Rubber | FIBRES: Cotton | |
SPICES: Pepper Turmeric Jeera Chilli Coriander Cardamom | CEREALS: Wheat Barley Maize | |
OIL & OIL SEEDS: Castor seeds Cotton seed oilcake Soy bean Refined soy oil Mustard seed Crude Palm oil | ||
OTHERS: Almond Guar seed Menthe oil Potato Guar gum Gur Sugar | ||
PULSES: Chana Yellow Peas |
METAL & ENERGY COMMODITIES:
BULLIONS/PRECIOUS METALS: Gold Silver Platinum | BASE METALS: Copper Zinc Lead Steel Nickel Aluminum Tin |
ENERGY: Crude oil Natural gas Gasoline Heating oil |
The list of internationally traded commodities is even longer. Internationally livestocks, weather contracts are also traded with good volume. Weather contracts have entered into India but will take good time to catch up attraction.
There are also some more commodities traded on Indian Commodity Exchanges such as ATF, Thermal coal etc. Variants of commodities such as Maize feed, Maize Industrial etc. Contracts also classified upon location and different volume/weight, import grade, export grade etc. are also traded.
We will shortly give you brief, and basic idea about each segment of commodities along with some useful insight.
Please be a part of this learning process.
MERCK LTD- MNC hunters and Mumbai based Portfolio Managers to start pilling up
MERCK LTD.
Is an pharmaceutical MNC Giant.
Our reliable sources gave a hint that some prominent Portfolio Managers and MNC hunters based in Mumbai are going to start piling up this counter.
More than 20% upside is likely in near future.
For detailed view of MEGHA INVESTMENTS AND RESEARCH team, please visit soon.
Sunday, May 23, 2010
Know the IDR FAQs as Stanci sets the ball rolling
The largest foreign bank in India, Standard Chartered Bank is all ready to become the first foreign company to list in India through an Indian depository receipts (IDR) issue. It will sell 240 million IDRs through a public issue opening on May 25. Ten IDRs will equal a share of Standard Chartered.
The bank expects to mop up around USD 500-750 million (Rs 22,500-33750 million) to expand its businesses globally.
Parties to the IDR issue include - issuer company, overseas custodian, the domestic depository and Registrar and Transfer Agent. Their roles are as under:
Issuer Company: It is a foreign listed company. The investor gets an exposure to the Global Company, so remember there is global risk. If Stanchart (Standard Chartered Bank) has a problem in any part of the world and the Stan C shares fall in UK, Indian IDR will fall.
Domestic Depository: Is a SEBI registered Custodian will issue the IDR and acts as a trustee for the IDR holders – for more details read the Deposit Agreement.
Overseas Custodian: Issuer Co issues shares to Overseas Custodian who holds it on behalf of the Domestic Depository on the basis of which the DD issues IDR in India. It is a foreign entity appointed by the DD
Registrar and Transfer Agent: Provides services to the issuer company, DD, and IDR holders in India. It does record keeping, coordinating corporate actions, handling investor grievances, etc.
Provides services like record keeping, co-ordinating corporate actions, handling investor grievances to issuer co, DD, IDR holders
Why is Stanci (Standard Chartered) taking the IDR route?
The fundamental rule goes thus….If `A` being a foreign company cannot list in India directly, it will take route of sharing the risk and rewards with Indian shareholders.
The logic of buying IDR of Standard Chartered Bank:
The very high price earning ratios of Indian banks is likely to be one the reasons which prompted Stan C to think of an IDR. Most of the revenues for Stan C come from Asia, it employs many Indians even internationally, and they have a fantastic client base in Asia. So they will lap it up in India hence they must be issuing shares. Also for the company the currency risk is reduced with the Euro not in great shape. In all, a win –win deal for all.
The risks involved are….
The very high price earning ratios of Indian banks is likely to be one the reasons which prompted Stan C to think of an IDR. Most of the revenues for Stan C come from Asia, it employs many Indians even internationally, and they have a fantastic client base in Asia. So they will lap it up in India hence they must be issuing shares. Also for the company the currency risk is reduced with the Euro not in great shape. In all, a win –win deal for all.
The risks involved are….
Well…each investment has its pros and cons assigned to it…..IDRs are not an exception. When you are investing you are exposing yourself to the global risk. But it like saying that our Indian markets are not impacted by the global economic environment. So, ideally speaking if you are ready to reap what it takes by investing in global company, IDRs are for you………….Happy investing !!!
ABC of Index Funds
An index fund allows you to enjoy the good parts of a mutual fund, with little or none of the bad, by buying stock in all the companies of a particular index and thereby reproducing the performance of an entire section of the market. An index fund builds its portfolio by simply buying all the stocks in a particular index - the fund buys the entire stock market, not just a few stocks. The most popular index of stock index funds is the Standard & Poor`s 500, but there are index funds that track 28 different indexes, and more are added all the time.
An S&P 500 stock index fund owns 500 stocks - all the companies that are included in the index.
According to Chetan Patel, VP-PMS, Sushil Finance (P), `` this is the key distinction between stock index funds and ``actively managed`` mutual funds. The manager of a stock index fund doesn`t have to worry about which stocks to buy or sell - he or she only has to buy the stocks that are included in the fund`s chosen index. A stock index fund has no need for a team of highly-paid stock analysts and expensive computer equipment that goes into picking stocks for the fund`s portfolio. So the hard part about running a mutual fund is gone. ``
An S&P 500 stock index fund owns 500 stocks - all the companies that are included in the index.
According to Chetan Patel, VP-PMS, Sushil Finance (P), `` this is the key distinction between stock index funds and ``actively managed`` mutual funds. The manager of a stock index fund doesn`t have to worry about which stocks to buy or sell - he or she only has to buy the stocks that are included in the fund`s chosen index. A stock index fund has no need for a team of highly-paid stock analysts and expensive computer equipment that goes into picking stocks for the fund`s portfolio. So the hard part about running a mutual fund is gone. ``
``Investing in stock index funds is often called passive investing, since the funds don`t use the same active management techniques as other funds. Passive investing has two big advantages over active investing. First, a passive stock market mutual fund is much cheaper to run than an active fund. Eliminate those analysts` salaries and an index fund can cut its costs tremendously - and those savings can be passed along to investors in the form of higher returns, `` he adds.
Chetan Patel is VP- PMS, Sushil Finance (P) since October 2007.
7 risk factors in the market today!
So should you invest directly in equities? Well here are some risks that I can see in the market today. Thought I should share it with you:
Risk No. 1: No fund manager is talking about interest rates going up. Ben Bernanke who thinks all problems can be solved by keeping interest low will have a problem. Once a few countries (did you notice a few small countries bought gold recently? smaller quantity than what India did, but is it a trend?). So Greenback could be in some tight spot in the longer run. As a country and as a world investor, we need to be prepared for the cumulative effect of credit deterioration around us - sovereign defaults will increase, big corporates will struggle, Euro competitiveness is a joke - see the Chinese power equipment pricing power. The recession may have just started - remember W is just 2 Vs stuck together? So we may be in a double dip recession in the world. And India may not create enough jobs for the 3-4 million MBAs, engineers, CAs, we churn out.
Risk No. 2: We ignore what we want to ignore: When Dubai happened, we said Dubai is not US. When Greece happened, we said Greece is not US. When Spain happened we said… When the Red Shirts disturbed Thailand, we said Thailand is not India. Dubai, Greece, Spain are symptoms of a world living beyond its means. One day it will catch up. We are all hoping when the music stops, the parcel will not be in our hand.
Risk No. 3: Throwing US currency from being the `reserve` currency will be bloody. The US thinks the rest of the world owes it a living. It subsidizes cotton - which leads to farmer suicide. Even Sharad Pawar will have to wake up to this. Dollar is strong because the Euro is worse. Watch this space it will be bloody. Our blood.
Risk No. 4: We think India is insulated from all this. We are not. Our luck is whichever currency is strong, there will be enough Indians working there and remitting money from there. Thank God for Keralites, Sindhis, Punjabis, Gujaratis, and Tamilians - and their wandering spirit!
Risk No. 5: Thinking that only the above 4 risks matter.
Risk No. 6: Thinking all risks will be nicely tabulated and given to you in a website. I call this the MBA power-point solution - problem. Most of us want only 7 slides - problem, example, what will happen, what is supposed to have happened, what is the solution, scenario of this solution applied to past data, and therefore will apply to the future, thank you and contact details.
Risk No. 7: The risk that will get your net-worth down is not listed here from 1 to 6. It is your behavior when the market is up or when the market is down. Investor behavior is much worse than market behavior.
Amusing risk: I just received a ppt from a broking house - showing about 20 companies which were supposed to do well in the future. I had not heard about this research house, so I opened it out of curiosity. The sender Mr. J had called them `Multi-beggars`. Of course I do not wish to share the name of the analyst of the name of the company. This I think is the worst risk. There are 20 good analysts, but 2000 people masquerading as analysts… This is perhaps the biggest risk- if it is not the media.
Risk No. 1: No fund manager is talking about interest rates going up. Ben Bernanke who thinks all problems can be solved by keeping interest low will have a problem. Once a few countries (did you notice a few small countries bought gold recently? smaller quantity than what India did, but is it a trend?). So Greenback could be in some tight spot in the longer run. As a country and as a world investor, we need to be prepared for the cumulative effect of credit deterioration around us - sovereign defaults will increase, big corporates will struggle, Euro competitiveness is a joke - see the Chinese power equipment pricing power. The recession may have just started - remember W is just 2 Vs stuck together? So we may be in a double dip recession in the world. And India may not create enough jobs for the 3-4 million MBAs, engineers, CAs, we churn out.
Risk No. 2: We ignore what we want to ignore: When Dubai happened, we said Dubai is not US. When Greece happened, we said Greece is not US. When Spain happened we said… When the Red Shirts disturbed Thailand, we said Thailand is not India. Dubai, Greece, Spain are symptoms of a world living beyond its means. One day it will catch up. We are all hoping when the music stops, the parcel will not be in our hand.
Risk No. 3: Throwing US currency from being the `reserve` currency will be bloody. The US thinks the rest of the world owes it a living. It subsidizes cotton - which leads to farmer suicide. Even Sharad Pawar will have to wake up to this. Dollar is strong because the Euro is worse. Watch this space it will be bloody. Our blood.
Risk No. 4: We think India is insulated from all this. We are not. Our luck is whichever currency is strong, there will be enough Indians working there and remitting money from there. Thank God for Keralites, Sindhis, Punjabis, Gujaratis, and Tamilians - and their wandering spirit!
Risk No. 5: Thinking that only the above 4 risks matter.
Risk No. 6: Thinking all risks will be nicely tabulated and given to you in a website. I call this the MBA power-point solution - problem. Most of us want only 7 slides - problem, example, what will happen, what is supposed to have happened, what is the solution, scenario of this solution applied to past data, and therefore will apply to the future, thank you and contact details.
Risk No. 7: The risk that will get your net-worth down is not listed here from 1 to 6. It is your behavior when the market is up or when the market is down. Investor behavior is much worse than market behavior.
Amusing risk: I just received a ppt from a broking house - showing about 20 companies which were supposed to do well in the future. I had not heard about this research house, so I opened it out of curiosity. The sender Mr. J had called them `Multi-beggars`. Of course I do not wish to share the name of the analyst of the name of the company. This I think is the worst risk. There are 20 good analysts, but 2000 people masquerading as analysts… This is perhaps the biggest risk- if it is not the media.
Saturday, May 22, 2010
Nifty and Sensex View + News Update
Nifty trades in a down channel and now trades very close to 200DEMA-4897. After 13 months of sustaining above this important average now Nifty looks set to break the average and confirm its bear market. From here Nifty looks to reach near 4000-3800 levels by October 2010 and it is not advisable to average losses still yet.
Sensex is near trendline support and trades at 12Week low. It has tested 200DEMA at 16373 and below that major weakness is expected. Sensex trades below all other important averages and until move past 17500 is not seen more weakness would follow.
Moody’s said SBI’s rating would come under ‘some pressure’ if the government-owned bank’s bottom line did not improve. This was attributed mainly to higher provisioning and increase in staff cost. http://www.business-standard.com/india/news/moody%5Cs-says-sbi-rating-may-come-under-pressure/395370/
http://www.moneycontrol.com/news/cnbc-tv18-comments/lt-plans-to-sell-satyam-stake-unhappytech-mah_458572.html L&T plans to sell Satyam stake, unhappy with Tech Mah
Steel firms prepare to ease prices on market signals, flat steel producers are looking to roll over and even cut prices from June. Producers indicated that the inventory levels at Shanghai were high at about 1.7 million tonnes, which could have added to the sentiment. Chinese domestic HRC dropped sharply by about $29 a tonne. , Bhushan Steel said, the company would drop prices by Rs 2,500-3,000 from June. The levels of $800 a tonne for hot rolled coil (HRC) never got absorbed in the market. http://www.business-standard.com/india/news/steel-firms-prepare-to-ease-pricesmarket-signals/395355/
Reliance Industries has shut crude oil and gas production from its Krishna Godavari basin MA fields in the Bay of Bengal as a precautionary measure to avoid damage from the tropical cyclone 'Laila'. MA fields was producing around 32,000-33,000 barrels of oil per day and 8 million standard cubic meters per day of gas. "This has stopped since yesterday. The shutdown will be for a minimum 48 hours," the source said. KG-D6's current gas production of around 63 mmscmd included 8 mmscmd from MA fields, and with the fields being shut, the output would come down. MA fields was producing around 32,000-33,000 barrels of oil per day and 8 million standard cubic meters per day of gas. "This has stopped since yesterday. The shutdown will be for a minimum 48 hours,"
LONDON (Reuters) - Hedge funds have reacted angrily to Germany's controversial decision to ban some naked short-selling and said the move could push investors to bet against other securities instead or move to other markets. Germany's move aims to curb the activities of speculators -- particularly hedge funds -- who are blamed by some politicians for exacerbating the financial crisis.http://in.reuters.com/article/businessNews/idINIndia-48632420100519
http://in.reuters.com/article/businessNews/idINIndia-48608220100519 BERLIN (Reuters) - Germany declared war on speculators on Wednesday, wrongfooting European partners who said they were not consulted about an overnight ban on naked short sales of a range of assets that rattled markets. Chancellor Angela Merkel told German lawmakers EU leaders had to ensure markets could not "extort" the state any more and the bloc would introduce its own financial transaction tax or levy if the Group of 20 nations failed to reach a deal in June.
| TURNING BAD Gross NPA (Rs crore) | |||||
| Banks | Mar ’09 | Dec ’09 | Mar ’10 | Chg | Chg (%) |
| SBI | 15,714 | 18,861 | 19,535 | 3,821.00 | 24.32 |
| BoI | 2,471 | 4,187 | 4,883 | 2,412.00 | 97.61 |
| IOB | 1,923 | 3,218 | 3,611 | 1,688.00 | 87.74 |
| Union Bank | 1,923 | 2,092 | 2,671 | 748.00 | 38.87 |
| PNB | 2,507 | 3,156 | 3,214 | 708.00 | 28.22 |
| IDBI Bank | 1,436 | 2,317 | 2,129 | 694.00 | 48.32 |
| BoB | 1,843 | 2,260 | 2,401 | 558.00 | 30.27 |
| Canara Bank | 2,168 | 2,619 | 2,590 | 422.00 | 19.48 |
| Axis Bank | 898 | 1,174 | 1,318 | 420.00 | 46.81 |
| Syndicate Bank | 1,595 | 2,018 | 2,007 | 412.00 | 25.86 |
| Top 10 banks on the basis of net change in Gross NPA for the period between Mar ‘10 and Mar ‘09 Compiled by BS Research Bureau Source: Capitaline | |||||
http://www.moneycontrol.com/news/cnbc-tv18-comments/lt-plans-to-sell-satyam-stake-unhappytech-mah_458572.html L&T plans to sell Satyam stake, unhappy with Tech Mah
Steel firms prepare to ease prices on market signals, flat steel producers are looking to roll over and even cut prices from June. Producers indicated that the inventory levels at Shanghai were high at about 1.7 million tonnes, which could have added to the sentiment. Chinese domestic HRC dropped sharply by about $29 a tonne. , Bhushan Steel said, the company would drop prices by Rs 2,500-3,000 from June. The levels of $800 a tonne for hot rolled coil (HRC) never got absorbed in the market. http://www.business-standard.com/india/news/steel-firms-prepare-to-ease-pricesmarket-signals/395355/
Reliance Industries has shut crude oil and gas production from its Krishna Godavari basin MA fields in the Bay of Bengal as a precautionary measure to avoid damage from the tropical cyclone 'Laila'. MA fields was producing around 32,000-33,000 barrels of oil per day and 8 million standard cubic meters per day of gas. "This has stopped since yesterday. The shutdown will be for a minimum 48 hours," the source said. KG-D6's current gas production of around 63 mmscmd included 8 mmscmd from MA fields, and with the fields being shut, the output would come down. MA fields was producing around 32,000-33,000 barrels of oil per day and 8 million standard cubic meters per day of gas. "This has stopped since yesterday. The shutdown will be for a minimum 48 hours,"
LONDON (Reuters) - Hedge funds have reacted angrily to Germany's controversial decision to ban some naked short-selling and said the move could push investors to bet against other securities instead or move to other markets. Germany's move aims to curb the activities of speculators -- particularly hedge funds -- who are blamed by some politicians for exacerbating the financial crisis.http://in.reuters.com/article/businessNews/idINIndia-48632420100519
http://in.reuters.com/article/businessNews/idINIndia-48608220100519 BERLIN (Reuters) - Germany declared war on speculators on Wednesday, wrongfooting European partners who said they were not consulted about an overnight ban on naked short sales of a range of assets that rattled markets. Chancellor Angela Merkel told German lawmakers EU leaders had to ensure markets could not "extort" the state any more and the bloc would introduce its own financial transaction tax or levy if the Group of 20 nations failed to reach a deal in June.
A DEADLY BEARISH BIG PICTURE
A DEADLY BEARISH BIG PICTURE
Flat correction on monthly chart
Target sensex 10000 and nifty 3000
www.wealthsolution.blogspot.com Adinath Investments
After completing five wave impulse patterns, index drops in wave A. It then rallies in wave B to the previous high.finally, the market drops one last time in wave C to the previous wave A low
The same picture is in the monthly chart of the sensex and nifty from 2002 to 2008, 5 wave impulse patterns and now we are in flat correction as per my preferable view.
Sensex monthly wave counts from 2002 is as below
Wave 1(up) 2828 to 6250
Wave 2(down) 6250 to 4227
Wave 3(up) 4227 to 12671
Wave 4(down) 12671 to 8799
Wave 5(up) 8799 to 21206
Wave 2(down) 6250 to 4227
Wave 3(up) 4227 to 12671
Wave 4(down) 12671 to 8799
Wave 5(up) 8799 to 21206
Now a-b-c flat correction calculation
Wave A (down) 21206 to 7697
Wave B (up) 7697 to 18047(78.6% retracements from low)
Wave C (down) 18047 to 9911(78.6% retracements of wave b)
Wave B (up) 7697 to 18047(78.6% retracements from low)
Wave C (down) 18047 to 9911(78.6% retracements of wave b)
Nse nifty monthly wave counts from 2002 is as below
Wave 1(up) 920 to 2015
Wave 2(down) 2015 to 1292
Wave 3(up) 1292 to 3775
Wave 4(down) 3775 to 2595
Wave 5(up) 2595 to 6357
Wave 2(down) 2015 to 1292
Wave 3(up) 1292 to 3775
Wave 4(down) 3775 to 2595
Wave 5(up) 2595 to 6357
Now a-b-c flat correction calculation
Wave A (down) 6357 to 2252
Wave B (up) 2252 to 5400(78.6% retracements from low)
Wave c (down) 5400 to 2914(78.6% retracements from low)
Wave B (up) 2252 to 5400(78.6% retracements from low)
Wave c (down) 5400 to 2914(78.6% retracements from low)
Down trend may continue till end of 2010 or first quarter of 2011.
If you wants to invest for long term call me and ask name of 5 mutual fund schemes for SIP investments in this down trend of the market. call on 09879586722
Thursday, May 20, 2010
Are we going to have subprimein india --Builders in trouble! Rs 25,000-crore debt payment looms
Raghavendra Kamath in Mumbai
Real estate developers, who need to pay around Rs 25,000 crore (Rs 250 billion) on debt instalments in the current financial year, could face an uphill task. For, equity issuances remain uncertain and cash flows have dwindled.
According to Reserve Bank of India estimates, developers have piled up debt of Rs 75,000 crore (Rs 750 billion). Public sector banks restructured debt worth Rs 10,000 crore (Rs 100 billion) in 2009 and allowed them a roll over.
By March 2011, developers need to repay this amount. An additional Rs 15,000 crore (Rs 150 billion) will be due this year, says a recent report by Kim Eng Securities. What has made matters worse for developers is that the Reserve Bank of India has already ruled out fresh restructuring for them.
Equity route risky
The equity route, earlier a hot favourite of property developers to repay debt and fund projects, is turning out to be tough. After developers such as Omaxe could not raise fresh equity, Delhi-based Parsvnath had to cut its Qualified Institutional Placement size by half, due to poor investor response. Sobha Developers had to reduce the amount expected from a QIP after it failed to raise funds in its first attempt last June.
Click NEXT to read on. . .
Image: Builders in trouble! Rs 25,000-crore debt payment looms
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