Post on 11-May-2015
Investing In Stock Markets
Why Invest in Stock Markets
Historically on a long term horizon equities have given higher return than other asset classes
Source wwwrbiorgin
Basics of the Stock Market
Stocks It is a term used to symbolize an investorrsquos ownership of a company
Stock Market It is the place where buying amp selling of these shares happen (also known as stock Exchanges)
(Issues in Market Design )
Primary security markets where new issues of securities are initially sold
Secondary A market where securities are resold Eg the NSE
Basics of the Stock Market
Face Value
Market Value
Dividend
Bonus Shares
Market Capitalization Noof outstanding shares X Current Market Price
Small Cap Market Capitalization less than 75 crores
(High Risk high returns )
Mid Cap Market Capitalization between 75 to 7500 crores
(Medium Risk Medium Returns)
Large Cap Market Capitalization more than 7500 Crores
( Low Risk Low returns )
Classification of Shares
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Why Invest in Stock Markets
Historically on a long term horizon equities have given higher return than other asset classes
Source wwwrbiorgin
Basics of the Stock Market
Stocks It is a term used to symbolize an investorrsquos ownership of a company
Stock Market It is the place where buying amp selling of these shares happen (also known as stock Exchanges)
(Issues in Market Design )
Primary security markets where new issues of securities are initially sold
Secondary A market where securities are resold Eg the NSE
Basics of the Stock Market
Face Value
Market Value
Dividend
Bonus Shares
Market Capitalization Noof outstanding shares X Current Market Price
Small Cap Market Capitalization less than 75 crores
(High Risk high returns )
Mid Cap Market Capitalization between 75 to 7500 crores
(Medium Risk Medium Returns)
Large Cap Market Capitalization more than 7500 Crores
( Low Risk Low returns )
Classification of Shares
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Source wwwrbiorgin
Basics of the Stock Market
Stocks It is a term used to symbolize an investorrsquos ownership of a company
Stock Market It is the place where buying amp selling of these shares happen (also known as stock Exchanges)
(Issues in Market Design )
Primary security markets where new issues of securities are initially sold
Secondary A market where securities are resold Eg the NSE
Basics of the Stock Market
Face Value
Market Value
Dividend
Bonus Shares
Market Capitalization Noof outstanding shares X Current Market Price
Small Cap Market Capitalization less than 75 crores
(High Risk high returns )
Mid Cap Market Capitalization between 75 to 7500 crores
(Medium Risk Medium Returns)
Large Cap Market Capitalization more than 7500 Crores
( Low Risk Low returns )
Classification of Shares
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Basics of the Stock Market
Stocks It is a term used to symbolize an investorrsquos ownership of a company
Stock Market It is the place where buying amp selling of these shares happen (also known as stock Exchanges)
(Issues in Market Design )
Primary security markets where new issues of securities are initially sold
Secondary A market where securities are resold Eg the NSE
Basics of the Stock Market
Face Value
Market Value
Dividend
Bonus Shares
Market Capitalization Noof outstanding shares X Current Market Price
Small Cap Market Capitalization less than 75 crores
(High Risk high returns )
Mid Cap Market Capitalization between 75 to 7500 crores
(Medium Risk Medium Returns)
Large Cap Market Capitalization more than 7500 Crores
( Low Risk Low returns )
Classification of Shares
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Basics of the Stock Market
Face Value
Market Value
Dividend
Bonus Shares
Market Capitalization Noof outstanding shares X Current Market Price
Small Cap Market Capitalization less than 75 crores
(High Risk high returns )
Mid Cap Market Capitalization between 75 to 7500 crores
(Medium Risk Medium Returns)
Large Cap Market Capitalization more than 7500 Crores
( Low Risk Low returns )
Classification of Shares
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Small Cap Market Capitalization less than 75 crores
(High Risk high returns )
Mid Cap Market Capitalization between 75 to 7500 crores
(Medium Risk Medium Returns)
Large Cap Market Capitalization more than 7500 Crores
( Low Risk Low returns )
Classification of Shares
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
The Trading ProcessThe elements of the trading process can be divided into 4 components
Information
Order routing
Execution
Clearing
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Some Issues in Stock market design
The way the market is designed will affect what type of traders participate the overall trading process and the behaviour of prices
2 factors to consider
Transparency
Automation
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Information Bid Price
Ask Price
Volume
Percentage Change
Day High Day Low
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Types of Orders
Market Orders Most common type of order placed by an investoron the NSE It is an order to buy or sell at the best
price currentlyavailable
Limit Orders This is an order to buysell at a maximumminimum price These orders control the price paid or
received but investor has no way of knowing when the order will be filled
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Delivery orders Trades for which the investor takes or gives delivery of shares depending upon the trade he has entered into
IntraDay Orders Trades which have to be squared off on the very same day
Types of Orders
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Market Participants Regulators
Exchanges
Brokers
Depository Participants
Investors Clients
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Online Trading
Aims at converting the Open Outcry system of trading to a screen based trading system
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Now what is Online Trading
Buying ampSelling of stocks options bonds and other financial instruments using online brokerrsquos web sites and systems
Management guru Tom Peters distance is dead
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
How is it Done Online trading can be done through
A Trading Platform ( Software )
Brokerrsquos Website
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Why trade online
In a market where every second counts you have to constantly be up to speed
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
OBJECTIVESOF ON LINE TRADING
Leads to transparent deals in the market
Improves liquidity in the market
Increases the market depth through quote-continuity
Instantaneous dissemination of information through channels
Structured MIS reports for analysis
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Service Providers in India Brokerage Houses
Sharekhan
5paisacom
Indiabulls
Angel Broking
Financial institutions
ICICIDirect
HDFC Securities
IDBI Capital
Kotak Securities
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Getting Started
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Starting up Evaluate the Brokers
Select the best broker
Open a Demat Ac amp Trading Ac with the broker
Open a savings Bank Ac which is linked with the Broker
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
DEMAT ACCOUNT Dematerialized account
Approach the DP
Must for trading and investing
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Scenario 1 ndash 3 Entities for D T S
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac
9th Jan Shares Come to your demat Ac
( T + 2 )
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Scenario 2 ndash 2 Entities ndash DT ndash S(nl)
Date Particulars
1st Jan Give cheque to the broker
3rd Jan Money comes to your account
5th Jan Shares come in your trading Ac (same day transferred to demat Ac)
( T + 2 )
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Scenario 3 ndash 2 Entities ndash DT ndashS (l)
Date Particulars
1st Jan Give an online instruction money comes in your trading Ac You purchase the share that day itself
3rd Jan Shares come in your trading Ac (same day transferred to demat Ac)You may sell the shares off on the same day
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Investor
HDFC Bank(Savings ac)SHAREKHAN
(Demat ac)
Puts BUY order on
wwwsharekhancom
SHAREKHAN
Savings account Balance
checked amp blocked Contract note is sent through E-mail
Buy order executed amp
Savings ac debited
Shares credited on T+2 day
SHAREKHAN
(Trading ac)
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
YOUR SAVINGS ACYOUR SAVINGS AC
TRADING AC WITH BROKER
TRADING AC WITH BROKER
YOUR DP ACYOUR DP AC
MONEY COMES IN
PURCHASE SHARES
SHARES TRANSFERREDINTO DEMAT AC
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Documents Required
Photo ID Proof - Election Card Driving Licence PAN
Residence Proof ndash Ration Card MTNL bill Electricity bill
Bank Ac proof (Statement)
PAN Card - MUST
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Comparative analysis of broking firms
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Comparative Analysis of different Broking Firms
Following Broking Firms are taken for the purpose of comparative analysis -
bullKotak Securities
bullSharekhan
bullIDBI paisa builder
bullIndia Bulls
bullHDFC Securities
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Parameters Used
Parameters Used Weightage given
Portal 30Brokerage 30
Range of services offered (BSE NSE FampO Commodities PMS Etc)
20
Customer service 20Total 100
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
1st Parameter - Quality of Portal
USER FRIENDLINESSName of the Firm Ranking Scores Total Weighted score
(Scores 30)
Kotak Securities 4th 40 12Sharekhan 2nd 80 24
IDBI paisa builder
1st 100 30
India Bulls 5th 20 6HDFC
Securities2nd 80 24
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
2nd Parameter - Brokerage Charged
Name of the Firm Ranking Scores Total Weighted score(Scores 30)
Kotak Securities 3rd 60 18Sharekhan 2nd 80 24
IDBI paisa builder 2nd 80 24
India Bulls 1st 100 30HDFC Securities 2rd 80 24
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
3rd Parameter - Range of
Services Offered
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 3rd 60 12Sharekhan 2nd 80 16
IDBI paisa builder
3rd 60 12
India Bulls 4th 40 08HDFC Securities 1st 100 20
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
4th Parameter - Customer Services
Name of the Firm Ranking Scores Total Weighted score(Scores 20)
Kotak Securities 2nd 80 16Sharekhan 1st 100 20
IDBI paisa builder
4th 40 08
India Bulls 3rd 60 12HDFC Securities 1st 80 16
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
COMPARISON OF TOTAL WEIGHTED SCORE OF ALL THE
FIRMS
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Name of the firm
Weighted Score on Portal
Weighted Score on Brokerage
Weighted Score on Range of Services
Weighted Score on Customer Services
Total Weighted score
Relative Ranking
Kotak Securities
12 18 12 16 58 3rd
Sharekhan 24 24 16 20 84 1st
IDBI paisa builder
30 24 12 08 74 2nd
India Bulls 6 30 08 12 56 4th HDFC Securities
24 24 20 16 84 1st
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
What is a Depository
lsquohellipa facility for holding securities which enables securities transactions to be processed by book entryrsquo
Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic records)
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Depositories in IndiaCDSL
The Stock Exchange ndash Mumbai (BSE) Bank of India Bank of Baroda State Bank of India HDFC Bank Standard Chartered Bank Global Trust Bank Union Bank of India Centurion Bank Bank of Maharashtra The Calcutta Stock Exchange Association Ltd
NSDLbull Industrial Development Bank of Indiabull Unit Trust of Indiabull The National Stock Exchange of Indiabull State Bank of Indiabull Global Trust Bank Limitedbull Citibank NAbull Standard Chartered Bankbull HDFC Bank Limitedbull The Hong Kong and Shanghai Banking Corporation Limitedbull Deutsche Bankbull Dena Bankbull Canara Bank
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
REGULATOR OF THE MARKEThellip
SEBI - Protecting the interest of the
investors
Promoting and developing securities market
regulation of securities market
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Exchanges 28 exchanges in India
Major exchanges are
1 NSE2 BSE
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Welcome to a NEW INDIA
infinReal GDP Growth 65 to 75infinInflation estimates at ~ 5infinNominal GDP Growth at 125infinCorporate earnings growth at 15 ndash18
India ndashAn Investment Opportunity
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
infinCapital expenditure ndashTo growbullIIP(Industrial Index of Production) Growth to pick up again will need capacity expansion hellipbullStrong order book log improves revenue visibilityinfinConsumption ndashTo get stimulibullPer capita income has grown by 7 CAGR over the past decade positive demographicsbullRising aspiration availability and affordability of IndiansinfinCompetitiveness ndashAdds business confidencebullCompelling and sustainable Cost and Skill advantagebullBrand India gaining more acceptability globallyinfinContinuation of structural reformsbullVAT ndasha good beginning abolition of LTCG( Long Term Capital Gains ) in equitybullThrust on infrastructure creationbullPolitical will to push reforms despite resistance
Fundamentals ldquo4 Crdquo Effect
Welcome to a NEW INDIA
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Liquidity More to come
infin Indian households are under-invested in equity thanks to high interest rate regime in the pastinfin Cumulative FII holdings in India ~ 40bnUSD against total FII stocks globally ~ 35trUSD India still not rated as an investment gradeinfin More domestic institutional funds to come ndashInsurance Pension Funds AMCs etcinfin Long term global investors like pension funds and institutional trusts also have started participating in ldquoOpportunity Indiardquo
India ndashAn Investment Opportunity
Welcome to a NEW INDIA
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
infin India has come a long way ndashfrom near bankruptcy in early 90rsquos to being
one of the fastest growing economy in the world
infin 64 of Indiarsquos GDP is consumption-led providing sustainability to
economic growth
infin Average EPS growth rate of Sensex companies over the last 5 years
18 CAGR
infin Healthy balance sheet and operating efficiency ndashimproved capacity
utilisation cash up debt equity down growing profitability
India ndashAn Investment OpportunityValuation Supported by Earnings
Welcome to a NEW INDIA
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
infin GDP growth to remain strong
infin Changing lifestyle to boost consumption
infin Capital spend to lead to increased demand for capital goods
infin Continuation of structural reforms
infin FDI to be more relaxed
infin Market cap GDP ratio still low
infin Liquidity to continue
infin Valuations ndashFair but not stretched
Way AheadIndia ndashAn Investment Opportunity
Welcome to a NEW INDIA
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Concernsbull Expectation of high Interest Ratesbull Expectation of high Oil Pricesbull High Fiscal and Current Account Deficitsbull Geopolitical Tensions
bull Possibility of Liquidity Withdrawalsbull 1048707Reduction in leveraged positionsbull 1048707Flight to non-risky assets
bull Huge Volatility ndashA Key Deterrent
Case for Investing
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
bull Should we invest in equitybull If lsquoin-the marketrsquo possibility of capital lossbull If lsquoout-of the marketrsquo possibility of opportunity
loss
Capital Loss
vs
Opportunity Loss
Dilemma
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
HOW MUCH SHOULD YOU EARN
bull TO FIGHT INFLATION - 6
bull BANK INTEREST ndash 7
bull Hence you have to earn 13 just to stay afloat
bull Your real gain is the extra that you earn above 13 Equities gives you atleast 18 ndash 25 on a conservative estimate(Moneylender calculation)
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Must be DRIVEN BY
bull Your Financial Goals
amp
bull Your Risk Appetite
Hence Time Rate of Return amp Risk
ASSET ALLOCATION DECISION
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Success of any Investment
bull Longevity
bull Growth
bull Quality of Growth
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
ie Which Stocks
1 External Opportunities
2 Sustainable Competitive Ability
3 Scalability and Operating Leverage
4 Management Quality and Capital efficiency
5 Price and Value Divergence( What we buy and at what price we buy )
What to Invest In
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
What options do we have today
bull Investment with Limited Understanding and many uncertaintiesbull Sobull Our entry pricing must give us a margin of safetybull Reduce LOSS and EXTENT OF LOSSbull LONG TERM rather than SHORT TERM
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
WHY INDIA
bull INDIA is a confluence of CAPITAL EXPENDITURE and CONSUMPTION CYCLE in INDIA is the highest
bull One of the several booming sectors therefore are FMCG Power Construction and Engineering sector (infra)
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
When INVESTING
bull Place greater emphasis on Superior Business Models rather than sectors for investing decisions
bull An Entrepreneur makes an invaluable difference to the investment returns
bull Eg INFOSYS ADITYA BIRLA NUVOBIOCON BHEL
bull Recognise the passion and the skills of the entrepreneur and then believe in the VISION and BELIEFS of the entrepreneur and above all VALIDATE THE RISKS that may or may not have been perceived by the entrepreneur
bull Understand the broad drivers of PROFIT amp GROWTH
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Drivers for Indian Equities
bull Earnings Momentumbull Re-Rating Potential
bull Lack of Investment alternatives for Indiarsquos growing Savings
bull Larger Aspirations
bull Rising Risk Appetitebull Equity Participation by Indian amp Foreign Investors is still at a fairly nascent
stagebull Equity Valuations are still far away from their Peak Valuations
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
To Summarise
bull Superior Investment Returns are from a combination of
WISDOM and PATIENCE
rather than
INTELLECT amp EXPECTATIONS of QUICK amp HIGH RETURNS
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
USUAL BUY Strategies
bull INTRA DAY ndash Buy in the morning when the market opens or during the day BUT selling it before the close of trading hours ON THE SAME DAY
( 955am to 330pm)bull Two options (1) BUY - SELL ----Buy at LCL amp Sell at UCL (2) SHORTSELL ndash SELL at a High Price in anticipation of a drop in price as the day goes along ie Stock Opens at Higher Level ndash SHORTSELL and then BUY at LOWER LEVELS by the AFTERNOON
bull INFORMATION With YOU from a RELIABLE Sourcebull NEWS tickers on NEWS Channels investment bankers brokers
bull ON DELIVERY BASIS
bull Short term bull Long term
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
For Income Tax Purposes
bull On Long term gains ndash NIL Tax
bull On Short term gains ndash 10 income tax
bull On Day Trades gains ndash The gains are added to your gross income and subjected to tax( Treated as Business Income )
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
There was a one hour interview on
CNBC with Warren Buffet the second
richest man who has donated $31 billion
to charity Following are some very
interesting aspects of his life
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
1He bought his first share at age 11 and he now regrets that he started too late
Things were very cheap that time Encourage your children to invest
2He bought a small farm at age 14 with savings from delivering newspapers
One could have bought many things with little savings
Encourage your children to start some kind of business
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
3He still lives in the same small 3-bedroom
house in mid-town Omaha that he bought
after he got married 50 years ago He says
that he has everything he needs in that
house His house does not have a wall or a
fence
Dont buy more than what you really need and encourage your children to do and think the same
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
4He drives his own car everywhere and does not have a driver or security people around him
You are what you are
5He never travels by private jet although he owns the worlds largest private jet company
Always think how you can accomplish things economically
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
6His company Berkshire Hathaway owns 63
companies He writes only one letter each
year to the CEOs of these companies giving
them goals for the year He never holds
meetings or calls them on a regular basis
Assign the right people to the right jobs
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
7He has given his CEOs only two rules
Rule number 1 do not lose any of your share
holders money
Rule number 2 Do not forget rule number 1
Set goals and make sure people focus on
them
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
8He does not socialize with the high society crowd His past time after he gets home is to make himself some pop corn and watch Television
Dont try to show off just be your self and do what you enjoy doing
9Warren Buffet does not carry a cell phone
nor has a computer on his desk
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
9Bill Gates the worlds richest man met him
for the first time only 5 years ago Bill Gates
did not think he had anything in common
with Warren Buffet So he had scheduled
his meeting only for half hour But when
Gates met him the meeting lasted for ten
hours and Bill Gates became a devotee of
Warren Buffet
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
His advice to young people
Stay away from credit cards (bank loans) and invest
in yourself and Remember
A Money doesnt create man but it is the man who
created money
B Live your life as simple as you are
C Dont do what others say just listen them but
do what you feel good
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
D Dont go on brand name just wear those
things in which you feel comfortable
E Dont waste your money on unnecessary
things just spend on them who really in
need rather
F After all its your life then why give chance
to others to rule our life
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
Buffetrsquos maxims for future guidance (2009)
bull Hard work All hard work bring a profit but mere talk leads only to poverty
bull Laziness A sleeping lobster is carried away by the water current
bull Earnings Never depend on a single source of income [At least make your Investments get you second earning]
bull Spending If you buy things you dont need youll soon sell things you need
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
bull Savings Dont save what is left after spending Spend what is left after saving
bull Borrowings The borrower becomes the lenders slave Accounting Its no use carrying an umbrella if your shoes are leaking
bull Auditing Beware of little expenses A small leak can sink a large ship
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
bull Risk-taking Never test the depth of the river with both feet [Have an alternate plan ready]
bull Investment Dont put all your eggs in one basket
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
JBA
The HAPPIEST
people DONOT
necessarily have the
BEST of all
They simply
APPRECIATE what
they find on their
wayrdquo
Let us choose the way to live
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Power of Equity
Unbelievablebut it has happened
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Just imaginehellip
bullHow much can you make in 26 years by just investing Rs10000 initially in any of financial instruments
Take a wild guess Let us look at the real examplehellip
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
If you have subscribed in 100 shares of ________ company with a face value of Rs 100 in 1980hellip
bullIn 1981 company declared 11 bonus = you have 200sharesbullIn 1985 company declared 11 bonus = you have 400sharesbullIn 1986 company split the share to Rs 10 = you have 4000sharesbullIn 1987 company declared 11 bonus = you have 8000sharesbullIn 1989 company declared 11 bonus = you have 16000sharesbullIn 1992 company declared 11 bonus = you have 32000sharesbullIn 1995 company declared 11 bonus = you have 64000sharesbullIn 1997 company declared 12 bonus = you have 192000sharesbullIn 1999 company split the share to Rs 2 = you have 960000sharesbullIn 2004 company declared 12 bonus = you have 2880000sharesbullIn 2005 company declared 11 bonus = you have 5760000shares
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
At the end of 2005hellip
bullYou have 5760000shares of the company
Any guess about the company (Hint Its an Indian company)
Any guess about the present valuation
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
The result of lsquoPower of Compoundingrsquo
Your present valuation is aboutRs 200 Cr+
ampThe company is lsquoWIPROrsquo
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+
Other such exampleshellip
CIPLAInvestment of Rs 10000 in 1979 will fetch Rs 95 cr+
INFOSYSInvestment of Rs 10000 in 1992 will fetch Rs 15 cr+
RANBAXYInvestment of Rs 1000 in 1980 will fetch Rs 19 cr+