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2010

VIJAYDEEP

RT1901B44

LOVELY PROFESSIONALUNIVERSITY(LIM)

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Going against the crowd (Devangshu Datta / New Delhi August 30, 2009,0:45 IS .

Interpretation : Stock prices are leading indicators. Before the real economy doesstock prices start rising.e.g:- In January 2008 (last quarter 2007-08) The stock market peaked but GDP growth declined only in the second half of 2008-09 Mostlong-term investor will want to see a minimum of two or three quarters of earningsgrowth. Value investors also look for sound financial histories. Value investors tryto reduce the risk and maximise the returns by only entering when discounts arelow. If a stock is heavily touted, the contrarian assumes that it is fully-valued. If a

business is known to be in trouble, the contrarian hopes that it has already been beaten down. Contrarian logic can also be really risky when it's the basis for ashort-selling strategy. A contrarian will enter only when a stock is unfashionableand hence, low-priced. Which sectors would a contrarian invest in right now with

say, a perspective of 18-24 months? IT or telecom these sectors seem to be inhigh fashion at the moment. Automobiles are more promising from the contrarianviewpoint. The sector is seeing flat sales and a poor monsoon implies trucks andtractors will not do well in 2009-10. . Fertilisers and pesticides will also not dowell for the same reasons. Cement is another possibility because offtake couldremain slow since it lags housing finance, and real estate. Most engineering andconstruction firms will also struggle in 2009-10 because infrastructure projectawards have slowed. some auto companies will show profit growth in 2009-10 andso will some engineering, pharma, cement and fertilisers companies. These

businesses have attractive price-book value ratios and value investors would alsoaccumulate them. Offshore logistics has received some investment already due tothe promise of NELP awards and therefore, enhanced business prospects. Thehigh-risk contrarian will pick aviation plays while the conservative contrarian willenter maritime stocks.

(2) Pratip Kar: A game change for mutual funds

Pratip Kar / New Delhi September 14, 2009, 0:31 IST

SUMMARY:-

y Sebis decision to abolish entry loads has given mutual funds a chance to relook their model which hasnt caught the fancy of retail investors in a big way.

y the financial markets in India were preserving their pristine purity, and life insuch markets was simple, conventional wisdom was that mutual funds were theappropriate investment vehicles suitable for the small investors

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y that Association of Mutual Funds in India (AMFI) that claims developing theIndian Mutual Fund Industry on professional, healthy and ethical lines and toenhance and maintain standards in all areas with a view to protecting and

promoting interests of mutual funds and their unit holders as one its lofty

goals, still faintly echoes the remnants of the yesteryears when it describes in itsweb site thus a Mutual Fund is the most suitable investment for the commonman.

y The portfolio numbers swelled in the last two years because of the multiplicityin the number of new schemes. The logic for floating more and more new open-ended schemes was simple and not a great work of innovative financing. Retailinvestors were advised by the distributors (their agents) that there was no pointin entering an open-ended mutual fund scheme when the Net Asset Value(NAV) was more than Rs 10. She would be better off waiting till the nextscheme was launched.

y Sebi stepped in, by first abolishing entry loads for all mutual fund schemes;empowering the investors in deciding the commission paid to distributors inaccordance with the level of service received and then ensuring that there was

parity among all classes of unit holders in terms of charging exit load that nodistinction be made among unit holders should be made on the basis of theamount of subscription while charging exit loads.

y that Sebi did was to bring the focus back on the investor the samecommon man which AMFI refers to in its web site.

y Sebi has given the mutual funds an opportunity for a game change and the

strategy would lie in using this as an opportunity and breaking existing marketsand creating new ones.y latest Report on Currency and Finance says that the net financial savings of the

household sector in 2008-09 were 10.9 per cent of GDP, lower than 11.5 per cent in 2007-08 and the household investment in shares and debentures fell toRs 19,349 crore from Rs 89,134 crore. As a percentage of GDP, it fell to 0.4 per cent from 1.9 per cent.

y fund houses will have to revitalise their business model, use technology andreach outside the familiar markets. They must understand why the investors arecomfortable with fixed deposits, post office schemes, NSCs, KVPs, LICs,

precious metals and property in the second- and third- tiered cities and ruralareas. They have to tap these markets, integrate innovation into the mainstreamof their business strategy, and manage risks and create new markets andcustomers.

y Glossary- a list (with meaning) of all the new terms in the article:-

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abolish :- exterminate, extinguish, extirpate

proliferation:- growth by the rapid multiplication of parts

revitalize :- Give new life

(3) Surjit S Bhalla: Can RBI's forecasts be trusted:-

y According to RBI governor, Dr Subbarao, recently announced that he was

seeking discussion and perhaps even criticism from within his organization.

y The RBI is perhaps the last of the feudal organisations in India.

y H e further says that Dr. Subbarao luck having worked on two RBIcommittees a decade apart in 1997 and 2006, under the chairmanship of

former Deputy Governor and a true-blue RBI man Mr. Tarapore) he can say

with some experience that the RBI does not take lightly to anti-feudal forces.

y GDP growth for 2009/10 from 7.5-8 per cent to 6 per cent. , it raised its

forecast for WPI inflation in March next year from 3 per cent to 5 per cent.

These pronouncements are put into focus by noting three facts.a. First, internationally, India is the only economy that is lowering its GDP

forecast, while most are debating not that GDP will be higher in 2009, but

how much higher.

b. Second, while all expect inflation to be higher than zero inflation, there is no

central banker of a non-banana republic (that I know) who is forecasting this

high inflation.

c. The third fact is perhaps the most damning. The table shows the past

forecasts and the errors on both.

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y Monetary policy should not be a domain for idle researchers,

policymakers, commentators to have fun, or for some feudal to dictate

policy

y The reason that fiscal policy is expansionary in India, more than it needs to be, is precisely because he and the RBI cannot be trusted to do a good job

on monetary policy.

y At last we come to know that monetary policy can be less tight and fiscal

policy more.

(4) Use Basics to Get Better

Yajuvender Singh / June 25, 2009, 18:10 IST

ANALYSIS:- 4) Use Basics to Get Better:-

The article tells about the basis investor relation techniques. The author says that

y The recession the support of investor is very importanty During economic recession the investor clearly see what difficult your

company from its competitor.y If competitor stock performing very low then that competitor will

understand the whole scenario and then tell his investor and the investor

base is recession time they will help.

y In any company investor are in investing their money which is risky because

by definition corporate business dynamic world and the only thing is that

certain there is certainly.y Investor relations are informative and communicative both are important.

Information should be right and communicated at right time.

y Transparency and trust is very important in between issue and investors.y Basic opportunities of investor relatives are:-

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1. understand investor

2. right disclosure and communication at the right time,y This is important in the company that the role of investor relation is to

persuade and convince the investor that.y The rupee investor in the company by the investor is appreciate faster them a

rupee investor in other company despite the recessionary times.

y The relation is strong when gain investor trust and confidence and feel they

important to company and they are not ignored by the tough times.

y Complete disclosure is very important so that all information of the company

is disclosed to investor so; they will go to accurate investment decisions.

Investor is expected that the company showed give good dividend but sometime inrecessions time or enhance the business company. So they are not giving dividendto investor. This will affect the relationship of investors and the company.

(5) A V Rajwade: Getting interest rates right

Apart from reviewing the PLR mechanism, the LAF facility also needs to be looked

into again. A V Rajwade / New Delhi April 27, 2009, 0:48 IST

SUMMARY:- the transmission of changes in the policy rates in the deposit andloan-pricing of commercial banks is not as effective as it should be. In recentmonths, policy rates have dropped much more than the fall in the deposit or lending rates of banks. In the US, in contrast, the correlation between the

policy and prime rates is very strong.y the greater the uncertainty in terms of the price or availability of money, the

larger would be the cushion market participants (banks in this case) would

structure into the interest rates.y there are two policy rates (the Bank Rate itself has become irrelevant for

most practical purposes), while most central banks have a single one like,for example, the federal funds rate in the US which the Federal Reservetargets through open market operations. At one time, the gap between the

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two rates was as wide as 3 per cent; it has now come down to 1.5 per cent, but is still not insignificant.

y The policy statement also gives various reasons advanced by bankers, whichare coming in the way of a drop in the market rates for deposits and loans.

y the current practice, in a rising rate scenario, depositors take prematureencashment of an existing deposit, and re-deploy it at a higher rate; on theother hand, when rates are falling, the banks are stuck with the existing highrate deposits.

y This would imply that when rates are rising, the cost of prematurewithdrawal could even mean a negative interest rate; in the contraryscenario, the depositor could get more than the contracted interest rate.

y First, the policy objectives of the two are different: In the case of M3, to

limit the growth; in the case of bank deposits, it is to increase the level in the pursuit of financial inclusion. Second, surely the cause and effectrelationship is not so much from M3 to deposits as it is the other way round

deposit growth leading to M3 growth, with the central bank adjusting thereserve requirements if it is too high.

y It is a good thing that the central bank is appointing a committee to reviewthe operation of the benchmark prime lending rate system.

y This would help in improved asset:liability management from the interest

rate perspective;y Banks will be forced to review their entire pricing structure at quarterly

intervals.

(6) Abheek Barua: Preparing for recovery:-

The RBI may be concerned about inflation but it is unlikely to put an abrupt

end to monetary accommodation- Abheek Barua / New Delhi September 14,2009, 0:25 ISTThe RBI may be concerned about inflation but it is unlikely to put an abrupt end tomonetary accommodation. The author says that

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y The monsoon is very delayed in north India so it effect the summer crop and

help the winter or rabi crop this result in poor agriculture output and this

effect negatively to growth of the company and predicted profits.

y International news has also been positive. US labor market is profitable asthey expected risk appetite is also improved i.e. equity price.

y The market analysis and academic economists believe that the industrialized

economies are headed for another sharp dip in the business cycle.

y Structure changes are made by US economy i.e. control the demand this

result the contraction or decrease in growth in the developed economies that

will affect the energy economics.y The RBI may be extremely concerned about inflation but it is unlikely to put

an end to monetary accommodation.

y We must also prepare for a scenario in which during inflation the current

recovery in the global economy markets sustains. The strategy adopted is to

manage the money supply.

y The ability to grow faster will depend on how effectively we can participate

in the global recovery through export goods and services.

y Our evolution of the currency and excess of priya position of the current

economy but this will not result in the growth is depend on the resources and

capital.

y It is imperative to run a larger current deficit in the long term to avoid

prolonged..

y RBI does need to come between disputes in the market that how does it deal

with the monetary consequence. two comfort are:-

1. The govt. is likely to be a fairly large bond issuer in the medium term

given the size of fiscal deficit to automatic stylization.

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billion (Rs 149,706 crore) to check the rupees free fall and ensured thatover Rs 6,00,000 crore primary liquidity was pumped into the system.

y The corporate performance is expected to improve in the second quarter. Butthe dilemma for policymakers is the exit strategy.

y The RBI Annual Report, released last month, has already announced itsintention to lay down a risk management and capital adequacy framework for bank-sponsored private pools of capital such as private equity andventure capital funds

y Our salvation will be to become active supporters of globalisation, particularly at a time when traditional supporters like the Anglo-Saxoncountries seems to be retreating.

(8) Circuit breakers cannot stop market manipulationJoydeep Ghosh & Palak Shah / June 04, 2009, 0:15 IST

SUMMARY :- This article is all about Indian stock markets.

y In Indian stock markets very large Contribution is from London rather thanindia.

y Due to benchmark indices hit the lower or upper circuit filters.Indianstock markets have stopped trading four times in the last five years

y The irony was evident on May 18 itself when trading was stopped on the NSE after the CNX Nifty gained 17.74 per cent, or 651 points. No such problem was faced by the SGX Nifty, the futures trading index listed on theSingapore stock exchange. The index continued trading even after rising20.75 per cent, or 765 points. The index circuit breakers kick in when thereis a rise/fall of 10 per cent, 15 per cent and 20 per cent.

y In the LSE, there is automatic suspension of trading in a particular scrip for around five minutes if it is found that the stock price would move beyond itstolerance threshold

y Some like the Australian, H ong Kong and Taiwan exchanges do not haveany such mechanism.

y Reasons y The Indian stock markets lack depth in terms of investors and free float,

says Deven Choksey, managing director, K R Choksey Shares and Securities

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y At present, there are 233 stocks in the futures and options (F&O) market.And all the Nifty and Sensex stocks are traded there.

y THE ROAD AHEAD: Experts are of the view that halting tradingcompletely is not the best option even on days when circuit breakers are hit.

R H

Patil, former managing director of NSE, says one possible solution is torestrict further long trades for the day rather than shutting down the markets. y director of BSE, suggest that markets should be closed for sometime, but not

the entire day y Another suggestion is to follow the Nasdaq way: Trading in a company scrip

halts automatically to allow it to announce important news or when there is asignificant order imbalance between buyers and sellers in a security. Atrading delay (or delayed opening) is called if either of these situationsoccurs at the beginning of the trading day.

(9) A uniform face value needed

M R Mayya / June 8, 2009, 0:52 IST

SUMMARY:- This Article is all about the face value of shares

y SEBI (Security Exchange and board of India) should mandate acommon face value for shares.

y The debate on uniform face value of shares has been going on for over eight years now.

y The circular issued under Section 11 (1) of the SEBI Act to protectthe interest of investors in securities and to promote the developmentof, and to regulate the securities market.

y , The multiple face value system creates confusion among investors y It needs to be recalled that a large number of companies used to have

varying face values. For example, a number of companies based in

Ahmedabad used to have a face value of Rs 125 while the face valueof Tata Steel used to be Rs 75. The Ministry of Finance, thereforeissued in February 1981 a guideline that denomination.

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(10) The Satyam effect

Pooja Thakur / Mumbai January 12, 2009, 0:56 IST

y The Satyam episode drags down indices as investors get into the sell mode.

y Satyam dropped 41 percent to Rs 23.75, taking its losses to 87 percent since

Raju on January 7 said he inflated earnings and assets by $1 billion. Larsen

& Toubro, which owns a 3.95 percent stake in Satyam, dropped 7 percent,

the most in almost three months, as the value of its investment in thesoftware developer fell.

y Satyam incident is very negativey who helps manage the equivalent of $870 million in stocks at IDFC Assets

Management Co. in Mumbaiy The S&P CNX Nifty Index on the National Stock Exchange slid 1.6 percent

to 2,873. The BSE 200 Index declined 2.1 percent to 1,124.65.

y Tata Consultancy Services, Indias largest software-services provider,gained today on expectation it will gain market share as clients desertSatyam after its chairman falsified earnings.

y Tata Consultancy added 6.4 percent to Rs 536.95. Rival Wipro climbed 2.6 percent to Rs 250.95. Infosys Technologies, Indias second-largest provider of software services, gained 1.3 percent to Rs 1,203.4. The stock is amongthose recommended by Credit Suisse analysts Nilesh Jasani and Arya Sen,who said investors should own shares of Indian companies with goodcorporate governance.

y Reliance Communications, Indias second-largest phone-service provider,and Tata Steel, the nations biggest maker of the alloy. Sterlite Industries,Indias largest copper producer, fell 10 per cent to Rs 271.9 the most since

November 11.y Reliance Communications fell 9.5 per cent to Rs 186.85,

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y The Indian engineering company fell after saying its UK unit began court proceedings against SABIC Petrochemicals UK seeking 28.5 million pounds($43 million) compensation.

y Tata Motors fell Rs 8.4, or 4.8 per cent, to Rs 165.75. Indias biggesttruckmaker will stop production at a commercial-vehicle factory for six daysas higher borrowing costs stymie demand

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