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Reliance Earnings & Share Buyback Plan – Falls Short of Investor Expectations !

Viral Dholakia — Mon, 23 Jan 2012 13:55:59 +0000

What an oxymoron! Reliance Industries (RIL), the largest Indian conglomerate, is going through a stagnation phase in terms of its earnings performance, yet being the country’s most valued firm.

For almost a year now, RIL has been a dragger on the benchmark indices – with its share price dipping by almost 35% in 2011; adversely hit by depressing refining margins, fall in KG basin gas production, lack of new project pipeline and lower income from overseas investments in unconventional sources of energy.

In addition, the petrochemical and refining major reported a sharp drop in net profit by 13.5% to Rs.4440 crore for the quarter ended December 2011. This beaten down earnings has come on the back of 40% improvement in turnover at Rs.87840 crore, which indicates benign growth in demand for the company’s products, whilst contracting refining margins.

RIL’s gross refining margins have dipped even below the Singapore benchmark of about $8/bbl, at $6.80 per barrel, dismally down from $9/bbl during a year-ago period. The group honcho has blamed the global nature of its business and weakness in economic conditions for reduced earnings in the quarter.

In order to overcome the clouds of pessimism from weak results and beaten down stock price, RIL’s management has announced a buyback program of an aggregate amount which shall not exceed Rs.10440 crore. Here’s more clarity on the buyback plan:

Maximum Buyback spending: Rs.10440 crore
Maximum number of shares planned to be bought: 12 crore
Maximum Shares of Free float to be bought: 6.7%
Maximum Shares of Total equity capital to be bought: 3.7%
Maximum Price per share: Rs.870/-

This means that the management will be happy to buyback shares of the company at a price NOT exceeding Rs.870/- per share, which is determined as a fair value price point to deploy company’s cash reserves to reduce free float from the open market. Indirectly, it also means that the share price will find it difficult to rise beyond Rs.870/- in the near future, as a discovered value zone.

However, the company is not obliged to buyback all the 12 crore shares at a stretch, even if the stock continues to linger below the threshold price for long. The guideline is to put in place the upside limitations in terms of price and quantum of shares planned to be bought back.

Reality Check on Your Investments in RIL [1 Year Performance]

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For long, there exists a great disparity in the corporate world to announce lucrative buyback plans to enthuse investors and the real intention to execute the same. Is SEBI hearing it?

It must be pointed out that RIL had cash reserves of Rs.74539 crore at the end of the December quarter – including funds shored-up from the country’s biggest energy deal for sale of 30% stake in its 23 blocks to BP for $7.2 billion. In fact, RIL’s surplus cash reserves is likely to hit $25 billion by March 2012, if reports are to be believed.

Not surprisingly, Reliance’s ‘other income’ has surged to a high of Rs.1717 crore in its Q3-FY12 performance. Almost a third of the company’s profit before tax is constituted of non-core income rather than being topped up by the operating income.

In the near term, the share buyback will prove to be EPS accretive as the company mops-up its free float from the open market, thus improving the earnings per share for the existing shareholders. Moreover, a chunk of its non-core assets are also taken care of, while company betting its cash reserves on its own growth plans.

However, disappointing Q3 results meant that markets expected a mega-buyback plans to keep them contended – say to the tune of Rs.15-20 thousand crores. But, the markets didn’t get it. The Resultant: RIL stock dipped by 3% on the bourses today.

2012 Resolutions for Stock Market Investors !

Viral Dholakia — Mon, 02 Jan 2012 12:25:06 +0000

Year 2011 is history now – I do not wish to start this post with its reference, but the year gone by was fraught with so much of pain and uncertainty, that it has become imperative for me to formulate an essay on top 2012 resolutions for the bruised investors so as to not burn their hands in the New Year or repeat their past mistakes.

In fact, this post is for me as much as it is for readers, because this post will serve as a ready reckoner when we venture into investing in 2012.

To start with, let me share a small lesson from my experience in investing in Indian markets. Just as they say, every bull market has a new hero to ride upon; no bear market scenario is ever similar in nature to its past phase. Every new recession is plagued with a new set of reasoning and ailments.

For instance, the 1997 Asia financial crisis started with collapse of Thai baht and deepened further to spread across Asia, whereas the 2008-recession was largely on account of liquidity crunch worldwide triggered by the US recession. And, now, we’re grinding through the Euro zone sovereign debt crisis.

Hence, it is not necessary that the symptoms and ailments of any two equity bear market scenarios will resemble each other. Yet, we can always take lessons from the same, as they come with a message that will serve some or the other good cause during the times of crisis.

Five 2012 Resolutions for Investors:

Repent by investing in leveraged business

Before 2008-recession, the stock prices of corporate firms were screened based on their future business prospects and order book size. However, after witnessing the liquidity crunch, market participants felt the need to evaluate stock prices based on additional parameters such as debt equity ratio and operating cash flows amongst others.

High debt levels means that a company has been aggressive in financing its growth, which could add volatility and additional interest costs on its heads. The bet over here is that the firm expects the returns from its businesses to be superior to overall expenses. But, if this equation gets screwed up, the company gets into trouble.

Lesson: Stretch your legs according to the length of the coverlet.

Markets are never too cheap

Yes, it sounds a bit upside down, as investors usually tend to value firms based on several fundamental valuation metrics. Though, this is not to betray those genuine valuation parameters. But, how often have you bought a stock thinking that the valuation is cheap; and it took further hair-cut of another 50% from those lucrative levels?

Frankly, this had happened to me few months back. I had bought shares of few mid-cap real estate firms, such as HDIL and Indiabulls Real Estate, thinking that their valuations have stooped to rock bottom levels, after witnessing a melt-down to a tenth of their previous bull market peaks.

But, now I realize that two best stocks to buy from the real estate sector are Godrej Properties and Oberoi Realty – both of which boast of very low or negligible debt on their books.

Lesson: Never rely on valuations alone, evaluate other parameters as well.

Trust on the Management quality

It might sound a bit theoretic to say that one ought to place trust on the management quality of a firm, but the fact remains that such companies get re-rated on the bourses sooner than others, if the administration enjoys higher trust seal amongst investors and other stakeholders.

Of course, management quality alone can not work wonders; it needs to be backed with sound business prospects and optimal debt size limit as well. But, you can rest assured that once the recession is over and the market is in the recovery mode, you will regain your lost investment value in the stock price of firm with good pedigree management.

Lesson: A tree grows with firm foundation and roots.

Hear others opinions, but keep your Mind Open

Stock market is a subjective game where different analysts ought to hold divergent views. Analysts are here to predict and guide us to the way forward, but no one is certain about the future. There is no harm in hearing patiently to every other analyst on the street, but keep your mind open to various possibilities of market movement rather than relying on any particular strong opinion.

Remember, in equity markets, there is a buyer for every seller out there (of course, until there is a downside circuit) in the middle. It means that every sale trade from a pessimistic seller is seen as an opportunity by an optimistic buyer at the other end.

Lesson: Take inputs from others, but calculate your own risks!

Don’t invest for Pleasure

Lastly, don’t invest in equity markets for the sake of pleasure, or just because markets have corrected steeply. First, evaluate your needs for investing, support your investments according to your risk profile and invest with a clear plan and time horizon to see your hard earned money work for you. For instance, a person of 75 year age should not invest in stock markets even if Sensex plunges to 8000-points, based on his risk profile and future needs.

Furthermore, if you are not an informed investor, better stay away from the vagaries of investing directly into markets. There are mutual funds with various themes which operate with the mandate to provide expertise at very reasonable costs for your hard earned money.

Lesson: Do not gamble with your hard earned money.

So, do you confide to adhere to any of the above 2012 resolutions? Let me know…

Foreign Investors allowed to directly invest in Indian Equity Markets!

Arun Prabhudesai — Mon, 02 Jan 2012 09:11:29 +0000

2011 was not a very Happy year for investors in Indian Stock Markets – Indian as well as international investors lost money to the tune of lakh’s of crore rupees. Benchmark Index lost over 20% from the start of the year.

This year though, Government is taking steps to turn around – The new year has started on a happy note for Indian Stock Markets with Central Government allowing Qualified Foreign Investors (QFIs) to directly invest in Indian equity market. This will help Indian stock markets to widen the class of investors, attract more foreign funds, and reduce market volatility.

It is a great sign that Government is bringing in reforms to open up Indian capital markets – Till now, Foreign Institutional Investors (FII’s) were only allowed to invest in mutual funds . Though, this is a significant news, somehow investors don’t seem to have taken it in a very positive way – At the point of writing this, Sensex as well as Nifty are both trading marginally in red.

Here are salient features of the new Scheme:

RBI would grant general permission to Qualified Foreign Investors (QFIs) for investment under Portfolio Investment Scheme (PIS) route similar to FIIs.
The individual investment limit for QFIs shall be 5% and 10% respectively of the paid up capital of Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India.
QFIs will be allowed to invest only through SEBI registered Qualified Depository Participant (DP). A QFI can open only one demat account and a trading account with any of the qualified DP.
DP shall ensure that QFIs meet all KYC (Know your Customer) and other regulatory requirements, as per the relevant regulations issued by SEBI from time to time. QFIs shall remit money through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category – I bank. Upon receipt of instructions from QFI, DP shall carry out the transactions (purchase/sale of equity).
DP shall be responsible for deduction of applicable tax at source out of the redemption proceeds before making redemption payments to QFIs.

With most of the stock Analysts and experts being under-weight on Indian equities currently, we may not see much participation from QFI’s. However, when the tide turns, I am sure this new reform will help bring more money into Indian capital markets.

Would love to hear your views on this.

[Suggested Reading - Dear FM, are reforms only for foreigners or Indians, too? by R. Jagannathan]

Five Important Wall Street Q3 Results [Apple, Goldman, BoA, Citigroup, Yahoo]

Viral Dholakia — Wed, 19 Oct 2011 08:26:45 +0000

Even as India Inc moves forward with its Q2 fiscal earnings, the top Wall Street companies are slowly oozing out with their Q3 results performance amid slowdown and deficit-reeling US economy.

While the global sentiment is mired by the unanimous downgrade of Spain’s creditworthiness by three credit rating agencies – Fitch Ratings, S&P and now even Moody’s; the Wall Street earnings have been no show-stealer amid mixed-bag of results with some banks doing well, while few others including Apple missing earnings forecast.

Let me summarize a few important Wall Street earnings performance over here:

Apple drags on lower iPhone sales

In a rare instance on missing its earnings forecast, Apple Inc reported a net profit of $6.62 billion (up 54% from $4.31 billion last year) on revenues of $28.3 billion, which came in a tad lower than Wall Street expectation of $30 billion, for its fiscal fourth quarter of this year.

At 17.7 million, Apple sold 21% more iPhones than last year during the July to September 2011 quarter, with no new next-generation iPhone and iPad releases. However, the iPhone sales fell short by 19% when compared with its previous quarter figures.

Goldman stutters with underwriting losses

Investment banker Goldman Sachs reported a quarterly loss of $428 million for the three months ended September 2011, run down by slump in its investment portfolio and fall in trading revenues. This was its second-ever quarterly loss in at least a decade, next only to post-Lehman era loss of $1.6 billion in Q4-2008.

Goldman’s net revenues came in at $3.59 billion, down 60% from $8.9 billion a year ago period. The Q3 results include $1.05 billion losses from investment in Industrial and commercial Bank of China. Its investment and lending business lost $2.48 billion during the quarter under review.

Bank of America prospers with one-time gains

Bank of America, the second biggest US bank by assets next only to JP Morgan Chase, posted a net profit of $6.23 billion. Revenues recorded a growth of 6% to $28.7 billion mostly led by one-time accounting gains related to debt valuations.

In the race to claim position of top-most American bank, Bank of America came in second with its $2.22 trillion in assets, behind JP Morgan Chase’s which reported assets of $2.29 trillion in this latest quarter.

Citigroup in the pink of health

Citigroup posted positive Q3 results with net income of $3.77 billion, up 74% from $2.17 billion in the corresponding quarter last year, backed by lower losses from loans and $1.9 billion from credit valuation adjustment gains.

Citigroup, which is fourth largest US bank, posted revenues of $20.8 billion, almost at par with its revenues clocked in the year-ago period. The bank’s losses from bad loans came down by 41% during the July-September quarter to $4.5 billion.

Yahoo beats estimates

Internet portal Yahoo announced its third quarter results with dwindling sales and profitability, led by growing prominence of social media platforms and Google search products. Yahoo Inc posted Q3 profit of $293 million, with search queries showing tepid growth.

Revenues for the third quarter came in at $1.07 billion, down 4.5% from $1.12 billion recorded last year for the September-end quarter. The revenues exclude traffic acquisition costs. The internet giant is aiming for more business partnerships to target growing monetization.

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Top 5 Mid-cap stocks to Buy in Market meltdown !

Viral Dholakia — Fri, 09 Sep 2011 11:02:11 +0000

NSE Nifty is down almost 18% from its November 2010 peak of 6300 points on the back of the US losing its top-notch AAA rating, unabated sovereign crisis in the euro zone and high domestic inflation.

Well, that’s the tell-tale story related to the benchmark index. But, looking into its constituents and sub-indices, one can easily figure out that there is more blood in the markets than meets the eyes. Many individual stocks, especially mid-cap counters, have capitulated by over 50% in the last 3 months itself.

But, now investors have become wiser after witnessing a deadly 2008-recession. Other than evaluating business earnings and its future prospects, they also tend to check whether the companies that they invest in are over-leveraged in context of the prevailing high interest rate scenario.

Evaluating cash flow statements have gained all the more importance in the current times – fraught with project delays led by funding constraints. In an era where frauds, scams and tax-evasion have become common practices, investments based on determining the quality of management and its track record is gaining more and more traction.

Under such circumstances, we screen 5 quality mid-caps stocks for our readers which could prove to be handy long-term investment bets in prevailing tumultuous market conditions.

However, investors are recommended that, if at all, they take position in any of the below counters, they do so in slow accumulation mode in phased (time-wise) manner in order to leave room for averaging at lower levels in case markets tend to slip further. And, of course, a little bit of your own research and due-diligence before getting on with it will always help.

Rural Electrification Corporation (CMP Rs.175)

REC commenced operations in 1969 to develop power infrastructure in rural areas. This state-run lender to power projects has a strong sanctions pipeline of Rs.1.6t and high exposure in power transmission and distribution segment. The loan book of this Navratna status company grew 24% YoY to Rs.858b at sequentially stable margins.

REC has an edge in power financing over banks, as power projects have long gestation periods. However, the stock has taken a sharp beating over the last one year led by concerns on the bad debts happening from the poor financial health of SEBs and delay in implementation of projects marred by fuel availability and coal linkages.

The stock has taken a severe beating on the bourses from its October 2010 highs of Rs.385 to Rs.175 now, correcting beyond its fundamentals and presents a good opportunity to buy at current levels looking at the government’s continued thrust on power sector reforms.

Thermax Limited (CMP Rs.525)

Pune-based Thermax is one of the leading engineering solutions providers in the country with a major thrust on manufacturing industrial heaters, sub-critical power boilers, steam vaporizers, waste heat recovery, captive power, water treatment, recycling and waste management. Thermax is a zero-debt, cash surplus company with an order book worth Rs.5900-crore at the end of June quarter.

Over the last 5 years, this multi-national energy and environment engineering company grew at a CAGR of over 50%. The energy segment contributes over two-thirds of the company’s consolidate revenues, whereas rest is made up by its business related to environment segment. Thermax’s high stakes in the renewable energy segment would benefit it from government’s increased focus and budgetary allocations in fiscal 2012 to develop renewable energy resources.

The company stock price has corrected from the highs of Rs.900 in Nov 2010 to Rs.525 now on the back of negative news of its order book shrinking by 16% YoY, margins coming under pressure and the capital goods sector facing multiple challenges on account of industrial slowdown. However, these concerns have gone overboard to say that the stock is quoting at nearly half its average P/E of the past 5 years.

Jain Irrigation Systems (CMP Rs.170)

Jain Irrigation is India’s biggest drip irrigation company and leading global producer, provider of tailor-made irrigation solutions and holds 55% share in domestic Micro irrigation systems (MIS) business.

This largest integrated agri business player boasts of multi-product industrial profile and manufacture Drip and Sprinkler irrigation systems and components, PVC pipes and sheets, processed food business such as dehydrated onions and processed fruits, hybrid and grafted plants, bio-fertilizers and solar water heating systems, amongst other business segments.

Early this year, the stock price of Jain Irrigation witnessed a sharp fall on the news of its proposed new commitment in form of a setting up a low-margin NBFC arm to finance the purchase of micro-drip irrigation and other agri productivity tools for rural India. However, it panned out that the investor concerns were over-done regarding its unrelated NBFC arm, and the stock seems to be building strong base at current levels.

Educomp Solutions (CMP Rs.225)

Educomp still remains the most dynamic thematic investment story in India – being a well-planned business model involved in providing diversified education solutions including its pioneered digital initiative transforming the way teachers teach and students learn in schools.

In latest, this education solution provider bagged a Rs.60.72 crore order from the Chhattisgarh government for implementation of ICT solutions across 582 government high schools and higher secondary institutes. With the new project, the total number of schools in Edureach’s portfolio is 11,154. The company serves more than 15 million learners and educators.

Currently, the stock price is way off from its peak levels of Rs.1000 per share, almost 80% down; more recently marred by likely corporate governance issues with respect to Income Tax department search and surveys conducted on its premises.

United Phosphorus (CMP Rs.150)

United Phosphorus Limited (UPL) is India’s biggest agrochemicals maker which is currently trading at attractive valuations given its growth prospects on the back of improved global agrochemicals demand and the company’s growing foothold in the Brazilian market through inorganic route.

Over the last 5 years, the company’s revenue has grown at CAGR of 26% led by its backward and forward integration in the agrochemical industry; and derives almost 70% of its total revenues from overseas. The company has revised its revenue guidance for FY12 upwards to 25-30% on account of improved volumes. However, its earnings have been negatively impacted by rising input prices, despite strong global demand for its products.

So, do you feel the above list of stocks is good enough to take the bait?

Disclaimer: The above content/report is only for the educational purpose of the readers. It does not qualify as any type of advice or recommendation to Buy/Sell securities. The author and the blog are not responsible for the reader’s decisions based on the above report and news within.

How much are the "New Economy" Businesses for Real ?

Viral Dholakia — Mon, 05 Sep 2011 11:16:04 +0000

Are the high-flying “new economy” stocks crashing or just grinding through a patch of rough turbulence? Well, this circumspect question often crops-up in the mind of investors when relatively young companies witness sharp correction, especially, followed by rise to unprecedented price-to-earnings ratios during the bull phase.

In new economy the value is created by intangible assets: ideas, brands, ways of working, and franchises. The risk premium demanded by such companies ride on the assumption that in a few years time, they will win out over the competition. However, investors may not fully factor in the consequences of the transition from a growth market to a mature market.

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Dot-com Bubble

The tech bubble, which originated before the turn of the century, marks a striking example of new economy stocks going through a classic boom and bust cycle. However, the silver lining is that every new economy-led story, even after shaving off its speculative froth, leaves behind a semblance of new technological innovation, on the back of which the sector climbed to unsustainable market valuations.

The internet boom heralded steady commercial growth of the internet with the advent of the World Wide Web. Fortunately, today the tech stocks promise the greatest return despite their nerve wrecking variations. IT bellwether stocks have, now, gone past their bubbly valuations on the back of firmly footed fundamentals. It took almost a decade for these stocks to climb back to their earlier peaks recorded during the dot-com bubble.

Media & Entertainment

However, not all new economy revolutions end up with the same fate of gung-ho revelations. The introduction of new technology also comes with circumspection that all newly-sparked changes might not necessarily generate strong long-term sustainable cycles on the stock markets.

In India, the media and entertainment industry went through a similar rusty cycle; though it was not a full-scale bubble, expectations were built big-time that media would emerge as a sun-shine sector. The crisis led by 2008-recession spelled rough waters for businesses involved in creation, aggregation and distribution of content on account of acute slowdown in discretionary spending by public.

Reliance Mediaworks, formerly Adlabs Films, touched dizzy valuations in January 2008. The stock price of this ADAG firm slumped from its all-time highs of Rs.1600 to Rs.100 now. Deccan Chronicle Holdings is way off from regaining its peak price of Rs.270 recorded in early 2008; the stock lingers down at sub-Rs.60 levels now.

Social Media

While we speak about media, how can we forget to make mention of the incredible social media? This niche concept media has emerged as the biggest wonder of the new millennium; and no wonder that the stakes have also climbed up the ladder along with its frenetic fame.

In short, social media became the ‘Face’ of the internet ‘Book’. Whatever small connection gap that the internet had left within the virtual world, has been bridged by social media and exploited to its fullest ever; so much so that the virtual world now stays closely connected with the real world by the virtue of social media platform.

This has sent valuations of the social media industry soaring high and wide. The social media gold rush started way back in 2005 when Rupert Murdoch’s News Corp. bought into MySpace as an act of visionary. But, on the hindsight, the so-called vision turned out to be blurred when Facebook came up with superior offerings and News Corp. had to make an exit from its stake at a substantial loss.

In June 2011, Facebook was valued at $70 billion when Investment fund GSV Capital bought 225,000 shares in the company; though officially Facebook claimed its valuations at $50 billion during December 2010. However, some expect the social media giant to be valued at around $100 billion by the time it goes public, which is rumoured as soon as Q1-2012.

Education

Fast growing education industry is next in line of fire and investors’ apathy. Though, each beaten down stock in the sector has its own bit of negative news to narrate, the fact of the matter remains that industry has been de-rated on the bourses. The latest to join the row is Chennai-based education company Everonn Education, which has been hammered down by 40% in last 2 sessions after the arrest on bribery and tax evasion charge of its managing director, P Kishore.

Another education giant Educomp Solutions has already corrected 40-45% in one month on the back of income tax raids in its offices, indicating susceptible quality of accounting standards followed by the company; this, despite positive vibes of a story that boasts of secular growth prospects, but PE multiples taking a beating on account of corporate governance issues.

Both the education companies have shown formidable progress and growth backed by smart FII money. While Educomp’s shareholding pattern comprises of 35% FII holding, showcasing smart non-promoter back up; Everonn Education boasted a little over 29% institutional investor holding as on June 2011. The Blackstone Group invested $42 million in Everonn in 2009.

Infrastructure

Lastly, we have also witnessed a classic boom and bust cycle in India’s infrastructure sector. Theoretically, infrastructure sector can not be included exactly in the new economy space, but looking at India’s new dawn as fast-paced growing economy starved of infrastructural facilities, I would like to categorize this sector as a new-age sector.

Recently, this crucial sector has witnessed a massive meltdown on the bourses bogged down by high interest rates and leveraged debt positions of the infrastructure companies. The space requires a voice on the policy front from the government, initiatives in terms of land acquisition, non-availability of coal and gas linkages, high working capital requirements and fast tracking of bigger projects, and delay in payments by state electricity boards.

Today, most infrastructure stocks are languishing substantially below their 2008-recessionary lows, leave alone 52-week lows on the bourses.

Why is the current economic scenario a good time to have fixed deposits?

Kaushambi — Wed, 31 Aug 2011 10:59:14 +0000

The current economic situation is better termed as ‘uncertain’ rather than blatantly labeled as a ‘recession‘. Investors in India who have their money invested in Equity and Mutual Funds are probably tearing their hair apart because there have been losses witnessed in all sectors. Here are some top reasons why you should have fixed deposits to see you through rough times, especially the current market scenario in India.

Beat the recession – Fixed deposits have a fixed rate of interest

Yes, we know that the rate of interest on fixed deposits vary from time to time when the Reserve Bank of India changes the rates. But effectively, you are locked in for a rate that is applicable to your fixed deposit in India with the prevailing rate.

For example, if you decide to lock in Rs. 100,000 for a period of 3 years with SBI right now, you can access rates like 9.25%. So for the next 3 years, whether the Sensex stumbles down to 10,000 or 8,000, your fixed deposit investment in India will keep earning you 9.25% regardless of the market scenario.

Fixed deposits are great in the current economic situation in India – the RBI rate rise

Did you know that RBI recently made its 11^th rate rise in the last 18 months? So, what does this mean for you as an investor?

In simple words, you will have access to better rates on bank deposits and fixed deposits in India. In an economic situation like this where every basis point matter, a 1 or 2% increase in rates of fixed deposits in India is a welcome sight to any investor’s portfolio, isn’t it?

Fixed deposits help you avert a cash crisis

While many of us are still trying to find ways to beat the cash crisis in the current economic situation in India, intelligent investors have already benefited by taking out personal loans against their fixed deposits in India.

If you didn’t know, banks generally offer loans against fixed deposits to its customers who have a lending rate of about 200 basis points, or 2% higher than their rate of interest earned on the fixed deposit. It beats paying 16-18% on a personal loan to manage a cash crisis, doesn’t it?

Fixed deposits help you lock your money away

Okay, here’s getting a bit deeper into an investor’s psyche. We all like to go on a spending spree especially when it comes to buying stocks when the stock market is down. But do we really know when the stock markets have bottomed out?

The current economic situation in India is plagued not only by political instability but also the pressure of a global slowdown. Many investors emptied their pockets to buy into stocks when the market breached levels of 17,000. What happened next? The markets tumbled further.

Here is where fixed deposits come into the picture. Fixed deposits in India offer investors a chance to simply ‘lock-away’ a part of their investment. This may be only a psychological safeguard against falling markets and a bleak economic situation, but you can thank us later for stopping you from blowing away more money on falling stocks.

We’ve talked about the benefits of fixed deposits in India especially in the current economic scenario. Check out some of the products and rates on offer for fixed deposits in India from some of the leading banks in the country.

Happy saving!

Why Infosys is still a top stock pick despite recent fall!

Kaushambi — Mon, 29 Aug 2011 16:34:05 +0000

Yes, Narayana Murthy has retired as the Chairman of Infosys. Yes, Infosys has drawn flak for visa issues for employees in its foreign operations. Yes, current COO S.D Shibulal has accepted that Infosys is facing a challenging environment currently. And yes, Infosys’ stock price has witnessed sharp fall in past few weeks. Shareholders with any other company would have already sold their holdings by now. But that is definitely not the case with Infosys shares. Read on to find out why Infosys is a top stock pick despite the steep fall and other issues.

Current market situation and the impact on Infosys

While the analyst meet at Infosys did acknowledge the global slowdown, the management at Infosys reportedly claims that there have been no cuts or decrease in client spending. They’ve added that there have been no project cancellations which have been a result of the US slowdown either.

So, the bottom line is that the Infosys share price has had to bear the brunt of a slowdown in the global markets, visa trouble for some of its employees and an overall investor panic. However business is as usual at Infosys.

Why Infosys is a top stock pick

The IT sector in India has taken a thorough beating in terms of fall in stock prices. Analysts report that overall IT stocks in India (IT Index) have fallen more than 30% in this year. In comparison, Infosys stock has shed about 37% in this year. Analyst and broker Anil Manghnani of Modern Shares & Stock Brokers told a leading news channel that Infosys is still "a trading bet".

Infosys is the only Indian stock still on the list of Goldman Sachs stock picks from Asia, despite the US slowdown and the fall in Infosys share price. A report from Goldman Sachs talks about how the recent economic crash is a great time to buy. "The fact that the market doesn’t immediately discriminate in favor of quality in a sell-off can provide a buying opportunity" stated the Goldman Sachs report.

Infosys Long Term Strategy

The management at Infosys has said that Infosys "would continue to drive the same for a sustainable long-term growth rather than near-term out-performance (while maintaining industry leading financial performance)". At a recent Infosys analyst meeting, a sustainable and diversified business model and projected growth in terms of profitability are encouraging signs to go long term in Infosys.

Infosys share price

The last close of Infosys share on Monday, 29 August 2011 was at Rs. 2,297.85 on the BSE. This is significantly lower than a 52 week high of Infosys share price of 3289.10. The current share price of Infosys has also breach 52 week lows of Rs. 2170 in the last 10 days.

We cannot ignore core and vast spread of Infosys

To do a quick overview of Infosys operations around the world, it has offices and development centers in more than 30 countries. Infosys has been listed on the BSE since 1993 and has been galloping forward ever since. For those of you who don’t know, Infosys employs more than 130,000 people worldwide.

Investor’s approach to Infosys shares

Okay, so we’ve given you information, comments and analytics of the fall in price of Infosys share price. But what should you do as an individual investor?

If you have Infosys shares:

General recommendation for investors who hold Infosys shares is to hold. Unless you are looking for some major recycling in your portfolio, Infosys is definitely a top stock pick you want to hold on to for the long term for profitability and dividends.

Investors looking to buy Infosys shares:

Investors wanting to get into the troubled markets in the short term are better off staying away from Infosys. Given the recent change in top management and US slow down, Infosys may not be your best bet for the short term.

However, Infosys still remains a top stock pick for investors in the long term. As Anil Manghnani told a news channel,

"Infosys has hit Rs 2170 in the last 10 days. That’s a major 50 month moving average, so I assume that it should hold here because the next target is all the way at Rs 1974 that’s another 200 points away. So I think Infosys may be at these levels would be a trading bet"

Now do you think this IT powerhouse is here to stay? We suggest you hold on and reap the benefits of ex-chairman Narayana Murthy’s vision for years to come.

Your comments on Infosys stock are welcome!

WoW! Coal India beats Reliance to become India’s most Valuable Company by Market Capitalization!

Ankit Agarwal — Wed, 17 Aug 2011 11:20:09 +0000

The unthinkable has happened!

Mukesh Ambani led Reliance has been upstaged as India’s largest company by market capitalization and the one who has managed to achieve this feat is by no means a veteran in the Stock Market.

Coal India, which listed on 4th November, 2010 and got included in the BSE Sensex on August 4 is a toddler by stock market standards and this makes the company’s claim to fame even more formidable.

Here’s how the market capitalization looks like for Reliance and Coal India

Reliance Industries’ market cap stands at Rs 248,662.36 crore and that of Coal India stands at Rs 250,728.08 crore

Coal India touched an intraday high of Rs 397.65 and an intraday low of Rs 387.50.

For the similar period, RIL stock prices remained stagnant and catapulted the market cap of Coal India higher than RIL.

For starters, Coal India’s tryst with the stock market has been nothing short of perfect. Coal India IPO witnessed tremendous response, got oversubscribed by multiple times and managed to list above Rs 300 (as against the IPO price of 245).

But over-subscription and premium listing is not a one-off case in Indian Stock markets. Where Coal India differentiated itself was that it seldom lost steam and continued its upward journey in-spite of the market driven ups and downs.

Coal India and Jubilant IPO are the only two IPOs in my knowledge that have done tremendously well among the IPOs that have come in the last 2 years.

However, more than Coal India taking the number 1 spot the worrying aspect is Reliance Industries losing the top spot.

Mr. Dhirubhai Ambani was the master player of the Indian Stock Market and he used the markets every now and then to raise capital.

However, ever since the split of business Reliance brand has had its share of setbacks. Global recessionary periods not withstanding, both Mukesh and Anil Ambani have failed to keep the investors happy which has resulted in fall of share prices for Reliance brand of companies owned by the brothers.

Again, market capitalization is a short-term metric and a jump in RIL share prices tomorrow can restore RIL’s place at the top but Coal India has managed to do what other companies in India have not managed to do for years.

Somewhere in a corner, ONGC must be managing a grin out of this news. Afterall, it was RIL which took away the ‘biggest company by market capitalization’ tag from ONGC

What are your thoughts on Coal India’s moment of fame as India’s biggest company?

Moreover, will Coal India be able to sustain the top spot for long enough because as they say "It is easy to become No.1 but difficult to sustain the No.1 position"