Monday, June 28, 2010

[Safe Invest] SHRIRAM - UNNATI FIXED DEPOSIT

SHRIRAM  - UNNATI FIXED DEPOSIT

Scheme Period: 1st July – 31st August 2010

RATING FAA FROM CRISIL and MAA+ from ICRA.

  • Minimum Investment: Rs.25000 and in multiples of Rs.1000 there after.
  • Maximum Investment: Rs. 10 Crores.
  • Scheme Options
    1. Quarterly, Half yearly, annually.
    2. Cumulative 

 ·         Who Can Apply?

     Resident Individuals, HUF, Trust, Firms, Corporate, Senior Citizens, Minors

 ·        Rate of Interest :

 

PERIOD

Yearly % (p.a)

Half Yearly % (p.a)

Quarterly % (p.a)

CUMULATIVE YIELD %(p.a)

MATURITY VALUE FOR RS. 25000

1 Year

8.75

8.57

8.48

8.75

27188

2 Year

9.5

9.28

9.18

9.95

29975

3 Year

10

9.76

9

11.03

33273

4 Year

10

9.76

9.65

11.6

36600

5 Year

10

9.76

9.65

12.21

40263

 

Company Profile

·         Largest asset financing NBFC in India.

·         PAT : Rs. 873.11 Crores 

·         NPA of 0.71%

·         Network of 479 Branches, service centers & having an Employee base of 11000.

·         Consistently profit making and dividend paying company.

 

For requirement of forms for above Deposit Program,  Kindly forward all your queries to info@safeinvestindia.com mentioning your postal & contact details.

 

 

 

--By

Safe Invest - Team

www.safeinvestonline.com/

Saturday, June 26, 2010

Petrol De-regulation

Event : EGoM decided to free petroleum prices from government control. 


Announcement

EGoM decided to free petroleum prices from government control, meaning gasoline and diesel prices will move in response to global fuel prices rather than government fiat. The panel didn't reveal any details about how this will work. However, the panel hasn't freed some fuels like subsidies for cooking gas and cheaper kerosene, vital to low-income households. 

The government's decision to hike fuel prices follows a recommendation to that effect by the Kirit Parekh committee appointed by the government earlier this year. The committee had recommended linking the prices of petrol and diesel to market rates. 


Impact on Economy 

Diesel and petrol consumption has been growing at 10-15% per year even during the global economic turmoil. Around 92% of the market is with state-owned companies, which are bedevilled with issues such as corruption, bloated infrastructure and adulteration of their products by their agents. 

To describe the government's decision to deregulate petroleum and diesel as an act of raising prices is to get it completely wrong. It is one of the most major reforms of recent times and should have beneficial effects on the entire economy. What is being done is to put both diesel and petrol prices on a float. Prices will rise and fall in step with the international prices. For diesel, there will still be a per-litre subsidy from the government, to keep the domestic retail price below market level. But what is important is that it will no longer be a fixed price. 

The fiscal deficit definitely is going to look down now from the current levels. At $75 per barrel kind of a crude oil price at which government would have ended spending full year about 75,000 crores just to fill this particular deficit part for the under recoveries. Now, in a given situation it will be down anywhere between 53000 crores to 47,000 crores that means what we are talking off is close to about 25,000 crores worth of saving in the fiscal deficit situation and the most important part is that going forward in subsequent years now onwards this worry would be kept aside because these prices are driven by the market factor and if it is going to be linked to the market that means government will not had to bear that particular cost. 

The petrol price hike will cause an increase of 100bps in the monthly WPI inflation. But since these changes will cause the fiscal and revenue deficits to decline, they will exert a downward pressure on prices. Hence, though the immediate impact of this policy will be to increase inflation, in six to nine months will have lower prices than what would have happened in the absence of this much-needed reform. 

Kerosene and LPG would continue to drag government into this particular game to a certain extent but by going forward it will also find its way into partial deregulation. So from a view point government has gathered the courage to bring down the fiscal deficit, it would get a thumbs up in form of winning the confidence of the investors including global investors. 


Impact on Industry 

Market determined pricing is expected to attract higher investments in the fuel retail sector, and by spurring market competition, encourage OMCs to reduce costs, improve efficiency and service standards. Market determined pricing will also incentivise fuel conservation and encourage the consumer to adopt fuel efficiency practices. 

The move would save around Rs 6,500 crore on petrol under-recoveries for government and around Rs 15,000 crore on diesel under-recoveries. Once the diesel is fully deregulated, it will further lead to a Rs 9,000 crore saving 

Till last year, 31% of the under-recoveries were borne by the upstream companies, about 12% by the downstream companies and the rest by the government. Extrapolating the numbers based on last year's formula, upstream companies like ONGC, GAIL and Oil India would save Rs 4,000 crore, Rs 600 crore and Rs 700 crore, respectively, leading to a 10-13% increase in earnings per share. Similarly, among OMCs, BPCL, HPCL and IOC would see 23%, 15% and 7% addition to their bottomline. 

Total under-recoveries in the system will come down substantially. Though the earnings would significantly improve for all the oil companies, the exact extent would depend on the final subsidy sharing formula, which the government has not come out with till now. 


Impact on Private Players 

Deregulation of petrol prices has cleared the way for private fuel retailers to reopen petrol pumps that had become unviable owing to government cap on prices and could eventually lead to a price war between them and the state-run oil marketing firms. 

The Centre provided subsidy to its own companies, no such comfort was available for private firms. While Essar has continued to operate its 1,342 outlets throught the control era, Reliance Industries and Shell had shut down most of their petrol pumps some years back when they could not compete against the government-capped price being offered by the public sector firms. 

In a decontrolled environment, private retailers may be able to offer cheaper rates since they do not have historical baggage of location or manpower and enjoy the advantages of new technology, more efficient operation and competitive sourcing of crude. They are able to keep their crude costs down through hedging and high-sea trading, which state-run entities are not allowed. The private refineries also have the latest technology that allows them to extract more high-value products from inferior crude varieties that come cheaper and maximise returns on refining. 

The move has opened up one of the world's fastest growing hydrocarbon markets to private sector players like Reliance Industries, Essar Oil and Shell, three years after they were virtually forced out of the market. These private players, who entered the Indian retail market in 2003 when the government scrapped the controlled prices policy the first time, had been forced to shut down most of their outlets three years ago due to spiralling prices of crude oil. 

The price of crude oil, which was around $25 per barrel when the administered pricing formula was abandoned in 2002-03, reached levels of up to $147 by early 2008, forcing the government to bring back price controls on petrol and diesel and pushing private players out of business. 


Impact on State Run OMCs 

Public sector oil marketing companies are expected to be major beneficiaries from the government's decision to free petrol prices. The companies were expected to lose a whopping Rs 1,10,000 crore this year, 

The re-entry of private retailers is expected to ease off the pressure on resources of the public sector oil marketers and will allow them to redeploy manpower and operate infrastructure such as terminals, depots and pipelines more efficiently. 

The re-entry of private firms will also bring back to life their idle infrastructure, built at huge investments. This will take off pressure on state facilities, though they are sure to lose market share. However, even at a lower market share returns on their investments will be much better if they did not have to stretch manpower, finances or infrastructure to unviable options. They may now also take a rationalise their outlets. 

The government compensates the state-owned oil marketing companies for some of their losses. It was on track to spend $17.7 billion on subsidies for such firms this year, but with the move means the total will likely drop to $13.5 billion 

The state-run companies will also benefit as their cash flows will improve and revitalise financial health. Though the petrol volumes, at 5-6 million tonnes a year, are half of the diesel or kerosene, profitability in the motor fuel and reduced losses in kitchen fuels will certainly shore up their financial muscle and may resurrect many expansion projects. 


Impact on End Users 

This move will benefit the consumer in the long run through competitive pricing of fuel and an offering of better services across outlets. The move will also rationalise the way end user spend money, the kinds and amount of energy end user use. It is an important step in making India a more efficient, global player. 


--
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Thursday, June 24, 2010

NEWS THAT YOU SHOULD KNOW

Corporate
Tatas buy back pledged shares in 4 group cos
The Tata group has bought back shares of at least four group companies that it had pledged with financial institutions, in a transaction worth about Rs 850 crore at current market price, signalling a healthy liquidity for the holding company of the Mumbai- based conglomerate. Besides freeing the shares from lenders, Tata Sons, the unlisted holding company, would infuse about Rs 1,800 crore by subscribing to preferential shares of two group companies, Tata Steel and Tata Chemicals. The Rs 2,700-crore fund outflow will likely be funded by recent share sales in top group companies and a high profile sale of equity stake in telecom subsidiary, Tata Teleservices, said people familiar with the development. 

Morgan Stanley buys Parkway shares
Morgan Stanley has bought about 4.5 lakh Parkway shares over the past two weeks and said it is buying the shares for a discretionary investment client. Fortis Indian rival, Apollo Hospitals, in which Khazanah owns about a 12% stake,has indicated its tacit backing of the Malaysian sovereign funds move. Apollo, which was displaced as Asias largest hospital chain by Fortis, last month said it is willing to work with Khazanah to expand the health care business in India and Asia. Fortis has four members on the Parkway board and contracts with three other directors who will vote against Khazanahs offer and wont sell their shares .Five of Parkways 12 board members who are considered independent for the purpose of the Khazanah bid said they concur with Morgan Stanleys advice. 

Trai caps cable tariff at Rs 250 for all channels
Consumers will have to pay up to Rs 250 plus taxes a month to watch a complete bouquet of channels on cable television,though operators have the option to charge lesser,says a proposal that is expected to get the governments blessings as early as next week. The proposal to cap cable tariffs was part of a broad consensus that emerged at a meeting between industry representatives and telecom regulator Trai on Wednesday, said people who attended the meeting. A plan to digitise all cable operations in three years was also debated, they said. Trai, which also regulates the broadcast sector, will issue a tariff order early next week, the persons said. Barring certain areas in Mumbai, Delhi and Kolkata where conditional access system (CAS) or digital cable signals are available, all other cable operators will have to follow the new tariff order.

Renuka seals Equipav deal at 25% discount
Shree Renuka Sugars has signed an agreement to acquire a majority stake in Brazilian firm Equipav SA Acar e lcool for Rs 1,151 crore, 25% lower than the price agreed earlier. Shree Renuka, Indias largest sugar refiner,will acquire a 50.3% stake in Equipav which has an annual cane crushing capacity of 10.5 million tonnes and ownership of 115,000 hectares of land. The transaction is expected to be closed in two weeks. The acquisition will consolidate Shree Renukas position in the worlds two largest sugar consuming countries,Brazil and India, said its managing director Narendra Murkumbi. Also, three-fourths of our cane requirement will come from our own land,a big advantage in the sugar business. On February 21,Shree Renuka announced that it would acquire at least 50.8% stake in Equipav for Rs 1,530 crore, subject to debt restructuring by Equipav. The companies extended the original 40-day deadline for completing the transaction by another 20 days but fresh bidding was invited when the deal could not be consummated because of differences over valuation. 

Market
Funds wail, but get an earful in return
A Forum by an industry body on mutual funds on Wednesday, where fund houses intended to pour out their woes to the Securities and Exchange Board of India or Sebi, hardly had any effect on the market regulator. On the contrary, Sebi chairman CB Bhave launched a scathing attack on the practices of the mutual fund industry. Mr Bhave was critical of the way fund houses do business and reiterated the need for them to focus on investors to grow. If you (mutual funds) are producing better returns than what an average investor investing himself in the stock market gets,then why is it that you are unable to convince investors that you are giving them better returns, said Mr Bhave, at a mutual fund summit organised by the Confederation of Indian Industry (CII). I mean, are investors so dumb as not to understand that they are getting better returns here (mutual funds) and yet would invest somewhere they would get lesser returns, he said. 

Chindia to lead emerging markets in HNI growth story
ASIA-PACIFIC and BRIC nations would likely be the powerhouses of high net worth individuals (HNIs) growth,according to a Merrill Lynch Global Wealth Management and Capgemini report .China and India will continue to lead the way in Asia-Pacific, with economic expansion and HNI growth likely to keep outpacing developed economies. After falling 14.2% in 2008 to 2.4 million,Asia-Pacifics HNI population rebounded in 2009 to reach 3 million,matching that of Europes HNI population for the first time, the report said. The Asia-Pacific regions wealth also surged 30.9% to $9.7 trillion, more than erasing 2008 losses and surpassing the $9.5 trillion in wealth held by Europes HNIs. This shift in rankings occurred because HNI gains in Europe, while numbers were far less than those in Asia-Pacific, which saw a continued robust growth in both economic and market drivers of wealth. Hong Kong and India led the growth in Asia-Pacific, after experiencing massive declines in their HNI bases and wealth in 2008, amid an outsized resurgence in their stock markets. While Hong Kong witnessed the highest growth of 104.4% in the HNI population, India was the second- largest contributor with a growth of 50.9% in the HNI population. 

Banking
Dealers see liquidity crunch easing by mid-July
Money market dealers say the liquidity crunch has reached its peak and the situation will ease from now with markets reaching equilibrium by mid-July. Given the situation, dealers also expect that RBI will extend the special liquidity facility where banks are allowed to use some of the bonds required to be held under the statutory liquidity requirement to borrow from RBI. On Wednesday, cash shortfall in the market reached its peak with banks borrowing Rs 70,175 crore up from Rs 64,125 crore on Tuesday. According to Hitendra Dave, managing director, Head Global Markets, HSBC, India: What we are seeing is the peak of the shortfall. It may last for another day or two. But I don't think, it would go beyond these numbers. He added that banks would be compelled to borrow until the third or fourth week of July since liquidity would only return when the government starts spending and the Centre has no mechanism to accelerate the spending 

IPO
MCX gets FMC nod for IPO
MCX has received Forward Markets Commissions (FMC) approval to go ahead with an initial public offering (IPO), even though the proposed sale of 10% shares to a government company failed to elicit any response,reports Our Bureau. The sale was to take place through the bidding process with a total of 81.6 lakh shares being put on the block at a floor price of Rs 563 per share or for Rs 459 crore. FMC had given approval for MCXs IPO subject to the condition that the bourse divests 10% of its paid-up capital to a government company. They called for quotations but nobody came forward to buy the stake. We do not want to bind them to this guideline now that they have gone through the process, so have given them a clean no-objection certificate, said BC Khatua, chairman of FMC. Mr Khatua also said that the bourse would have to comply with Sebis norms before it could list and that as a sectoral regulator FMCs job was to only give an NoC. 

--
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News From The Market

INDIAN ECONOMY

RBI may hike rates to cool prices: Sen
The central bank could tighten key interest rates at any time, after inflation flared up once again in May to cross into double digits, the country's chief statistician, Pronab Sen, said on Wednesday. The case for a rate hike could become stronger if an empowered group of ministers that will meet on Friday decides to increase fuel prices. Yes, it (RBI) can do so at any time, Mr Sen said on Wednesday referring to the central bank increasing key policy rates. That is a call it has to take as core inflation is starting to get worrying, he said. The Reserve Bank of India,or RBI, will review its monetary policy on July 27, but it could well decide to raise rates earlier. Bond yields have remained steady in recent weeks. The wholesale price index based inflation shot up to 10.16% for May, amid signs of the price rise becoming more generalised. Mr Sen expects WPI inflation to be below 10% in June because of the base effect, but Mr Sen expressed concern about price rise spreading to manufactured items. We are seeing it (inflation) happen in non-agricultural products. That is one area of worry that has to be tackled, he said. 


WORLD ECONOMY

Germany could cause euro collapse'
Germany's budget savings policy risks destroying the European project and a collapse of the euro cannot be ruled out, billionaire investor George Soros said in a newspaper interview released on Wednesday. "German policy is a danger for Europe, it could destroy the European project," he told German weekly Die Zeit. Soros, who earned $1 billion in 1992 by betting against the British pound, added that he "could not rule out a collapse of the euro". "If the Germans don't change their policy, their exit from the currency union would be helpful for the rest of Europe," he said.

Wednesday, June 23, 2010

IPO Report: ASTER SILICATES LIMITED

Issue Highlights
Industry: Chemical
Issue Size in Cr. 53.10
Price Band in (Rs.) 112-118
Offer Date 24-Jun-10 & Close Date 28-Jun-10
Face Value 10, Lot Size 50
IPO Grade BWR IPO Grade 2 - Indicating below average fundamentals

Aster Silicates Limited (ASL) is engaged in the business of manufacturing of sodium silicate
which includes food grade sodium silicate, special drilling grade silicate and detergent
grade silicate. The company produces sodium silicate both in glass and liquid form. Food
grade sodium silicate is used in the manufacturing of Silica precipitate and Gel which finds
its applications in toothpaste, salt, cosmetics, glucose powder, tyre & rubber and pesticides
etc. Sodium silicate, (special drilling grade silicate) is also used in off-shore drilling and for
reactivation of old oil and gas fields. The sodium silicate manufactured by ASL is also used in
water-proofing, in foundries and for investment casting, paper, silica gel, textiles and
detergents.
Currently, the company operates from two manufacturing units in Gujarat having an
aggregate installed capacity of 150 MT of glass/day. Unit I has three furnaces with an
average combined capacity of 100 MT of glass/day. All the three furnaces are triple pass
regenerative and recuperative end fired glass furnace with multiple fuel arrangement,
capable of using bio gas, coal and also natural gas. Unit II has a single furnace with a
capacity of 50 MT of glass/day, which is also triple pass regenerative and recuperative end
fired glass furnace.

Strength

Sound understanding in the line of business
Over a decade of experience in the business have made its promoters to be active in terms
of the technological changes and other factors, which affect the business operations of
companies. Company is amongst the early movers to switch their raw material from soda
ash to caustics, as the same is a better reactant as compared to the former.
Location and Cost Benefits
The company's manufacturing facilities located in Gujarat provides it with the logistics and
material handling advantage. Its major suppliers and clients are within a 10 km radius, thus
saving logistics costs and efforts.

Flexibility to adopt technology
The company found great opportunity in moving from the conventional fossil fuels to
biogas, resulting in additional cost savings. As its furnaces in manufacturing facilities has
the capability to use multiple fuels, in case of unavailability of a particular fuel, company's
production is not affected due to the flexibility of multiple fuel arrangements.

Strategies

Technological investment
With the changing market scenario, new and advanced technologies are being developed
for various processes for manufacturing sodium silicate. The company had invested in
latest technologies for manufacturing sodium silicate such as triple pass regenerative and
recuperative end fired glass furnace with multiple fuel arrangement, keeping abreast of the
latest trends and advancements.

Reduce operational costs and increase cost competitiveness
The Company intends to maintain the operational efficiencies at the highest possible level
as compared to its peers in the industry. By reducing administrative costs, storage cost,
transportation costs and inventory levels the company is trying to improve its cost
structure.

Risks

Lack of long term contracts with customers and suppliers
ASL's top five customer contribute approximately 83.08 percent of the sales for FY
2010.Any decline in the quality standards or growing competition or change in the demand
for the product by these customers may adversely impair company's ability to retain these
customers. Also its top five suppliers contributed approximately 98.83% of the purchases
for FY2010 that makes ASL prone to highly concentrated to customers as well as suppliers.

Lack of arrangements of working capital funds
ASL has estimated additional working capital requirement of Rs. 26.61cr for FY 2011, of
which Rs. 7.5Cr would be funded out of the Issue Proceeds, whereas the balance amount
i.e.Rs. 19.12 Cr would be arranged by way of borrowings from Banks. However, as on date
no arrangement for the same has been finalized by the company.

Negative Cash Flows from operations and investing activities
The cash flow from operating activities was negative in the FY 2007, 2008 and 2009 and
cash flow from investing activities has been negative for all the years. Sustained negative
cash flows could impact company's growth and profitability.

Valuation
Considering the P/E valuation, the company is trading at pre issue P/E of 26.24x on the
lower side of the band and 27.65x on the higher side of the band of its FY10 EPS of
Rs.4.27.Looking at the post issue valuation,the company is trading at P/E of 37.64 times on
the lower side and 40 times on the higher side of its post issue FY10 EPS of Rs.3.At its P/B
ratio it trades at 5.73 and 6 multiples of the lower and higher band of its pre issue book value
of Rs.20 and 2.27x and 2.39x on the lower and higher side of its post issue book value of Rs.
49.34 respectively.

Outlook
The company expansion of 300MTPD plant capacity which will come into effect in January
2011 would give huge fillip to its revenues and bottomline . Considering stable margins,
the enhanced capacity would lead to three times of the profitability in FY12 compared to
FY10.The moment plant becomes operational it would run on near to the existing capacity
utilization rate i.e 83 percent. However considering the price, company is offering, the stock
looks expensive as the P/E multiple would come down after two year forward earning. Also
40MTPD capacity addition in FY10 accelerated its debtors collection period to 101 days due
to its better credit terms and so tripling the existing capacity puts question mark for its
additional working capital requirement. Moreover the industry in which the company
operates does not require any technology edge and huge capital and so any player can
easily enter the industry.


Let's Hear Some Noise from the market

INDIAN ECONOMY
RIL, others pay rs 30,229 cr for BWA spectrum
The government on Tuesday received Rs 30,229.51 crore as fee towards broadband wireless spectrum from all successful bidders, with Mukesh Ambani-led RIL's internet arm Infotel alone coughing up Rs 12,847.77 crore. State- owned BSNL is yet to pay the dues of Rs 8,313.80 crore. No explanation, either from the corporation or from the government, was forthcoming. Department of Telecommunications officials said there was no information from the PSU.


World Economy
China loosens reins on yuan ahead of G-20
China's yuan jumped on Tuesday to its highest level since the currency was revalued in 2005 as the central bank signalled it would tolerate yet further gains to make good on its vow for more foreign exchange flexibility. China is relaxing its control on the yuan ahead of this weekend's G-20 summit of world leaders and breaking a two-year dollar peg that had been a lightning rod for critics who say the currency is under valued and gives Chinese exporters an unfair trade advantage. Markets surged on Monday after Beijing's weekend vow to allow flexibility for the yuan, on optimism a stronger currency would boost the fast-growing economy's purchasing power. Some doubts crept in to market sentiment at the end of the global day on just how far China would go. But on Tuesday,the People's Bank of China set the yuan's daily mid-point the reference rate for trading at 6.7980 per dollar,the highest level in five years. I am not surprised they did this, said Edward Meir, commodities and energy analyst at MF Global in New York.



Corporate
RIL plans to spend $3 b in fertiliser business
Reliance Industries plans to invest more than $3 billion over the next four to five years to build capacity for its entry into the fertiliser sector, a source with direct knowledge of the plan said. The move is related to chairman Mukesh Ambanis announcement on Friday to set up a giant coke gasification project at Jamnagar on Indias west coast, where Reliances two refineries are located. Reliances refining complex, the largest in the world, can process 1.24 million barrels of crude a day. The entire project right from coke gasification to urea production will need an investment of over $3 billion, the source, who declined to be named, said, adding: Reliance can also gasify coal in the same plant,in case there is a shortage of petcoke. 

Vivendi joins race for stake in RCOM
French media and telecom giant Vivendi SA is negotiating with Reliance Communications to buy a 26% stake in the firm as the Anil Ambaniled company seeks to pare down debt. The two companies have been talking for a month and discussions are now at an advanced stage, said a person with direct knowledge of the negotiations. A top Vivendi team was in Mumbai last week to freeze the contours of the deal. Another person close to the negotiations told ET that Vivendi is the front- runner in RCOMs quest for a strategic partner, in which other another contender is believed to be the UAE-based telecom service provider Etisalat. If Vivendi acquires a 26% stake,which will by way of a fresh issue of shares,it would have to make an open offer for another 20%,according to Sebi guidelines. 

Murli in talks with cement MNCs for unit sale
Murli Industries, a Nagpur based diversified company,is seeking a buyer for its 3- million tonne cement plant in Maharashtra,said a senior company executive. We are in preliminary talks with a handful companies,including some foreign giants, to sell the Chandrapur unit, Anand M Chandak, chief financial officer of the company, told ET. The company has appointed Motilal Oswal Investment Advisors to find a buyer, he said, without revealing the name of the interested parties. The company, which also produces cattle feed and paper, recently commissioned the cement unit in Chandrapur, near Nagpur. It is not clear what it intends to do with the funds from the sale.

Centum Learning raises Rs 40 crore
Centum Learning a Bharti associate company,engaged in higher education and skills training has raised Rs 40 crore from venture capital firm Mayfield India Fund by selling a minority stake. Centum Learning will invest the money over five years to expand skills building and higher education programmes. We plan to train nearly one crore people over the next 5-7 years, said Centum Learning Systems CEO Sanjeev Duggal.

RIL may close $1.35-billion US Gas deal
Reliance Industries Limited (RIL) is close to buying a 45 per cent stake in shale gas assets owned by the US-based Pioneer Natural Resources for $1.35 billion. An RIL spokesperson said the company couldn't make a comment at this point, but agencies quoted sources familiar with the development as saying the deal could be announced in a couple of days. Pioneer has about 310,000 acres of shale gas plays in the Eagle Ford region of Texas, US. The company had last month said it would be announcing a joint venture for the assets in the second quarter. This would be RIL's second acquisition of shale gas assets in the US. The company had in April bought 40 per cent interest in Atlas Energy's Marcellus Shale acreage. The Atlas deal size was $1.7 billion, with RIL committing to a capital expenditure of $3.5 billion over 10 years. 


MARKETS
Retail investors stay on sidelines despite rebound
Share prices have rallied smartly in the past few weeks, but retail investors are treading cautiously, as evident from the fall in trading volumes in second-rung stocks, this month. According to brokers,small investors are keeping away, as they expect the current phase of volatility to persist for some more time, because of uncertainty in world markets. Adverse news flow from European markets,and back home, fears of a rise in interest rates due to high inflation, have been keeping share prices volatile for the past couple of months. This has prompted small investors to adopt a selective approach with the focus mainly on sectors like metal and banking, according to ST Gerela, CEO, Satco Securities and Financial Services, a Mumbai-based retail broking firm. On the face of it,the situation in Europe appears to be improving steadily, but there are also fears that more skeletons could come out of the cupboard of the Eurozone crisis, he said. 

Govt share sales could do with some dragon fire
The government will have to hard-sell its upcoming divestment offerings to overseas investors, as it faces competition from larges ized public issues out of China,say bankers. Many Chinese firms are aiming to go public in the second half of this calendar. The size of one offering from China is almost thrice the size of Indian governments divestment target of Rs 40,000 crore for the current financial year. The first half (of 2010) was a lean period for share offerings globally. But with sentiment stabilising somewhat, there is a rush to raise money, said the head of equity capital markets at a foreign bank. Two mega-sized issues from Asia will be on offer sometime between July and September. Of these, the $23 billion initial public offering the worlds largest share issuance till date from Chinas Agbank is looking to hit the market by mid-July. The $3 billion-plus Coal India public issue Indias largest to date could be launched in late September. 
Banking
Rabobank sells 11% stake in YES Bank
The Netherlands-based Rabobank may take up the wholly-owned route to launch banking operations in India. As a prelude to setting up its banking operations, the Dutch lender on Monday sold 3.73 crore shares in YES Bank, which works out to an 11% stake, paring its total shareholding to 4.9%. The shares were sold in a series of bulk deals at an average price of Rs 263 per share,amounting to over Rs 1,000 crore. According to sources,the buyers included Life Insurance Corporation of India, SBI Life, Templeton and Carmignaca French fund. A Rabobank spokesperson did not respond to emailed queries. 

Govt capital in 5 PSU banks to boost their ratings
Public sector banks (PSBs) in the country can look forward to better credit ratings,following the governments decision to infuse Rs 620-crore capital in public sector banks. The government has announced that it will infuse Rs 620 crore in five PSBs UCO Bank, IDBI Bank, Central Bank, Bank of Maharashtra and Union Bank. This will be in addition to the Rs 150 crore of capital already pumped into four banks in May 2010. The announcement reinforces the strong expectation of government support, said rating firm Crisil. The proposed capital infusion, likely to be completed by end-September 2010, follows the sizeable capital already infused into PSBs over the past two years,and is consistent with the governments announcements in this regard. According to the ratings firm, the government will continue to extend such support to PSBs over the next two years, either directly through capital infusion, or indirectly, by facilitating capital mobilisation by these banks. 

Mutual Fund
Sebi breather for MFs on debt valuation rule
Capital market regulator the Securities and Exchange Board of India (Sebi) has given mutual funds (MFs) a breather to implement a norm for valuing money market and debt securities with maturity of over 91 days in their schemes. The market regulator has stretched the deadline for its implementation to August 1 from July 1 earlier, a Sebi circular Monday said. The move has come as a temporary relief to Mfs, as liquid plus schemes, which comprise nearly 40% of the industrys assets under management (AUM) of Rs 8 lakh crore,will be most impacted by the new rule. The new norm requires MFs to mark the value of money market and debt securities with maturity of over 91 days the securities that constitute liquid plus schemes to market prices. 

IPO
Barath Power to raise Rs 1.1 cr via IPO
Ind-Barath Power Infra plans to raise Rs 1,140 crore from an initial public offering (IPO) in India. The sale will be managed by JM Financial Consultants, Motilal Oswal Investment Advisors,Bank of America,IDFC Capital and Avendus Capital, according to a draft offer document on JM Financials website. Stakeholders including CVCIGP II Client Rosehill and Unit Trust of India will sell an additional 6.47 million shares, the document showed.

Tuesday, June 22, 2010

Declaration of Dividend

Declaration of dividend under Tata Equity Opportunities Fund
Tata Mutual Fund has declared dividend under dividend option of Tata Equity
Opportunities Fund.

The quantum of dividend will be Rs 0.50 per unit on the face value of Rs 10
per unit. The record date for dividend is fixed as 22 June 2010.
The investment objective of the scheme is to provide income distribution
and/or medium to long-term capital gains while at all times emphasizing the
importance of capital appreciation.

Declaration of dividend under UTI Banking Sector Fund
UTI Mutual Fund has announced dividend under dividend option of UTI
Banking Sector Fund.

The quantum of dividend will be 10% or Re 1 per unit as on record date. The
record date for dividend is fixed as 24 June, 2010.
The investment objective of the scheme is 'Capital appreciation' through
investments in the stocks of the companies/institutions engaged in the
banking and financial services activities.

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Monday, June 21, 2010

Let's Hear Some Noise from the market

Crude past $78,gold hits new high
Crude oil rose past $78 a barrel, copper for delivery in three months rose 3.8% to $6,680 a tonne, and gold touched a new high. This decision is great for industrial, energy and materials stocks, Bloomberg quoted Don Wordell, a fund manager for Atlanta based RidgeWorth Capital Management, as saying. You will have rising demand from China because oil is getting cheaper to Chinese consumers, industrial companies will have to build out the energy infrastructure,and materials producers will benefit from higher wages and wealth in China. In India, the broader market did not reflect the optimism in index gains. For every 1.7 stocks that rose, one stock declined, with gainers to losers at 1,828:1,020 on BSE. 

Golds expensive, India feels the pinch finally
Soaring global gold prices are taking a toll on gold demand with imports recording a distinct slowdown during April and May. Imports of gold have halved to 17 tonnes in May from 34 tonnes in April. Indians are now becoming price-sensitive to gold unlike in the past when demand continued to be strong despite rising prices. Despite overseas gold rising to a record $1,266 an ounce (31.15 gms), local gold dipped by Rs 60 per 10 gms from Saturdays close to Rs 18,790, thanks to a stronger rupee. India imports 97% of its gold requirement annually, and a stronger rupee makes imported gold cheaper. Although jewellery demand is typically price inelastic, the run- up in prices has begun to hurt consumption, notes a report by Citis Rohini Malkani. The report also notes that RBIs 200 tonnes purchase of gold from the International Monetary Fund (IMF) last year has helped fuel perception of gold as a reliable asset class and supported investment demand for gold.

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Gold: The eternal currency

A VERY INTERESTING READ ON GOLD FROM AN ARTICLE IN BUSINESS TIMES, PLEASE GO THROUGH

Gold: The eternal currency

It is the favoured asset class in both inflation and deflation scenarios, even though in the latter case, it will not make a lot, but it will be better than equities

By GENEVIEVE CUA
PERSONAL FINANCE EDITOR

IN early 2000, strategists who recommended a holding in gold would have been up against scepticism.

Today, advisers are calling on investors to buy gold, never mind that it has seen a decade of outstanding returns. Since 2000, gold has delivered an annualised return of 16.09 per cent in US dollar terms, against the S&P 500 returns of minus 0.81 per cent.

Returns were even more robust in the last five years: Gold's annualised return was 23.88 per cent; against S&P 500's 0.31 per cent.

Says Pictet group managing director Yves Bonzon: 'We introduced gold into our portfolios at US$320 an ounce around 2003. We've been bullish since. We think the bull market will last until 2015. Our target for gold is US$2000 minimum, equivalent to five ounces of gold per unit of Dow Jones Industrial Index.

'If inflation is the way out of the debt problem that the West faces, the upside - depending on inflation - can be substantially higher.'

The firm invests in physical gold rather than through exchange traded funds, to avoid counterparty risk.

Julius Baer chief investment officer Van Anantha-Nageswaran told clients last week: 'As insurance, don't have second thoughts about the role of gold. Load up on gold up to 10-15 per cent for the next two to three years. As countries compete to keep their exchange rates weak, you don't have too may options . . . The best news for gold is still ahead of us.'

Gold currently trades at about US$1244 per ounce. In roughly about a year, it has appreciated by 37 per cent from US$908 in July last year.

While Europe's debt crisis and the resultant weakness in the euro have been almost immediate and obvious underpinnings to gold's rise, worries over an unsustainable US budget deficit and the spectre of inflation have been an almost constant refrain in the last few years.

As a recent article in the New York Times says, gold buyers have always been motivated by fear. 'What has changed is that some of the most respected investors on Wall Street are now among the fearful.' Hedge fund manager John Paulson, who made billions shorting sub-prime mortgages, holds US$3 billion of gold ETFs. Gold is his largest position in his US$35 billion portfolio, says NYT.

Pictet's Mr Bonzon argues that gold is the favoured asset class in both inflation and deflation scenarios, even though in the latter case, it 'will not make a lot, but it will be better than equities'.

While the eventual outcome of inflation or deflation is debatable, gold as an alternative currency may well be the most persuasive argument. Mr Bonzon says: 'In the first few years, we spent years explaining that gold is not just a bearish bet on the dollar, but on all paper currencies. It's a currency that (central banks) do not have the printing presses for. That's why (we) like gold.'

In a paper 'Gold - the ultimate currency' published recently, UBS offers insights into the valuation of gold and its investment outlook. The popular view of gold as a commodity, it says, is too limiting and fails to explain gold's behaviour.

'Gold is money - a very special form of money. It is gold's monetary function that drives its price beyond its relative value as a commodity . . . Applying a valuation to gold is tricky. There is no absolute independent measure that determines when gold is cheap, expensive or fairly valued.'

Based on production costs, gold is not cheap, says the report. But compared to other assets such as oil or stocks, 'gold appears to be at least fairly valued if not inexpensive'. The stock-to-gold ratio is one yardstick that is often cited, for instance. In 1900, the ratio was two - that is, it took two ounces of gold to buy the whole Dow Jones Index. It remained below five for the next 25 years, and then shot up to 15 during the market boom of the 1920s.

With the US in recession in 1980, that ratio fell to one. It picked up speed in 1990s and during the technology bubble, was an astonishing 35. Since then the ratio has been falling to its current level of about eight.

'Given that the long term average price of the Dow Jones Index is 5 ounces, gold is still somewhat cheap compared to stocks, which is the same as saying that stocks are still somewhat expensive compared to gold.'

'We think that the price of gold has yet further to rise. Our target is about US$1,500 per ounce in 12 months time. Of course, any sharp intensification of the sovereign debt crisis in Europe could propel the gold price even higher, but the downside risks should not be discarded lightly either.'

The firm says any dip below US$1,200 is a buy. 'We would expect investors to be richly compensated for the risk they take.'

UBS' report also advises investors on their approach to gold. Investors, it says, should be clear about why they want to invest in gold. There are typically four considerations - portfolio diversification; thematic exposure through structured notes; yield enhancement using options; and opportunistic trading. Those objectives will exist alongside varying investment horizons.

It favours direct investments in gold rather than mining shares. A higher gold price may not have a strong impact on a company's share price. Shares are also affected by the broader market, as witnessed in the steep drop of mining shares in 2008.

In a portfolio, it does not advise allocations of more than 10-15 per cent in the long term. 'Even though the correlation with equities is rather low, especially in difficult investment environments, gold fails to deliver adequate returns over a multi-decade investment horizon. An allocation of more than 10-15 per cent harms the historical risk/return profile of a balanced US dollar portfolio.'

There are of course, risks to gold. High real interest rates, for instance, could trigger outflows out of gold and a fall in price, it says. For now the likelihood of this is believed to be low, given a still fragile economic backdrop.

In Singapore, buying physical gold incurs GST. There will also be custodian charges at banks. The most accessible way may be through SPDR Gold ETF listed here.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

 

 

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Sunday, June 20, 2010

Let's Hear Some Noise from the market

Citi names Laskowski as Asia-Pac COO, PE head: Citigroup has named Chris Laskowski as its chief operating officer (COO) and the head of financial entrepreneurs group for Asia Pacific ex-Japan, an internal memo seen by Reuters said on Monday. Laskowski, who previously held the role of head of private equity banking for Citi in Asia, is returning to Hong Kong from Citi's Chicago office.

 

Cadbury India revamps top management: Five months after Kraft Foods announced the global acquisition of Cadbury Plc, the Indian subsidiary, represented by Cadbury India, has put in place a top team that will lead the combined interests of Kraft Foods and Cadbury in the country. The development is in sync with the company's move to change from a single marketing function for all products, to aligning it with categories. The categories, as they exist in Cadbury India, include chocolates, gums and candies and powdered drinks. This has been done to provide focused attention to every brand in the portfolio.

 

IDFC to bring global partner aboard for AMC: Infrastructure Development Finance Corporation (IDFC) plans to rope in a global fund manager as a strategic partner in its asset management arm, potentially looking to bolster the business at a time of turmoil in the mutual fund industry. IDFC's executive director Vikram Limaye told ET the firm was looking at a strategic partnership "to either manage the fund or advise foreign flow of funds into the Indian equity market". He declined to give details.

 

Currency fluctuations may hit exports: Indian exports may loose its growth momentum again due to currency fluctuations and rising raw material costs, a survey conducted by industry body Ficci said. Expected rise in interest cost due to introduction of base rate mechanism and slowdown in Euro zone are some of the other reasons that may slowdown exports that grew 35.1% in May over the year-ago period, the survey said.

Exports have seen a moderately positive growth for the past few quarters but decline in orders from EU has started to hit the exporters. Demand from European buyers has slowed down and in some cases they have asked the Indian exporters to withhold supply. With softer demand in the large markets of Europe and US, the exporters are now exploring alternate destinations.

 

RCom to sell Infratel stake to GTL, PE firm: The Reliance Anil Dhirubhai Ambani Group (R-Adag) plans to reduce its holding in its telecom tower business to 20-25% from 95%, with stake sales to GTL Infrastructure Ltd and a private equity investor, two bankers familiar with the plan said. The sale of stakes in Reliance Infratel Ltd, which is being spun off from the group's cellphone firm Reliance Communications Ltd (RCom), will take place in transactions that will combine cash and stock, said the bankers, who didn't want to be named. The sale will take place in three stages. First, 54,000 telecom towers operated by Reliance Infratel and 32,000 GTL Infrastructure towers will be hived off into a special purpose vehicle, or SPV.

Second, the SPV will sell a stake to a private equity investor. Third, the SPV will issue shares to RCom and GTL Infrastructure shareholders, and subsequently seek a stock market listing, one of the bankers cited above said. The details are being worked out and the sale may take place in a few weeks.

 

Promoters raise stake in Max India to 35%: Promoters of Max India, led by Analjit Singh, have increased their stake in the company to about 35% last week and are expected to raise their holding further in the near future.The promoter group increased stake by 0.69% to 35.47% through open market purchases in the last two trading sessions, sources close to the development said.

The promoters are committed to raise their stake further as they believe group's business has potential to grow multi-fold in profits as well as valuation in the future. The company is into life insurance, health insurance and healthcare businesses through subsidiaries. Sources said that the deals were executed at an average price of Rs163.95 resulting in an investment of about Rs26 crore.

--By

SAFE INVEST INDIA

info@safeinvestindia.com

www.safeinvestonline.com

 

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Thursday, June 17, 2010

Nifty short term target of 5339 will be achieved

Nifty broke out above 5250, after witnessing two days of consolidation and consistently maintained positive trend for the seventh consecutive day. On hourly, chart Nifty has bounced back after taking support at 20-HSMA and thus gave a bullish breakout from the Flag pattern. Hence we believe that our short term target of 5339 will be achieved in the coming future.

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Wednesday, June 16, 2010

SIP and its myths !

What is a Systematic Investment Plan (SIP)?

SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is very similar to regular saving schemes like a recurring deposit.

An SIP allows you to buy units on a given date each month, so that you can implement an investment / saving plan for yourself. Once you have decided on the amount you want to invest every month and the mutual fund scheme in which you want to invest, you can either give post-dated cheques or ECS instruction, and the investment will be made regularly. SIPs generally start at minimum amounts of Rs 500 per month and the upper limit for using an ECS is as per instruction. 

We started with describing the concept of an SIP. Let us break some myths on SIP now.

Investment in equity mutual funds or unit linked insurance should always be done in SIP mode: We might remember in 1999 when Templeton Mutual fund would talk about SIP – the market looked at it skeptically. And it took a lot of convincing for customers to accept it. Now, life has come a full circle. Everybody wants to (always) invest using an SIP. If you have the maturity and calmness to realize that equities are for the long term and are willing to give your funds about 10 years, and you have a lump sum, you can afford to give the SIP route a pass. However, if your horizon is less than five years, you must do an SIP.

We do rupee cost averaging in a single equity – that is a kind of SIP is it not?: This is a question we face every day. No, a rupee cost averaging in a single scrip cannot be equated to an SIP. When the market brings down the price of a single scrip, it is giving you information. You need to react to that.

Let us take 2 examples – Lupin Laboratories – has moved from a high of Rs 700 to Rs 100 and back to Rs 700. The question to ask here is not whether an SIP would have worked. The question to ask is whether you would have had the stomach to continue the SIP through this period. Silverline Technologies moved from Rs 30 to Rs 1300 to Rs 14! In this case, if you had started an SIP at a price of Rs 1300, today you would be licking your wounds.SIP works in a portfolio, not in a single scrip.

You cannot invest a lump sum in the same account in which you are doing an SIP:  Many people assume that if they are doing an SIP in a particular fund, and suddenly they have a surplus, they cannot put that lump sum in that account. Fact is, in case you are doing an SIP of Rs 10,000 per month in an equity fund, and suddenly you have a surplus of Rs 100,000 and clearly you have a 10-year view on the same, then you can just push it into your SIP account. SIP is just a payment mode, not a scheme!

If I miss investing for a particular month, will they prosecute me?: Now, this is the fear of EMI that people have. In an SIP you are buying an investment every month (or quarter), there is no question of prosecuting you for missing one investment. As a matter of discipline, you should not miss any month; however, missing one month’s investment is not a crime!

When you have a surplus (accumulation stage of your life) you should do an SIP and during retirement you should do a Systematic Withdrawal Plan (SWP): No. You should ideally keep your withdrawals only from an income fund or a bank fixed deposit. You should sell an equity fund on some other basis, say deciding to sell 20% of your portfolio in a year so that the return is 4 times the 30 year historic return. SWP, by definition cannot work in an equity fund! 

SIP works for everybody, but does not work for me: Another myth. SIP works in a well-diversified equity fund in the long run. When people put forth arguments that it does not work for them, they have either not chosen a good fund or are looking at a 12 month horizon.

SIP is only for small investors: Nothing can be farther from the truth. Suppose we have a client who had invested 1000/- on monthly mode using SIP, starting from January 2001 to January,2010 in Realince vision fund then his total investment of 109000 had grown into 595063 with an whopping return of 445.93%, substantially higher than his provident fund.

Market is at very high level to start an SIP: We have heard this when the index was 3000 also. We have no clue where the market is headed, but we know SIP works!

All fund houses are now charging a no load on the SIP, so now SIP will have very low cost.

If I do an SIP in a tax plan, can I withdraw all the money on completion of 3 years? Another regular question almost! Every installment has to be with the fund house for 3 years. The lock-in comes from the Income tax rules, which say that a tax saving scheme should have a 3-year lock-in. You cannot escape that by doing an SIP!

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