Important break outs for next week.

Dear Clients ,

As per your esteemed suggestions ,I have started posting of my TA analysis yet again more frequently (now on my blog) as per your repeatative requests.

Wish market be with you this time too.

Next week would see some history being created as nifty will move to next level.

Some of the break-outs I have tried to snap up here.Have a look at them.
Have a close look at them. Corp bank and VSNL has already been broken out and warrants immediate long positions with trailing ATX stops(i would be giving you later).

One should watch for 3-4% upward movement with volume supportive in Dabur to get into long positions.

All long positions except TCS.

Regards,
Ravi

Off-topic

The Road Not Taken
by Robert Frost

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that, the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I-
I took the one less traveled by,
And that has made all the difference.

The most inspiring poem i have ever come across.
More to come.

Thanx.

Nagarconst has broken its resistant -

Knowledge is money

Knowledge is money OKONOMOS T C A Srinivasa-Raghavan / New Delhi November 18, 2005

Here are two ways of reducing your knowledge gap while betting on the stock and currency markets

India's stock markets used to be a private betting club until the end of the 1970s. Then things changed. The forced dilutions by foreign companies on the one hand, and Reliance on the other, brought in that greedy creature called the small investor.

The small investor knew as much about the stock market as he did about nanotechnology or the interior of Pluto. Throughout the 1980s, when floating stock was no more than about 15 per cent of the total, he operated at the fringes.

Many even made money in the boom of 1985-87, only to be laid low in the collapse later that year. Until 1992, the small investor stayed away from the market, when along came Harshad Mehta and another boom.

The same story was repeated and, in the bust of 1995, the small investor withdrew from the market until another pied piper, Ketan Parekh, came along in 2000. A third encore, another retreat, until the latest and largest boom till date.

But this time, anecdotal evidence suggests that the small investor is hedging his bets by investing in mutual funds as well. He has figured out, at last, that the less you know, the more likely you are to lose money.

The theory is that mutual funds know more, both in terms of current information and the ability to analyse that information. So they are less likely to make mistakes (correct) and, therefore, more likely to help you earn more (wrong).

In a recent paper*, Marcin Kacperczyk, Clemens Sialm and Lu Zheng have tried to see how much better of an investor really is with a mutual fund. They say that although the disclosure requirements on mutual funds are extensive, "investors do not observe all the actions of the fund managers".

Then they do some econometrically and mathematically decorated high-wire jumping and conclude that "the impact of unobserved actions on fund returns using the return gap, which is defined as the difference between the reported fund return and the return of a portfolio that invests in the previously disclosed holdings after adjusting for expenses..." is pretty dramatic.

Thus, the "unobserved actions of some funds persistently create value, while such actions of others destroy value". Furthermore, future fund performance can be predicted from the return gap which suggests that "investors should use it as an additional measure to evaluate the performance of mutual funds."

In another paper on a similar predictive theme, Ajay Shah who recently moved on from the finance ministry and has touching faith in data and econometrics, along with Achim Zeileis and Ila Patnaik has developed a computer programme for predicting what the Chinese might be doing with their exchange rate.

Shah says they are giving this programme away as a public good. So if you want to make money betting on the yuan, you know whom to ask for help.

Everyone knows that China held its currency rock steady against the US dollar for almost eight years and this led to a huge increase in its exports to the US. This annoyed the US which eventually succeeded last July in pressuring China to revalue its currency and — so everyone hoped — move to a flexible exchange rate system.

Rubbish, say the authors. They have looked at the data since July and say "utilising contemporary ideas in the econometrics of structural change, we find that the yuan has remained pegged to the USD, rather than to a basket, and has extremely limited currency flexibility."

In short, it is business as usual for the Chinese. "There has been no evolution towards greater flexibility."

Unobserved Actions of Mutual Funds, NBER Working Paper No. 11765, November 2005

 

Asia/Pacific: Bursting of Oil Bubble Revives Growth Expectations by Morgan Stanley

Asia/Pacific: Bursting of Oil Bubble Revives Growth Expectations

Andy Xie (Hong Kong)

Summary and Investment Conclusion

The growth scare of October may be behind us.  The decline in oil prices is reviving growth expectations.   I believe that the oil price could drop below US$40/bbl in the coming months.  This would be good news, especially for Asia.

The current round of growth optimism may last six months.  Two factors could cause growth expectations to turn down by mid-2006: (1) the tightening by major central banks could start to bite by that time; and (2) the property bubble has already begun to deflate in China and the US, which could become a major headwind for growth by the middle of next year.

The Oil Bubble May Be Deflating

The price of Brent crude dropped by 9% last week and is off by 18% from the peak in early September.  Oil may be the first bubble to burst in the current cycle.   If so, the price could drop below US$40/bbl in the coming months.

Oil is a bubble, I believe.  The supply-demand balance is not as tight in 2005 as it was in 2004.   Despite the recent correction, oil prices are still 50% above the averages in 2004.  It is demand from financial buyers that has kept oil prices so high, in my opinion.

According to the IEA, global oil demand rose by 2.9 million bbl/day or 3.7% in 2004.  Growth in 2004 was twice as high as the historical average mainly because of a 15% increase in Chinese demand.   The market thought that the trend in Chinese demand growth had permanently changed and sharply pushed up oil prices this year. 

I thought that the growth in Chinese demand at twice as fast as previously last year was due to the economy overheating and bottlenecks in electricity generation, which led to the widespread use of diesel generators.   As capacity for the generation of electricity has increased at a faster rate than demand this year, the use of oil products for electricity production has declined sharply.  This is why China's demand for crude and oil products has remained flat despite rapid economic growth.

Despite evidence of plentiful oil supply, the market has kept pushing oil prices higher and higher on any excuse.   It looked to me like financial mania.  Low interest rates and anemic returns in stock market were the catalysts in triggering speculation in oil.  The momentum sucked in more and more speculators.   The bubble is finally crumbling under its own weight as there are not enough new speculators to sustain the upward momentum.

Oil supply could be even more abundant in 2006.  The IEA forecasts production capacity rising by 2.5 million bbl/day next year.   I suspect that demand will grow by less than 1.5 million bbl/day.  Rising interest rates and a supply glut in 2006 create the environment for an oil price collapse, in my view.  The oil prices could drop below US$40/bbl in the coming months, I estimate.

AsiaBenefits Most from Declining Oil Prices

Asia excluding Japan accounts for 10% of global GDP but 20% of oil demand.  When oil prices decline, as they are doing now, the region should benefit substantially.  If Brent crude were to average US$40/bbl next year versus US$54/bbl this year, the region's oil import bill could be down by US$51 billion or 1.2% of GDP.

The overall benefit from the declining oil price in the above scenario is similar to a 5% increase in the region's exports.   Since the region's exports are growing three times as fast as that now, the fluctuation in oil prices is certainly less important than global trade momentum.  However, this benefit could offset som e US consumption weakness in the first half of 2006.

The distribution of the benefits from lower oil prices could be counterintuitive.  Because China has benefited so much from the increased purchasing power of oil exporters (see Diverse Effects of Expensive Oil, November 7, 2005), the benefit of low oil prices for China could be offset by lower export income to oil exporting economies.

One major benefit from a fall in oil prices is less inflationary pressure.  Indonesia and Thailand have been hit particularly hard in that regard.  Both have had to increase interest rates rapidly to contain inflationary pressure.  A drop in oil prices would give them much needed flexibility in monetary policy.

Growth Momentum Could Slacken by Mid-2006

Declining oil prices could be the last significant stimulus for growth in this economic cycle.  However, growth headwinds are intensifying in the global economy.   As soon as the stimulus from declining oil prices is exhausted, the current business cycle could turn down decisively.

The most important headwind for growth is the deflating of the property bubble almost everywhere.  Because interest rates are still low despite the 12 Fed rate hikes, property deflation seems to be at a slow pace, which is not yet alarming financial markets.   I think the situation will be quite different by mid-2006.

First, the slow-motion deflation of a property bubble will bite over time in any case.  There should be enough time to convince property owners that they are holding a depreciating asset by mid-2006, which would change their consumption behavior.   The consumption momentum in the US could turn sluggish.

China's property bubble is beginning to deflate.  While construction is still rising rapidly despite sluggish sales, it should slow or even decline by mid-2006 as inventories pile up.  The slowing trend could accelerate by then, which could bring down China's investment growth rate sharply.

Second, global liquidity should begin to decline by that time.  The Fed rate hikes have had a limited effect on global liquidity because financial markets can tap into the plentiful liquidity in Europe and Japan.   One by-product of this trend is the decline in the euro and the yen.  The availability of alternative sources of liquidity has reduced the effectiveness of the Fed rate hikes.

As the dollar strengthens, the effectiveness of alternative liquidity will decline and global liquidity tighten.   Furthermore, by all indications, the ECB and BoJ should have begun to tighten by mid-2006.  Global liquidity could drop sharply by that time.  This could cause the risk appetite in the world to decline significantly.

The rise in risk appetite in financial markets has been at the heart of the global economic resilience in recent years.   The proliferation of innovative mortgage products, hedge funds, private equity, and Wall Street proprietary trading has sharply decreased the cost of capital for physical investment or financial speculation.   

There has been a close correlation between the increase in risk appetite and decline in interest rates, making monetary policy more potent than usual in this cycle.   This has been the principal reason for the numerous bubbles that have elevated global growth.  As monetary conditions reverse, the risk appetite may reverse also.   Many financial bubbles could deflate in 2006, bringing down the global growth rate.

-- DISCLAIMER --
The information and statistical data herein have been obtained from sources I believe to be reliable but in no way are warranted by me as to accuracy or completeness.
I do not undertake to advise you as to any change of my views and I may hold securities which are recommended here.
This is not a solicitation or any offer to buy or sell.
All information and advice is given in good faith but without any warranty.

How Do I Know if I Should Buy, Sell or Hold?

How Do I Know if I Should Buy, Sell or Hold?

"Buy low, sell high" is a favorite quip uttered by actors playing Wall Street tycoons in movies. It would be great if we could know that when we buy a stock it is low in price and that we will be certain to make a killing later when we sell it. Unfortunately, such knowledge is impossible to come by.

 

When people talk about buying, selling and holding, they are really talking about two different things: whether they should buy, sell or hold classes of assets, such as stocks, bonds and cash; and whether they should buy, sell or hold stocks or bonds of individual companies.

 

Buying, Selling and Holding Asset Classes

When investors buy, sell or hold, asset classes, such a decision should be part of a long-term and focused financial plan. For example, a young couple decide that they want to fund their child's higher education, they would figure out how much they could afford to invest each year or month. Generally, such couples may put the majority of the funds into stocks or stock funds because stocks generate the highest returns relative to other investments, such as bonds or cash. If the child is, say, two, they may be investing, or buying regularly in stocks or stock mutual funds, for example, buying $200 worth of stock each month, based, of course, on their income and whether they want to send their child to a private or public university. They may be buying and holding stocks until the child reaches the ages of 13 or 14.

 

At that point, with only four or five years before they need to pay tuition, they may be gradually selling some of their stocks and moving into medium-term bonds or bond funds, which are less volatile than stocks. In effect, the couple is reducing the risk that their stock market gains could be hurt by a sudden downturn in prices.

 

By the time the child is in college, they may have sold all their stock and have their proceeds in a combination of cash and short-term, high quality bonds, such as government bonds, in order to make sure that they can indeed pay the expense.

 

Clearly then when buying, selling and holding asset classes, the key driver is achieving the long-term financial goal.

 

Buying, Selling and Holding Individual Stocks

Figuring out when to buy, sell and hold individual stocks is much harder to determine. In general, financial professionals advise a long-term buy and hold approach, meaning that investors should carefully research companies they are interested in investing in and once they buy them, hold them for at least 10 years or more.

 

Many studies have shown that when investors try to time the market, that is guess when a stock is low or high and try to make a profit on the difference, they bet wrong. Another problem with buying and selling stocks quickly is transaction costs. In other words, even if there was a way to time the market and make a profit, costs such as broker commissions, taxes, etc. would eat away at those gains.

 

Many investment philosophies offer general rules when to buy, sell and hold. For example, value investing suggests buying companies when their price-earnings ratio is below that of the market as a whole and their competitors. If and when the company's price-earnings ratio rises above the market as a whole and its competitors, than that company is considered to be overvalued, and an investor should consider selling it and taking profits.

 

Some investors overreact to bad news about their companies and drops in their share prices. They think to themselves "everyone's dumping this stock, I should too." That may be a mistake. Investors need to analyze and decide for themselves whether a company that is seeing its share price drop really is in trouble, or is just having a minor setback.

 

That is no easy thing to decide. Some investors, in fact, talk themselves into believing that a company and its stock price will recover when in fact, the company will likely go under. These investors don't want to admit to themselves that they will incur losses and ride the stock down to the very end.

 

To reduce the tendency to react emotionally to changes in share prices, investors need to remain calm and collected and rely on the facts, as outlined in corporate earnings reports, news articles, etc. Another way to remain calm is to talk about your investments with a financial professional or join an investment club, where you'll get a variety of opinions on what you should do. 

30 Stupid Reasons to Invest! From Bob Singh

Have you not heard all of this? If not mail me, I will make a list of when and where, and how many times these reasons were given. :-)

From Rediff
Stupidest reasons to buy stocks
----------------------------------------------

1. It will double in 2 years. (Sensex at 6500).
2. It will double in 1 year. (Sensex at 7000).
3. It will double in 6 months. (Sensex at 7500).
4. It will double in 3 months. (Sensex at 8000).
5. It will double in 1 month. (Sensex at 8500).
6. Company is doing a private placement/FCCB.
7. Company is going to give a bonus issue.
8. Company is going for a stock split.
9. Debt restructuring package.
10. Low PE. (What does it mean, isn't it because the company has no earnings?).
11. Looks good on the chart.
12. Company has got a big order.
13. They are planning an expansion.
14. Company has won some order from China.
15. Wal-Mart is outsourcing.
16. Market will go to 15,000.
17. Rakesh Jhunjunwalla (a leading Indian stock broker) is buying.
18. Warren Buffett is buying.
19. Reliance Capital is buying.
20. A big operator is buying.
21. Fidelity is buying.
22. Japanese are buying.
23. Some fund is buying.
24. The research analyst said it's undervalued. (Analyst know nothing. Period.)
25. They have lots of property.
26. Company is going for a buyback.
27. RSI is low.
28. Good story.
29. It's a long-term secular bull market.
30. My broker says it's a good buy.

Reason No. 31. Good reports are pouring (Not in Rediff story)

The quantitative aspect: Does your stock measure up?

The quantitative aspect: Does your stock measure up?

The markets appear as strong as ever, again. Despite the October month fall, which saw the Sensex lose over 1,100-points from its all-time high of 8,800+ (nearly 13%), in November, the up trend appears to have resumed. At the current levels, the Sensex trades at a price to earnings multiple of 16.2 times trailing 12-month earnings. If we assume a reasonable 15% growth in earnings of the Sensex companies until FY07, this comes to a valuation of around 12.2 times FY07 estimated EPS, which appears to be quite reasonable.

However, we firmly believe that in this market, a bottom-up approach to investing would serve investors the best. Unless, of course, you would like to be a passive investor, in which case it would be advisable to probably go for an index fund. But now, with the current bull market around two-and-a-half years old, the days of strong returns across sectors are well and over and it is in such a market where the stock picking skills of investors are truly tested.

While we would not give a specific list of stocks we believe will be winners from these levels, we give here, a checklist of quantitative factors that any investor must take into account while judging his or her investments, current as well as prospective.

Topline and bottomline growth, past and present: While this may sound like repetitive advice of sorts, we believe that the importance of these factors cannot be overemphasized. If a company has been able to maintain a reasonable degree of consistency in its performance, it reflects its ability to grow even in difficult conditions. To substantiate with an example, Infosys grew sales and profits consistently even after the tech bubble burst, even as hundreds of 'fly-by-night' players and companies with weak business models went bust virtually overnight. Some of these companies are struggling even today, even as the demand environment for offshoring appears to be stronger than ever before. Therefore, this is undoubtedly a factor of prime importance. We believe that it is necessary to view the past four to five years CAGR and then take a call.

Of course, it should also be understood that one must note the industry in which that particular company operates. For example, steel is a cyclical industry and just because Tata Steel does not grow well in one or two years does not necessarily make the stock a bad bet. Although it may increase the risk profile of the stock, this factor should not be considered in isolation.

Operating margins: Margins reflect a company's operational performance and efficiency. The ability of a particular company to improve the selling price of goods/services and effective cost management determine the level of margins. Taking Infosys as an example again, the company's margins in FY05 stood at 32.8%, the highest in the industry. This is a combination of factors, such as premium billing rates that Infosys receives relative to competition and good control over major cost heads.

Financial ratios: Financial ratios are a very important tool to judge the performance of any company. Important ratios would include return on capital employed (ROCE), which shows the value that a firm is able to create for all its stakeholders, including creditors, and return on net worth (RONW), reflecting value created for shareholders. Companies with higher ratios should be considered as candidates for investment.

Industry-specific metrics: Depending upon the industry in which the current or potential company is operating, it is always advisable to compare ratios that are important in that particular industry. For example, in the software industry, ratios such as revenues per employee, geographical diversification, client concentration, revenues from high-end services and cash flows generated are key metrics for comparison before considering an investment in any software company.

Quantitative metrics: Who's the best?

	Infosys	TCS	Wipro	Satyam
Revenue CAGR (FY01-FY05)	39.2%	33.6%	27.6%	25.6%
Profit CAGR (FY01-FY05)	31.7%	27.4%	24.8%	28.0%
Operating margins (FY05)	32.8%	29.3%	25.1%	24.7%
Return on Net Worth (FY05)	43.7%	70.6%	36.0%	23.9%
Revenues per employee (Rs m, FY05)	2.3	2.6	2.3	2.1

Valuations: And of course, not to forget, the kind of valuations that the stock is trading at. If it has run ahead of itself and factors in two to three years of growth in earnings, then one must avoid the stock. Of course, if one is considering an entry into such a stock, then that investor will 'by default', become a long-term investor, as he or she will have to wait for a longer period of time in order to earn decent money on that stock!

There are numerous stocks that trade at such high valuations in this market and one must be very careful while picking and choosing. One must juxtapose the expected growth rate with the current valuations and then take a call if the company can justify its valuations by its earnings growth and more importantly, the sustainability of this growth.

Conclusion
It should be noted that all the above quantitative factors must always be considered on a relative basis. That is, one should compare the peer group and then arrive at a decision. We believe that companies with superior metrics will be able to better withstand any downturn in the business cycle and also any downturn in the stock markets. As long as the fundamentals are strong and there is indeed a solid growth story behind the company, regardless of whether it is a bull or bear market and regardless of whether FIIs are buying or selling, these companies will outperform their peers in the long term.

Of course, an investor must also consider qualitative factors in his or her analysis of the company, like management quality, reputation, vision, social responsibility and so on. Inevitably, the winners turn out to be the ones with the most credible and visionary managements. Therefore, as a long-term investor, one must always have such companies in one's portfolio or certainly consider having them at a future date.

Sent by toughee

EPFR report

Japan fund still attractive while US and global equity funds repel investors

Japan funds continued to see strong inflows in the latest week of Emerging Portfolio Fund Research (EPFR) data while emerging markets equity funds staunched the bleeding of three straight weeks of outflows and investors abandoned US and global equity funds. Emerging market bond funds suffered their first week of decisive outflows since the first quarter of this year while investors continued to flee high yield bond funds.

 

Could someone point me to links where i can understand the bond market, yields, and their impact on equities and the general economy. Basically, i need to study the bond market and how its impacting the equities and other financial markets like Currency mkt etc

 

Stockmarkets: Staging a comeback?

Stockmarkets: Staging a comeback?

After the gravity-defying sprint witnessed in the benchmark indices for the better part of the year, the strong sell off over in the month of October 2005, seemed to have left investors jittery. However, one wonders whether the 'even stronger' pullback in the past few trading sessions (Sensex has gained about 9% in about 5 trading sessions) is an early sign of a 'comeback'? While we have time and again hazarded a repetitive tone to reiterate that such market tantrums are for long-term investors to ignore, we also believe that there are several noteworthy features of India's recent macroeconomic performance that can help the Indian markets develop some resilience to the 'FII activity' (whether buying or selling) in the longer term.

• The investment climate (symbolised by credit and debt ratings) has improved and industrial and service sector activity has picked up. This has also reflected in the RBI's increment of GDP growth target to 7.5% for FY06.
  
  

• Buoyant exports have emerged as the demand driver for a broad spectrum of industries. The impact of any slowdown on India may be assessed with reference to two factors. First, India's economy is largely domestic-demand driven. While India's exports constituted 11.5% of GDP, its share in the world trade is only 0.8%. Second, India's exports basket is fairly diversified.
  
  

• There has been a modest attempt at and a commitment to achieve fiscal consolidation.
  
  

• The trend inflation has declined over the years and inflation expectations stabilised (5% to 5.5% for FY06).
  
  

• India has been successful in managing liquidity against the backdrop of continuing capital flows.
  
  

• India has emerged as a preferred destination for foreign investors and received about a quarter of the global portfolio flows to the emerging market economies in 2004.
  
  

• India's foreign exchange reserves are in excess of the total outstanding external debt of the country.
  
  

• The performance of the corporate sector (barring some aberrations in certain sectors in the previous quarter) has improved and the demand for goods has encouraged capacity expansions.
  
  

• India's financial markets have deepened, widened and become vibrant over the years with a robust institutional framework and market infrastructure in place.
  
  

• The profitability and soundness indicators of the banking sector (net interest margin and Net NPA) have improved.
  
  

• India has been adopting international benchmarks for financial standards and best practices (US GAAP and Basel norms to name a few) with suitable adaptations for Indian conditions.

All said, global financial imbalances and high and volatile oil prices may accentuate India's inability to adjust its investment standing. A spurt in interest rates could magnify and propagate the problems associated with increasing debt levels (at the household, corporate and government levels) and rates of sub-investment grade borrowers could increase. Increasing pressure on currency (as has been seen of late) could also weigh heavy on the already burgeoning deficit position. Here, we must acknowledge, that while India by itself hardly contributes to global financial imbalances, any large and rapid adjustments in major currencies and related interest rates or current accounts of trading partners could indirectly impact the economy.

We thus believe that while markets will continue to gamble on short term driven sentiments, long-term investors, instead of trying to draw cues from the same, should stick to their risk-return based strategy. The same will not only relieve them of unnecessary despair but also hedge them against the market's wild dispositions.

I have Final request to all the esteemed clients reading this.Do make a habit to leave comment or feedback so that we can have improvement in the content side.

 

 

Turnover Tax–Is your broker cheating you?

Friends:

A major fraud may be in the offing, if we do not take action immediately!

A close friend of mine has discovered that his broker is charging him 0.15% as turnover tax.

The actual turnover tax on delivery based transactions is 0.15% which is to be shared by both the buyer and seller, hence the turnover tax is 0.075% of the delivery based scrip.

What brokers are doing is charging excess turnover tax, and then claiming a refund from the exchange, which they do not refund back to you.

I request you to please check your contract notes, and immediately ask your broker for the refund, because this is another loophole they have discovered to make additional moolah.

Note that the tax is different from TDS, and will NOT be given directly to those being charged. It will be given back by the exchange to the BROKER who has to pass it back to the client.

MAKE SURE

1. YOU ARE NOT BEING EXCESSIVELY CHARGED

2. MAKE SURE THAT EXCESS CHARGE IS REFUNDED BACK TO YOU---ELSE IT GOES IN TO THE BROKER'S COFFERS!!!

 

Volcker report

 

Volcker report available at -

http://www.uscourts.gov/newsroom/VolckerRpt.pdf

Malar Hospital-Will it be taken-over?

SRI Ramachandra Medical College and Research Institute, which is run by a trust organisation, is in talks to buy Malar Hospitals Ltd, according to sources close to the negotiations.

Malar Hospitals Ltd is a listed company and has a 250-bed multi speciality hospital in south Chennai. It is also a renal transplant centre.

According to the sources, Sri Ramachandra Medical College and Research Institute (SRMC & RI) is carrying out due diligence of Malar Hospitals, after which a decision on whether to go ahead with the deal or not will be taken.

When asked about the likely sale, Dr Nithya Ramamurthy, whole-time Director, Malar Hospitals Ltd, said: "There is nothing like that."

For SRMC & RI, acquiring Malar Hospitals will give it a medical centre in the city, something that it has been wanting to have for some time, according to the sources. SRMC & RI is part of the Sri Ramachandra Education and Health Trust. The hospital and college are in Porur, a western suburb of Chennai. Its hospital has 1,500 beds, 114 intensive care unit beds and 25 operating rooms. The medical college is a deemed university.

Malar Hospitals, in which the promoters hold about 30 per cent stake, has an equity capital of Rs 13.94 crore. It reported a loss of Rs 89 lakh on net sales of Rs 18 crore for the year ending June 30, 2004. For the quarter ending March 31, 2005 its loss was Rs 32 lakh on net sales of Rs 2.9 crore

 

retaining earned profit is more difficult one can use this yardstick

Earning profit is not that easy in stock market but retaining  earned profit is more difficult. otherwise this earned profits find it own way to drain out. ( like water finds its own level/way when it overflows) pl take note of following points.

 

 

1-avoid stocks where promoter holding is coming down in this bull phase in every qtr.

 

2- avoid stock not having track record of performance & dividend payout but showing better performance in this bull run or paying  dividend in this bull run.

 

3- avoid new ipo at high premium unless u r very sure of the same,

 

4- avoid all  stocks where there is no  track record of performance but there is split up in stock value in this bull run.

 

5- avoid stocks of sector which is unknown to investors or where u are not very sure of the trend as we may not be having  data to compare.

 

6- many stocks flared up on hidden values/carbon credit story/ real estate story. avoid these stocks at higher level. do not get carried away with the sentiments unless u are very sure of it

 

7- many news/investment papers/brokers  also give motivated hint of inside news. be careful on the same.

 

why we need above stocks when many of good stocks are now at attractive levels.

 

pl share your view on ths

 

thanks

 

 

ICICI Bank plans shares at discount

Reading about ICICI:
ICICI Bank plans shares at discount


ICICI Bank will become the first private sector entity to sell equity shares to retail investors at a discount. The country's largest private sector bank hits the domestic capital market this month to raise over Rs 5,000 crore (Rs
50 billion), reports Business Standard.

Shares will be sold to retail investors at a price lower than the prices for qualified institutional investors and non-institutional high-networth bidders. ICICI Bank executives confirmed the decision today.

Earlier, the government had sold the shares of Oil and Natural Gas Corporation, Gas Authority of India and IPCL to retail investors at a discount of 5% compared with the price for institutional investors.

A decision on how much discount could be given to existing retail shareholders and retail individual bidders would be taken just before the opening of the issue sometime in the third or fourth week of this month, the executives said.

The issue will also be the largest ever by a private sector entity. ICICI Bank has decided to have a concurrent domestic equity issue and an ADS (American Depository Shares) offer aggregating 20 crore shares, including a 15% greenshoe option.

The domestic issue will approximately be 73% of a total capital of Rs 7,000 crore (Rs 70 billion) to be raised by the bank. Both the domestic and ADS issues will have a greenshoe option amounting to Rs 1,050 crore (Rs 10.50
billion). This issue and the ADS offer are part of a consolidated capital-raising exercise being undertaken by ICICI Bank.

According to the Securities and Exchange Board of India, Sebi, guidelines, 35% of the total issue size are reserved for retail investors, 15% for high-networth investors and the remaining 50% for qualified institutional
investors.

The shares of ICICI Bank have fallen sharply over the last one-month. The bank's share price has dropped from Rs 593.29 on October 3 to Rs 499.05 on November 2.

ICICI Bank will adjust the differential amount against the amount payable on call or the amount to be refunded to existing retail shareholders and retail individual bidders, as the case may be.

If retail shareholders and retail individual bidders receive partly paid equity shares, they shall be required to pay the amount on call within 30days of the allotment of the issue's equity shares. The bank shall issue a call notice simultaneously with the approval on the basis of allotments made by stock exchanges.

.

How a Tipster Makes You Lose

The modus operandus of some tipsters.

These are the steps he follows:

1. Go to ICICIdirect.com, and click on Research=>Custom Screen

2. Choose "Small Cap" in the screener, and screen companies for low debt/equity ratio

3. Pick the list of small-cap companies

4. Recommend them because they are debt-free

What blind followers do:

1. PAY 10 TIMES THE MARKET CAP/SALES RATIO OF THE COMPANY, based on recommendation!

2. End up paying 10 times Book Value

3. Wait eagerly for rise

What actually happens:

1. Small-cap company's quarterly results are dismal

2. Share price falls

What tipster does:

1. Calls it speculative call OR

2. Calls it long-term buy

Sure-shot way to lose money!

Oil, The New Reserve Currency

Oil, The New Reserve Currency
By Chris Mayer

I borrowed the title of today's column from Robert Friend,
the successful international investor at Recon Capital. At
last week's Grant's Investment Conference, Friend used this
title to provide a context for his bullish remarks about
oil and oil stocks.

He's a big fan of the integrated oil stocks, especially
Marathon Oil, because they are still valued as if oil were
trading for $40 a barrel. But if, as Friend believes, oil
deserves to trade near $60, the stocks of most integrated
oil companies offer great bargains.

Friend is also bullish on Brazil, both its stocks and its
currency. [If you harbor a soft spot for Brazilian
investments, you might want to check out the October 11,
2004 column from our archives entitled, "The Caipirinha
Connection"] Brazil's currency, the real, has appreciated
over the last several months, crushing the "hard"
currencies of Canada and Australia, as well as trouncing
the British pound and Euro.

Vale do Rio Doce (NYSE:RIO) is Friend's favorite investment
in the country that introduced the Samba and the g-string
to the rest of the world. "Vale" is the largest iron
producer in the world and maintains vast reserves of iron
ore, bauxite, copper/gold, kaolin, manganese, nickel and
potash. It is also the largest logistics and transport
company in Brazil.

Paying Homage to the "Barbarous Relic"

Like Friend, John Hathaway, manager of the Tocqueville Gold
Fund, advocated investing in the resource
sector...particularly in gold.

He launched into his presentation by displaying the image
of the Zimbabwe dollar. In 1999, about six Zimbabwe dollars
were worth one U.S. greenback. Today, it would take 50,000
Zimbabwe dollars to buy one U.S. dollar.

The U.S. is not Zimbabwe, of course, and Hathaway in no way
meant to imply that it was. But he did mean to imply that
the endgame for the U.S. dollar might closely resemble that
of its Zimbabwean counterpart. The greenback is a dying
currency, says Hathaway, which loses a little more of its
value with each passing year.

All paper currencies, Hathaway asserts, succumb to "a
process of monetary elimination." That's why gold continues
to excel throughout the ages...and that's also why Hathaway
believes gold is on the verge of a major new bull market.

The Federal Reserve...Gold's Best Friend

James Grant, the conference host and keynote speaker,
presented a talk entitled "Man's Inner Bubble," which, he
pointed out, had nothing to do with gastrointestinal
functions.

In the span of forty very entertaining and amusing minutes,
Grant argued that easy credit fuels EVERY U.S. asset
bubble, and that the Federal Reserve is the original source
of all easy credit. Therefore, the world might be much
better off without the Federal Reserve...or a Federal
Reserve Chairman.

Grant pointed out that before the creation of the Federal
Reserve in 1913, prices "sometimes sagged." Throughout the
19th century, therefore, prices tended to drift lower – as
productivity gains and innovation drove the cost of living
down. Post-1913, however, the Federal Reserve has presided
over the continuous depreciation of the U.S. dollar.

The appointment of Ben "Helicopter-drop" Bernanke as the
new Fed Chief will likely accelerate this trend. In fact,
any Fed Chief who thinks that the Federal Reserve is an
inflation-fighter ought to be lashed to a mast and forced
to stare at the following chart until his eyeballs burn
with memory of it.


The key difference between the pre-Federal Reserve American
economy of the 19th century and the post-1913 variety is
that the pre-fed dollar derived its value from a strict
connection to gold. Indeed, many dollars were actually
minted in gold itself. Such a tether limited the production
of new dollars and served to contain inflation...But the
last remaining tether to monetary responsibility snapped in
1971, when President Nixon eliminated any connection
whatsoever between dollars and gold.

To help the audience appreciate the dubious benefit of the
Federal Reserve's stewardship, Grant presented a snapshot
of life circa 1890, compared to today. First, there were
some stark differences. Inflation was a negative 1.2% in
1890. The population of the country was 62 million. The
Federal Government was in surplus. There were 25
professional baseball teams, spread over 3 leagues.
Railroad stocks dominated the Dow Jones Industrial Average
(with 10 of the 12 stocks).

But, there were also some remarkable, and ominous,
similarities.

Interest rates were low. High-grade bonds yielded only
3.68% and the savings rate was 4%. Investors, groping for
yield, took bigger risks causing a boom in speculative
Western securities.

Grant shared some quotes from Hallie Farmer (published in
1924), in a report published in the Mississippi Valley
Historical Review. Credit was easy and lending standards
were loose. "Competition existed not between borrowers but
between lenders," Farmer notes.

This created a boon for debtors. An example from Farmer:
"All the [rail] roads offered lands at low prices and one
easy terms...The Union Pacific offered eleven years'
credit. One-tenth of the purchase price was to be paid at
the time of sale; deferred payments bore interest charges
at 6%, but for the first three years the purchaser was
required to pay interest only."

Sound familiar? It's not so far removed from the
unconventional mortgages we see in our mortgage bubble
today. There was a boom in housing then as well, with the
total mortgages outstanding nearly tripling from 1880 to
1890.

In the 1890s, too, they had their share of securities
fraud. Grant related how the bonds of Capitola township in
Dakota were sold to Eastern investors and changed hands
many times before it was discovered that no such township
existed.

Farmer's diagnosis of 1890 applies today. "The prosperity
of the period was a prosperity based upon credit," he
wrote.

Today's prosperity is no different, says Grant. Easy credit
fueled the stock market bubble, the housing bubble and
every other bubble – great and small – that the Greenspan
Fed has nurtured. And presumably, as America's bubble
economy deflates, the dollar's value will suffer...despite
the very best efforts of the Federal Reserve and its new
"inflation-fighting" chairman.

But let's not forget that bad news for the buck is gold
news for the gold price and the oil price and for the price
of every other hard asset. Make way for the "new reserve
currencies."

Intrinsic value: The right price to pay

A great company at a fair price'
Nobody really knows the specific principles that Warren Buffett applies when deciding the price he will pay for a share investment. We do know that he has said on several occasions that it is better to buy a 'great company at a fair price than a fair company at a great price'.
This tends to agree with the view of Benjamin Graham who often referred to primary and secondary stocks. He believed that, although paying too high a price for any stock was foolish, the risk was higher when the stock was of secondary grade.
Patience
The other thing that Warren Buffett counsels, when deciding on investment purchases, is patience. He has said that he is prepared to wait forever to buy a stock at the right price.
There is a seeming disparity of views between Graham and Buffett on diversification. Benjamin Graham was a firm believer, even in relation to stock purchases at bargain prices, in spreading the risk over a number of share investments. Warren Buffett, on the other hand, appears to take a different view: concentrate on just a few stocks.

What Warren Buffett says about diversification

In 1992, Buffett said that his investment strategy did not rely upon spreading his risk over a large number of stocks; he preferred to have his investments in a limited number of companies.
'Many pundits would therefore say the [this] strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it.'

No real difference between Benjamin Graham and Warren Buffett

The differences between Graham and Buffett on stock diversification are perhaps not as wide as they might seem. Graham spoke of diversification primarily in relation to second grade stocks and it is arguable that the Buffett approach to stock selection results in the purchase of quality stocks only.

Berkshire Hathaway holdings

In addition, consideration of Berkshire Hathaway holdings in 2002 suggests that although Buffett may not necessarily believe in diversification in the number of companies that it owns, its investments certainly cross a broad spectrum of industry areas. They include:
Manufacturing and distribution – underwear, children's clothing, farm equipment, shoes, razor blades, soft drinks;
Retail – furniture, kitchenware
Insurance
Financial and accounting products and services
Flight operations
Gas pipelines
Real estate brokerage
Construction related industries
Media

Intrinsic value

Both Warren Buffett and Benjamin Graham talk about the intrinsic value of a business, or a share in it. That is, to buy a business, or a share in it, at a fair price. But, having regard to the possibility of error in calculating intrinsic value, the careful of investor should provide a margin of error by only buying the business, or shares, at a substantial discount to the intrinsic value.
Buffett is said to look for a 25 per cent discount, but who really knows?
Defining intrinsic value
Buffett's concept, in looking at intrinsic value, is that it values what can be taken out of the business. He has quoted investment guru John Burr Williams who defined value like this:
'The value of any stock, bond or business today is determined by the cash inflows and outflows – discounted at an appropriate interest rate – that can be expected to occur during the remaining life of the asset.' – The Theory of Investment Value.
The difference for Buffett in calculating the value of bonds and shares is that the investor knows the eventual price of the bond when it matures but has to guess the price of the share at some future date.

Discounted Cash Flow (DCF)

This method of valuation is often referred to as the Discounted Cash Flow (DCF) valuation method, but, as Buffett has said in relation to shares, it is not easy to predict future cash flows and this is why he sticks to investment in companies that are consistent, well managed, and simple to understand. A company that is hard to understand or that changes frequently does not allow for easy prediction of future earnings and outgoings.
What Warren Buffett says about predicting future cash flows
In 1992, Warren Buffett said that:
'Leaving question of price aside, the best business to own is one that over an extended period can employ large amounts of capital at very high rates of return. The worst company to own is one that must, or will, do the opposite – that is, consistently employ ever-greater amounts of capital at very low rates of return.'
It is well worth reading Buffet's analogy relating DCF to a university education in his 1994 Letter to Shareholders.
So, it would seem that the intrinsic value of a share in a company relates to the DCF that can be expected from the investment. There are formulas for working out discounted cash flows and they can be complex but they give a result.

Explanations of DCF

The best explanation that we have read of DCF is by Lawrence A Cunningham in his outstanding book How to think like Benjamin Graham and invest like Warren Buffett.
A good online explanation is available here.
How Warren Buffet determines a fair price
The real secret of Warren Buffett is the methods that he uses, some of which are known from his remarks, and some of which are not, that allow him to predict cash flows with some probability.
Various books about Warren Buffett give their explanations as to how he calculates the price that he is prepared to pay for a share with the desired margin of safety.
Mary Buffett and David Clarke pose a series of tests, based on past growth rates, returns on equity, book value and government bond price averages.
Robert G Hagstrom Jnr in The Warren Buffet Way gives explanatory tables of past Berkshire Hathaway purchases using a DCF model and owner earnings.
Ultimately, the investor must decide upon their own methods of arriving at the intrinsic value of a share and the margin of error that they want for themselves.