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For Private Circulation<br />
20th Apr ’09<br />
Opening <strong>The</strong> Door<br />
To Your Child’s<br />
Future Page 07<br />
<strong>Nestle</strong> <strong>Tastes</strong> <strong>Success</strong><br />
<strong>With</strong> <strong>The</strong> <strong>Right</strong><br />
<strong>Product</strong> <strong>Mix</strong> Page 18<br />
If you did not have<br />
a financial plan when you<br />
started out, you<br />
can still do it in<br />
your mid-30s<br />
‘Arbitrage Fund Is A Safe<br />
Haven Investment’ Page 28
DB Corner - Page 4<br />
For Secure Returns Invest in Public Provident Fund<br />
PPF is the best way to save money and<br />
also enjoy the benefits of tax exemption – Page 5<br />
Opening <strong>The</strong> Door To Your Child’s Future<br />
Start saving early to build a bigger corpus<br />
for your child, say experts – Page 7<br />
Unburden <strong>The</strong> Baggage Of Home Loans<br />
Make prepayments and invest the surplus thus saved<br />
in short-term deposits for maximum returns – Page 10<br />
Heart Of <strong>The</strong> Matter<br />
To stay in the pink of health it is important<br />
to get a health insurance – Page 12<br />
<strong>Mix</strong>ed Signals<br />
While the Indian telecom sector is expected to witness pressure on<br />
operating margin, there is hope for revival of metal companies – Page 13<br />
For A Picture-Perfect Family’s Financial Future<br />
When you have worked hard to earn money,<br />
let the money work for you through a good financial plan,<br />
says an expert – Page 16<br />
Volume 1 Issue: 7, 20th Apr ’09<br />
Editor-in-Chief & Publisher: Rakesh Bhandari<br />
Editor: Tushita Nigam<br />
Senior Sub-Editor: Kiran V Uchil<br />
Art Director: Sachin Kamble<br />
Research Team:<br />
Kunal Shah<br />
Michael Pillai<br />
Shivali Chipkar<br />
HEAD OFFICE<br />
38-B/39, Khatau Bldg, 2nd Flr,<br />
Alkesh Dinesh Mody Marg, Fort,<br />
Mumbai - 400 001<br />
Tel: 022 - 22641234, 30272000 / 2222<br />
Fax: 022 - 30272006<br />
CORPORATE OFFICE<br />
B-2, 301/302, Marathon Innova,<br />
Off Ganpatrao Kadam Marg,<br />
Lower Parel (W),<br />
Mumbai - 400 013<br />
Tel: 022 - 30272300; Fax: 3027 2303<br />
Web: www.nirmalbang.com<br />
We, at Beyond Market<br />
welcome your views, comments,<br />
inputs and feedback.<br />
Do help us to grow better<br />
as per your liking. This is our<br />
attempt to reach you better<br />
while crossing horizons...<br />
beyondmarket@nirmalbang.com<br />
Tel no: 022 - 30278232<br />
<strong>Nestle</strong> <strong>Tastes</strong> <strong>Success</strong> <strong>With</strong> <strong>The</strong> <strong>Right</strong> <strong>Product</strong> <strong>Mix</strong><br />
Health and wellness profile to be the key growth drivers for this FMCG<br />
company – Page 18<br />
<strong>The</strong> Multi-purpose Crop<br />
From a polymer in industries to food products, Guar seed is an essential<br />
commodity – Page 22<br />
Fortnightly Outlook – Page 25<br />
Turn Volatility Into An Opportunity<br />
Low risk and positive returns make Arbitrage Funds a good<br />
investment option in an unpredictable market – Page 26<br />
‘Arbitrage Fund Is A Safe Haven Investment’<br />
Biren Mehta speaks to Beyond Market on Capital Markets, JM Arbitrage<br />
Advantage Fund and the kinds of funds people can opt for in the current<br />
scenario – Page 28<br />
Important Statistics For <strong>The</strong> Fortnight Gone By - Page 30<br />
Cool Retreats To Beat <strong>The</strong> Heat<br />
Visit the good old destinations this summer<br />
without burning a hole in your pocket – Page 38<br />
Making Sense Of Personal Financial Ratios<br />
A person can evaluate his personal financial position<br />
by using six different ratios - Page 41<br />
2 Beyond Market 20th Apr ’09<br />
It’s simplified...
Keeping pace with changing times<br />
If you thought you could do without financial planning, think again. <strong>The</strong> rigmarole of planning your finances, although tedious, is inescapable,<br />
if you want to have a secured future.<br />
As you age, the desire to make money weighs more on you since you want to fulfill your dreams and aspirations. In the pursuit of earning<br />
money, you get bogged down by mundane activities that leave you with no time for yourself. Hence it is important to have a financial plan<br />
that gives you the opportunity to make the most of life.<br />
It is, therefore, imperative to start early. But if you do not have a financial plan, you need not fret as it is never too late to start planning your<br />
finances. <strong>The</strong> earlier issue was aimed at youngsters between 25 and 35 years while the current issue is targeted at middle-aged adults in the<br />
age group of 35 to 55 years. During this period, when children are growing up, their education and marriage become priorities of this target<br />
group. If you have other dependents like your parents, then taking care of their needs is also important and cannot be neglected.<br />
In this edition, we have covered topics ranging from Public Provident Fund to children plans to health insurance. <strong>The</strong>re is also a topic on<br />
Arbitrage Funds and personal financial ratios that help you judge your financial standing. We have also reviewed the metal and telecom<br />
sectors for the quarter ending March 2009. While flipping through the pages, you will come across a section called Beyond Analysis.<br />
Through this section, we aim to explain the fundamentals and financial aspects of listed companies. We have endeavoured to help you take<br />
the right decision while investing in stocks of a company since investing is easier if you rely on tips given by friends and acquaintances.<br />
But studying a company’s profile can make you aware of the investment potential it holds. <strong>With</strong> the onset of summer vacations, we have<br />
listed a handful of destinations in India, which you can visit to beat the heat.<br />
Last but not the least, I request one and all above the age of 18 to go cast their vote and choose a leader who is worthy of the chair he wins.<br />
Be the change you want to see in IndiA.<br />
Tushita Nigam<br />
Editor<br />
Beyond Market 20th Apr ’09<br />
It’s simplified... 3
I Advise Hedging<br />
Or Intra-day Trading<br />
For <strong>The</strong> Fortnight.<br />
<strong>The</strong> markets are expected to remain<br />
range-bound this fortnight, given the fact<br />
that the general elections in India have<br />
just commenced.<br />
However, market conditions such as these are not<br />
ideal for trading and traders should avoid keeping<br />
overnight positions. I advise hedging or intra-day<br />
trading for the fortnight.<br />
<strong>The</strong> market saw a pre-election rally with the<br />
Nifty ending at 3,484 points, up 3% on 15th<br />
April, closing above its crucial 200-day moving<br />
average, which is a positive thing. Higher amount<br />
of volatility is expected in the next fortnight as<br />
general elections are underway.<br />
On the upper side, I am not very bullish and I<br />
expect the Nifty to face resistance at 3,600 and<br />
above that at 3,750. On the downside, I expect the<br />
Nifty to face its first support at 3,200 and the<br />
second support at 2,950.<br />
<strong>The</strong> Bank Nifty is looking attractive and is likely<br />
to find its first support level at 4,900 and below<br />
that it has support at 4,600 and traders can take<br />
long calls at current levels and also at support<br />
levels.<br />
I would advise traders to buy on declines in the<br />
power and banking sectors.<br />
Disclaimer<br />
It is safe to assume that my clients and I may have an investment<br />
interest in the stocks/sectors discussed. Investors are required to<br />
take an independent decision before investing. Investment in equity<br />
is subject to market risk. Our research should not be considered as<br />
an advertisement or advice, professional or otherwise. <strong>The</strong> investor<br />
is requested to take into consideration all the risk factors including<br />
their financial condition, suitability to risk return profile and the<br />
like and take professional advice before investing.<br />
4<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
For Secure Returns<br />
Invest in<br />
Public Provident Fund<br />
PPF is the best way to save money and also<br />
enjoy the benefits of tax exemption<br />
Everyone would be aware of a Public Provident<br />
Fund or PPF as it is commonly called. A<br />
PPF is a statutory scheme of the central<br />
government. Individuals who are planning<br />
for their kids’ higher education or who are in their 40s<br />
A detailed explanation of PPF is mentioned below for easy understanding.<br />
and planning for retirement should take this investment<br />
avenue into consideration along with options. Why<br />
Because PPF is a good long-term investment option with<br />
the added advantage of tax benefits.<br />
What is PPF<br />
Tenure<br />
Rate Of Interest<br />
Minimum Deposit<br />
PPF is a statutory scheme backed by the central government.<br />
15 years. On maturity a person can further continue the<br />
account for a block of 5 years. An extension of three blocks of<br />
5 years is allowed. <strong>The</strong> tax benefit will be the same. <strong>The</strong><br />
account holder can extend the account and not invest anything<br />
but continue to earn interest.<br />
8 % pa. <strong>The</strong> interest is calculated on the lowest balance<br />
between 5th and 31st March so a person must make deposits<br />
before 5th March.<br />
Rs 500 per financial year. (Compulsory to every year). In case<br />
a person misses his deposit in a year, he will have to pay a fine<br />
of Rs 50 for each defaulted year along with Rs 500 to renew<br />
the account. A person cannot withdraw the amount before<br />
maturity of the fund.<br />
Beyond Market 20th Apr ’09 It’s simplified... 5
Maximum Deposit<br />
Who Can Open An Account<br />
Tax Benefit<br />
Age Limit<br />
Premature Closure<br />
<strong>With</strong>drawals<br />
Loan<br />
Where Can <strong>The</strong> Account Be Opened<br />
Rs 70,000 per financial year.<br />
All individuals can open an account. Even minors can open<br />
one through a guardian. Joint accounts aren’t allowed. NRIs,<br />
holders of power of attorney and the ones who want to invest<br />
for their grandchildren, cannot open and operate the account.<br />
Under section 80C, PPF falls under the category of EEE<br />
(Exempt Exempt Exempt), which means that the principal<br />
amount invested, interest earned and the amount received on<br />
maturity are all exempt from tax. <strong>The</strong> deposit in a minor’s<br />
account is clubbed with the deposit in the guardian’s account<br />
for a maximum limit of Rs 70,000.<br />
No age limit.<br />
It is not permitted except in case of death. A nominee or a<br />
legal heir cannot continue investing in the account.<br />
<strong>The</strong> first withdrawal can be done only in the seventh year<br />
limited to 50% of the balance in the account at the end of<br />
fourth year preceding the year in which the amount is to be<br />
withdrawn or at the end of the year preceding, whichever is<br />
lower. One withdrawal in each financial year is admissible.<br />
One can take a loan but only from the third year of opening of<br />
the account to the sixth year. <strong>The</strong> maximum loan amount can<br />
be 25% of the balance in the account at the end of the first<br />
financial year (if one opts for loan in third year); in the second<br />
financial year, if opted for a loan in the fourth financial year<br />
and so on. <strong>The</strong> loan must be repaid in 24 months. <strong>The</strong> second<br />
loan can be taken only if the first loan is repaid. Interest is 2%<br />
above the rate of interest earned on PPF.<br />
In a post office or in a bank and can be shifted from post office<br />
to a bank and vice versa and also from one branch to another.<br />
To help a person understand the basics of PPF, it is important to look at the pros and cons of this scheme.<br />
Pros:<br />
Lowest Risk: As the scheme is backed by the central government, the money is safe and can earn for individuals, unless<br />
the government goes bankrupt.<br />
Good Tax Benefits: <strong>The</strong> principal amount invested (subject to limit), interest earned and maturity amount are exempt<br />
from tax.<br />
Good Returns: 1) No tax on interest earned 2) <strong>The</strong> compounding effect gives a return higher than 8%.<br />
Minimum Investment And Flexibility: <strong>The</strong> minimum investment amount is Rs 500 per financial year and can be<br />
invested at any time in the year. It is also exempt from wealth tax.<br />
Cons:<br />
Lock-in period: <strong>The</strong> tenure is long and withdrawals and loans are allowed only till a limit.<br />
Liquidity: Due to the lock-in period, liquidity is a problem.<br />
To sum it up, PPF is a good investment option. Hence, individuals looking for a safe and a long-term investment<br />
option, which also gives decent returns with tax benefit, should opt for PPF.<br />
6 Beyond Market 20th Apr ’09<br />
It’s simplified...
Opening <strong>The</strong><br />
Door To Your<br />
Child’s Future<br />
Start saving early to build a bigger<br />
corpus for your child, say experts<br />
Becoming a parent may be called the single<br />
most satisfying experience in the world.<br />
Your child is what you will truly call an<br />
extension of yourself, a human being who<br />
you are responsible for. Your child is completely dependent<br />
on you. To guide him through the path of life, you<br />
are his guiding light and he looks up to you. <strong>The</strong> previous<br />
generation may have told you that the child comes with<br />
his own destiny, but you as a parent know that you will<br />
have a very critical role to play in shaping it.<br />
You are the child’s provider and must be able to see<br />
beyond the immediate need of providing for your child.<br />
If you do not plan well, you are bound to run into financial<br />
roadblocks at critical junctures of his life.<br />
As a parent, you’re willing to deprive yourself of luxuries<br />
in order to provide a long-term financial security to your<br />
child. In many cases, a happy by-product of this exercise<br />
is that the child grows up to be aware of the virtues of<br />
fiscal prudence.<br />
Beyond Market 20th Apr ’09 It’s simplified...<br />
7
One Generation Plants <strong>The</strong><br />
Trees; Another Gets <strong>The</strong> Shade.<br />
— Chinese Proverb<br />
<strong>The</strong> Building Blocks:<br />
"Every couple must set specific milestones and resolve to<br />
reach them through savings. It's easy to assess your<br />
performance midway and make adjustments such as<br />
revising the milestone, increasing your savings or<br />
pushing your horizon further," says private wealth<br />
management firm Client Associates’ founder-partner<br />
Rohit Sarin.<br />
<strong>The</strong> Consumer Attitudes to Savings Survey conducted by<br />
Aviva Life Insurance shows that 32% of Indians are<br />
motivated to save for the education of their children as<br />
against the global average of 17%. Fund Houses and<br />
insurance companies play heavily on this streak of parental<br />
responsibility. <strong>The</strong>y insist that it is only through their<br />
targeted schemes that you can afford to take care of your<br />
child’s future. Most of us buy this line of thought.<br />
When the economy was buoyant and the markets were<br />
booming, it didn’t really matter. But in these difficult<br />
times, every percentage point of return matters. So you<br />
must consider whether these plans will create wealth for<br />
your child or a regular investment strategy will work<br />
better for you.<br />
Getting It <strong>Right</strong> <strong>With</strong> Insurance:<br />
While beginning to save for your child’s future,<br />
insurance is the most likely consideration you can make.<br />
Today there are many children insurance plans that help<br />
you save regularly for your child’s need. A common<br />
misconception is that child plans insure the life of the<br />
child. This, if you pause to think, doesn’t make sense.<br />
A child plan insures your life but makes sure that the<br />
benefits go to the child. Sure, you think that you are<br />
going to be there with your child to hold his hand through<br />
every trial in life but in case of unfortunate occurrences at<br />
least financial security will see him through a rough<br />
patch without much difficulty.<br />
As a parent you want to be able to provide everything for<br />
important milestones in your children’s lives. Expenses<br />
for education are a critical component and are on a steep<br />
rising path. Consider this, apart from entry into pre<br />
school, admission to primary school will cost you Rs<br />
5,000 to Rs 50,000. College education will cost Rs 3 lakh<br />
to Rs 10 lakh. An MBA course, Rs 7.5 lakh, and if your<br />
child wants to pursue higher studies abroad and an MBA<br />
course that costs Rs 15 lakh today will amount to Rs 31<br />
lakh after 15 years, considering that the inflation is 5%.<br />
To accumulate this sum over a period of 15 years, you<br />
would have to save Rs 7,500 per month assuming a<br />
growth of 10%. But do not be intimidated by these<br />
numbers. <strong>The</strong>re is help at hand.<br />
When Do You Start<br />
In order to build a bigger corpus for the child, one needs<br />
to start saving early. <strong>The</strong> best time to start is at the time<br />
of the birth of the child. If you have missed that stage you<br />
could begin when your child starts going to school.<br />
While choosing a children plan, one must keep in mind<br />
important milestones in the life of the child such as<br />
graduation, post-graduation, career and marriage.<br />
If your insurance is insufficient you could consider a<br />
children plan. "A child plan gets you a head start to create<br />
a financial corpus for your child," says Aviva India’s<br />
director of marketing Vishal Gupta. Simplistically speaking,<br />
these are tailor-made life insurance products that are<br />
designed to meet the financial needs of your children, be<br />
it higher education, marriage or helping them begin their<br />
career. Children plans can be purchased against the life<br />
of any parent with the child as a nominee. <strong>The</strong>se plans are<br />
designed to provide a lumpsum on maturity.<br />
<strong>The</strong>re Are Only Two Lasting<br />
Bequests We Can Hope To Give<br />
Our Children. One Is Roots;<br />
<strong>The</strong> Other, Wings.<br />
– Journalist Hodding Carter<br />
All children plans come with two options. Under one<br />
variant, the payment to your child is staggered over<br />
various life stages. For example, 20% of the sum assured<br />
to the child is paid on his 21st birthday, 20% on his 24th<br />
birthday and the remaining 60% when the policy<br />
matures. Under the second variant, one gets a lumpsum<br />
at the desired age.<br />
One feature that makes a children plan unique is that the<br />
policy continues even after the policyholder’s death. <strong>The</strong><br />
insurer pays the sums assured immediately to the nominees.<br />
Along with that the insurer also pays the premium<br />
through the term of the policy. In some<br />
8 Beyond Market 20th Apr ’09<br />
It’s simplified...
policies, this feature is inbuilt and can be added as a rider.<br />
It assumes significance in children plans as it ensures<br />
double security at no extra cost for the child in case of the<br />
death of a parent.<br />
Children Plans - <strong>The</strong> Options <strong>With</strong>in:<br />
From a plethora of children plans available today, you<br />
can choose between an endowment plan and a Unit<br />
Linked Insurance Plan (ULIP). An endowment plan is a<br />
profits-based or a bonus-based plan, and is dependent<br />
largely on the profits and surplus generated by the<br />
insurer. An endowment plan’s modus operandi is similar<br />
to a bank Fixed Deposit, because once the returns come<br />
in the form of bonus, they get attached to the policy and<br />
the policy is guaranteed.<br />
When I Approach A Child, He<br />
Inspires In Me Two Sentiments;<br />
Tenderness For What He Is,<br />
And Respect For What He May<br />
Become.<br />
– Scientist Louis Pasteur<br />
ULIPs on the other hand, are products that combine a life<br />
cover with an investment plan. However, the investment<br />
does not guarantee returns like money back or an endowment<br />
policy, but works like a Mutual Fund. <strong>With</strong> ULIPs,<br />
it is difficult to estimate a final corpus as they are subject<br />
to market volatility. According to your risk appetite,<br />
choices in ULIPs can range from 0% exposure to equity<br />
to 100% exposure to equity.<br />
If your risk profile does not allow you to take risks<br />
through equity exposure, bonus-based endowment plans<br />
could be your best option. But if you are willing to take<br />
the risk, choosing ULIPs would be the ideal thing to do<br />
as it creates wealth for your child.<br />
Alternate Routes To A Secure Future:<br />
<strong>The</strong> other vehicle of investment can be Mutual Funds. At<br />
the very basic level, a child plan offered by an asset<br />
management company is very similar to a balanced fund,<br />
which has a portfolio of both equity and debt instruments.<br />
<strong>The</strong>refore, one of the biggest benefits these funds<br />
offer is that of automatic rebalancing of the equity and<br />
debt components. So, if due to market appreciation, the<br />
equity component begins to grow, the fund manager will<br />
book profits at systematic levels to guarantee an<br />
optimum balance.<br />
However, one needs to make a distinction between a<br />
child plan offered by an insurance company as against<br />
one offered by an asset management company. In the<br />
case of the former, there is a clear insurance cover on the<br />
life of the policyholder, whereas in case of Mutual<br />
Funds, the insurance cover offered can, at times, be<br />
misleading. In most of the schemes, the insurance cover<br />
offered is only a personal accident cover.<br />
While child-oriented insurance plans have their merits,<br />
financial experts do not attach much significance to<br />
child-oriented Mutual Fund schemes. <strong>The</strong>y say that a<br />
diversified Equity Fund is a much better option than a<br />
targeted fund. <strong>The</strong>re are several reasons why such<br />
targeted funds have not done well.<br />
For one, these funds have a small asset base. Also, most<br />
of them are heavily tilted towards debt instruments, and<br />
hence, fail to gain from the power of equity compounding.<br />
Most importantly, these funds do not come with<br />
lock-ins. So, despite a long-term goal, investors can exit<br />
whenever they want. While some investors are<br />
disciplined, many others might decide to exit early, in<br />
which case the fund will not be able to gain from its<br />
long-term investments.<br />
Customize Your Child’s Future Kitty:<br />
For those of you who are not interested in insurance plans<br />
or targeted schemes of Mutual Funds alone, financial<br />
planners suggest a healthy mix of equity and debt to<br />
secure the future of one’s child. In order to create wealth<br />
for your child, your portfolio needs to be skewed towards<br />
equities and large cap stocks and blue chips at that. Also<br />
have a fair share of equity diversified funds and mix it<br />
with some portion of debt. Investing in a PPF which<br />
gives 8% tax-free return and is a long-term product could<br />
be a good option. <strong>The</strong> PPF is a government sponsored<br />
scheme with a 15-year lock-in period. So if you save Rs<br />
70,000 a year in PPF, you'll get Rs 19 lakh in 15 yearsat<br />
virtually no risk.<br />
<strong>The</strong> Last Word:<br />
Whether you buy targeted schemes or customize your<br />
portfolio to secure your child’s future, financial planners<br />
strongly recommend you to keep a constant eye on the<br />
proceedings. In times of uncertainty, even if there is a<br />
mental block on touching the child’s money, do not<br />
hesitate to rejig the portfolio if need be, advise planners.<br />
Also keep in mind the inflation adjusted returns when<br />
you ascertain the value of your portfolio. Prudent early<br />
decisions can help you achieve the parental pride that<br />
will come from seeing the dreams of your children<br />
turning into realitY!<br />
Beyond Market 20th Apr ’09 It’s simplified...<br />
9
Unburden<br />
<strong>The</strong> Baggage<br />
Of Home Loans<br />
Make prepayments and invest<br />
the surplus thus saved<br />
in short-term deposits<br />
for maximum returns<br />
It is only after the completion of 10 years of the loan that you see<br />
that the interest recovery is lesser than 50% of your annual repayment.<br />
If you now think that the rate of interest is floating and hence<br />
subject to increase or decrease, the picture would then appear even<br />
more scary.<br />
Just being smart in taking a home loan is not the end, you need<br />
to be smart through the entire loan tenure – the shorter, the<br />
better. Be it fixed, floating, or hybrid, home loans are simply<br />
understood as the sum of money one borrows and repays with a<br />
pre-decided rate of interest – which could be fixed or variable or<br />
again the mix of both.<br />
But, what one struggles to understand is the mathematics which<br />
goes behind the exercise of paying the loan amount. An equated<br />
monthly installment - conveniently called EMI - which services<br />
the loan, has a component of interest and principal which gradually<br />
go out of your bank to your lender.<br />
But, do you actually know that a loan of Rs 10 lakh taken at a fixed<br />
rate of 12% for say 15 years (180 months) would mean that you<br />
end up paying over Rs 21,60,000 at the end of 15 years. That’s a<br />
stunning 2.16 times the principal amount you borrowed from the<br />
bank. And that is not all, the annual EMI of Rs 1,44,024 has a<br />
break-up of interest and principal repayment which is all the more<br />
heart-breaking. (See table Stacking It Up on the next page.)<br />
In a nutshell, it would cost you a fortune to continue repaying the<br />
loan through its entire tenure. So the way out of it is prepaying the<br />
home loan. <strong>The</strong> home loan has tax breaks but prepaying a home<br />
loan does not deprive you of the tax breaks. As you just realized<br />
that the initial years have a greater outflow of interest, prepayment<br />
would not disrupt your tax deductions unless you foreclose (pre<br />
maturely close) the loan. Also, it is in the later years of the loan<br />
tenure that the principal repayment shoots up and that’s when you<br />
can claim your tax deduction on the principal repayment.<br />
Experts advise that any pre-payment of the housing loan directly<br />
reduces the liability and additionally serves as a protection against<br />
future risk of increase in liability due to a rise in the interest rate.<br />
In short, floating loan borrowers need to look at prepayment<br />
opportunities as and when they have surplus disposable income.<br />
For floating loans, where applicable interest rates go up or down<br />
with changing market dynamics, banks and housing finance<br />
companies (HFCs) generally alter the balance tenure of the loan.<br />
This is mainly to avoid administrative hassles of changing the EMI<br />
every time a rate change takes places. Also, having seen the<br />
frequency at which rates shot up in the recent past, the process is<br />
feasible too.<br />
So, it is logical to find ways and means to trim the otherwise long<br />
loan tenure. Having realized that prepaying is in a way a smart<br />
financial medicine to your home loan worries it is now time to look<br />
into the options at hand. Here, you must remember the home loan<br />
agreement you have signed (at times, without reading also) at the<br />
time of borrowing. That home loan agreement has a long list of<br />
10 Beyond Market 20th Apr ’09<br />
It’s simplified...
Stacking It Up:<br />
Year 1<br />
Year 2<br />
Year 3<br />
Year 4<br />
Year 5<br />
Year 6<br />
Year 7<br />
Year 8<br />
Year 9<br />
Year 10<br />
Year 11<br />
Year 12<br />
Year 13<br />
Year 14<br />
Year 15<br />
Total<br />
Monthly<br />
Interest Repaid<br />
Principal Repaid<br />
Instalment<br />
(12002 X 12)<br />
(Rs)<br />
A = (B + C)<br />
Rupees<br />
B<br />
Percentage<br />
of annual<br />
repayment<br />
B / A<br />
Rupees Percentage<br />
of annual<br />
repayment<br />
C / A<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
144024<br />
2160360<br />
118634<br />
115414<br />
111785<br />
107696<br />
103089<br />
97897<br />
92047<br />
85456<br />
78028<br />
69658<br />
60226<br />
49598<br />
37623<br />
24129<br />
8923<br />
1160202<br />
82%<br />
80%<br />
78%<br />
75%<br />
72%<br />
68%<br />
64%<br />
59%<br />
54%<br />
48%<br />
42%<br />
34%<br />
26%<br />
17%<br />
6%<br />
25390<br />
28610<br />
32239<br />
36328<br />
40935<br />
46127<br />
51977<br />
58568<br />
65996<br />
74366<br />
83798<br />
94426<br />
106401<br />
119895<br />
134943<br />
1000000<br />
C 1,000,000<br />
Beyond Market 20th Apr ’09 It’s simplified... 11<br />
18%<br />
20%<br />
22%<br />
25%<br />
28%<br />
32%<br />
36%<br />
41%<br />
46%<br />
52%<br />
58%<br />
66%<br />
74%<br />
83%<br />
94%<br />
Outstanding<br />
principal at<br />
the end<br />
of each year (Rs)<br />
974610<br />
945999<br />
913760<br />
877432<br />
836497<br />
790371<br />
738394<br />
679826<br />
613830<br />
539463<br />
455665<br />
361240<br />
254839<br />
134943<br />
0<br />
Assumption: 15 year loan for Rs 10 lakhs carrying a fixed interest rate of 12%, with monthly interest<br />
terms and conditions you have signed and agreed to abide by the<br />
rules mentioned therein. <strong>With</strong>in the agreement there are also<br />
clauses and provisions for various charges, including part and full<br />
prepayment. So your lending institution - bank or HFC - is<br />
determined not to let you go so easily.<br />
Generally, part-payments are free up to a certain value or free for a<br />
specific number of times during a year. Some banks permit their<br />
borrowers to come down and make four part-prepayments during a<br />
year. In that case, the fifth attempt to make part prepayment would<br />
attract a fee (part-prepayment fee) of between 0.75–2% of the<br />
amount being prepaid. In such cases it makes sense to accumulate<br />
the savings and make the prepayment within the maximum<br />
permissible allowances every year. Unless the prepayment amount<br />
exceeds a minimum value (say Rs 1 lakh) and above, banks generally<br />
do not let borrowers change their EMI. And you must also<br />
note that such options carry a cost of their own. Hence, unless it is<br />
absolutely necessary an EMI change does not make sense.<br />
However, if the prepayment is a substantial 25% or more of the<br />
outstanding amount, an EMI change would be of greater use. Since<br />
a substantial portion of disposable income does not go towards<br />
loan repayment, it could be invested elsewhere. For example, a tax<br />
deductible Systematic Investment Plan (SIP) into Equity Linked<br />
Saving Schemes (ELSS) could fetch returns as well as count up for<br />
tax saving.<br />
<strong>The</strong>re is a common saying – the devil is in the fine print. <strong>The</strong><br />
reverse of this is also true. Some banks have an upper cap on the<br />
part prepayment a customer can make, beyond the number of<br />
times, during a year. For instance, a bank could allow you to<br />
prepay up to 90% of the outstanding loan or the entire outstanding<br />
except 12 EMIs. Such an option is a smart window for permanent<br />
escape. In case you have an inclination and financial capacity to<br />
foreclose the entire loan outstanding, you could end up paying<br />
nothing as foreclosure fee, which ranges above 2%.<br />
Such opportunities come up when you have sold some alternate<br />
property, etc. At such times, after leaving back 12-13 EMIs you<br />
must prepay the balance. However, you must note that after having<br />
paid a considerable amount you must not opt to reduce the EMI. If<br />
you do so, you are staggering the balance amount over a relatively<br />
longer tenure by reducing the installment.<br />
Finally, a very critical point to be kept in mind as and when you are<br />
part-prepaying your loan. <strong>The</strong> EMI you pay, say in May 2009, on<br />
a particular date, say May 7, is the payment for the month of April.<br />
So, if you approach your bank immediately after May 7 for making<br />
a part-prepayment you would get the effect of the same in June<br />
2009 when you pay the EMI for May. So you need to check with<br />
you bank or HFC the cut-off date in May 2009.<br />
When you can make your prepayment on the cut-off date, you get<br />
your due benefit in the next month. However, by delaying the<br />
prepayment by two or three weeks you have the advantage of<br />
parking that surplus money in a short-term deposit with your bank.<br />
You ought to be a smart loan customer, and enjoy the float for<br />
yourself rather then allowing your bank to make money in the<br />
period which is idle for your loan accounT.
Heart Of<br />
<strong>The</strong> Matter<br />
To stay in the pink of health it is<br />
important to get a health insurance<br />
Medical expenses are never cheap. And it is worse these<br />
days because they’ve rocketed even further. Even a five<br />
minute appointment with the doctor can easily make<br />
you poorer by Rs 500. Health insurance, therefore, is a must have<br />
as it saves money and covers unexpected misfortunes. Health<br />
insurance comes handy in meeting emergencies of severe ailments<br />
or accidents. Sometimes it is associated with covering disability<br />
and custodial needs.<br />
Life is unpredictable. Hence insurance can make it safe and<br />
prevent us from bearing huge losses. It is affordable and rids us of<br />
insecurities that threaten life now and then. Most experts suggest<br />
that one should invest young. Often youngsters feel they won’t<br />
need health insurance. But this is not true. It is better to be safe<br />
rather than be sorry. <strong>The</strong>refore people must have a good health<br />
insurance in place.<br />
However, looking for a comprehensive low-cost health insurance<br />
is almost similar to looking for a gold mine in a secret cave. Rising<br />
health insurance costs are becoming a big problem today. Every<br />
person has the right to be assured of proper medical attention. In<br />
effect, everybody needs health insurance coverage. But then again,<br />
providers are always faced with the constant battle of giving<br />
quality coverage against the ever-increasing medical care, hospitalization<br />
and health maintenance costs.<br />
For example, if you choose your sum assured to be Rs 1,00,000,<br />
you can pay a premium of as little as Rs 400 per year depending on<br />
the policy you choose. While picking out an insurance policy,<br />
make sure that you try and fit in as much expenses as possible, like<br />
hospitalization, domiciliary hospitalization, pre and<br />
post-hospitalization, pre-existing disease coverage, critical illness,<br />
daily hospitalization allowance, nursing allowance, ambulance<br />
service, free health check-up, organ donor, cumulative bonus and<br />
day care treatment.<br />
<strong>The</strong>re are various Indian health insurance companies. So make<br />
sure you compare them well before deciding which insurance<br />
policy to buy. ICICI Lombard, Tata AIG, Star Health Insurance,<br />
Royal Sundaram, United Insurance, Apollo-DKV Health Insurance,<br />
IFFCO-TOKIO, Bajaj Allianz, Cholamandalam MS, HDFC<br />
Ergo and many more provide good deals these days.<br />
<strong>The</strong>re are various family floater plans too, which one should<br />
carefully look at. Here is an example. ICICI Lombard offers a<br />
single premium health policy that covers hospitalization expenses<br />
of entire family, cashless hospitalization at over 3,500 network<br />
hospitals, income tax benefits on premiums, medical insurance for<br />
sum assured of Rs 2 lakhs, Rs 3 lakhs or Rs 4 lakhs and no medical<br />
check-up till the age of 55. It even covers hospitalization arising<br />
out of terrorist activities.<br />
Tata AIG’s Individual Accident, Sickness & Hospital Cash Plan<br />
offers up to 180 days hospitalization cash benefit. In addition, you<br />
can receive up to Rs 10,000 per day in case of accidental hospitalization,<br />
Rs 5,000 per day in case of sickness hospitalization and up<br />
to Rs 25,000 for accidental medical expenses reimbursement, even<br />
without hospitalization.<br />
All in all, there are a dozen policies you can choose from. All you<br />
need to remember is that you and your family must benefit entirely<br />
from the insurance and it should not go waste. Also, there are a<br />
number of websites these days where one can check and compare<br />
various policies. <strong>The</strong>se are helpful in letting one decide what he or<br />
she exactly wantS.<br />
12 Beyond Market 20th Apr ’09<br />
It’s simplified...
MIXED SIGNALS<br />
While the Indian telecom sector is expected to witness pressure on<br />
operating margin, there is hope for revival of metal companies<br />
Metal Sector:<br />
Indian metal companies have seen sharp volatility in<br />
their earnings in recent months, thanks to overall<br />
slowdown in the global economy. <strong>The</strong> December 2008<br />
quarter was one of the worst quarters in the last eight<br />
quarters. However, the scenario changed slightly during<br />
the March 2009 quarter when steel companies managed<br />
to sell more steel products. Stock clearing by end-users<br />
like auto, completion of projects by infrastructure<br />
companies (since their revenue flow is linked to the<br />
percentage of the project completed and March quarter<br />
coincides with the financial year-end) and revival in<br />
domestic demand were some of the main demand drivers<br />
for steel products.<br />
In fact, if one compares the performance on a quarteron-quarter<br />
basis, this revival in demand is clearly visible.<br />
For instance, Tata Steel’s sales volume grew by 68%<br />
sequentially. <strong>The</strong> sequential growth rates in volume for<br />
other players like Steel Authority of India (SAIL) and<br />
JSW Steel are also in similar range. Such higher demand<br />
from domestic market and import barriers raised by<br />
government had a positive impact on domestic steel<br />
prices. Though international prices continued to decline,<br />
although moderately, domestic prices almost stabilized,<br />
during the March 2009 quarter. For instance, the wire rod<br />
(6 mm, Mumbai) prices were at the level of Rs 37,500<br />
during the quarter.<br />
However, such good sequential growth did not translate<br />
into proportionate year-on-year (y-o-y) growth. One of<br />
the main reasons for this is that the March 2008 quarter<br />
was excellent because of very high demand. Tata Steel,<br />
which sold around 1.8 million tonnes of steel products<br />
during the March 2009 quarter, is expected to report a<br />
y-o-y growth of around 40% only. Similarly, JSW Steel<br />
is also expected to have a y-o-y volume growth of around<br />
20%. However, for SAIL, the year-on-year growth might<br />
not be so high and is expected to be a single-digit figure.<br />
Again, such higher sequential growth in sales volume did<br />
not translate into higher y-o-y growth in revenues. This is<br />
because, domestic steel prices during the March 2009<br />
quarter are around 20-25% lower from their year-ago<br />
levels. As a result, the y-o-y growth of revenues for these<br />
companies might range from flat to negative. In fact,<br />
barring Tata Steel, other primary steel producers are<br />
expected to report a y-o-y decline in their net sales.<br />
Even the operating profit margins of these steel companies<br />
is expected to contract further due to lower sales<br />
realization and higher raw material cost compared to<br />
their levels a year ago. Most of the Indian companies are<br />
dependent on external suppliers for their raw material<br />
requirements. <strong>The</strong> degree of dependency varies from<br />
company to company. Such companies usually enter into<br />
long-term contracts (in terms of volume and price) with<br />
their suppliers during the beginning of the financial year.<br />
Last year, companies entered into such contracts for the<br />
financial year 2008-09 when raw material prices were at<br />
their peak. <strong>The</strong>se contracted high raw material prices<br />
continue to burn the operating profits during the March<br />
2009 quarter.<br />
Though Indian companies might have renegotiated the<br />
contract prices with their suppliers for the March 2009<br />
quarter on account of sharp fall in spot prices, the impact<br />
of such negotiation would have been minimal. As a<br />
result, companies are expected to report contraction in<br />
their operating margins. Integrated players like Tata<br />
Steel would be less hit than others like SAIL and JSW<br />
Beyond Market 20th Apr ’09 It’s simplified...<br />
13
Steel. <strong>The</strong> consensus estimate indicates that Tata Steel’s<br />
operating profit would decline (y-o-y) only by 15%<br />
whereas it would decline by around 47% and 68% in case<br />
of JSW Steel and SAIL respectively. <strong>The</strong> higher decline<br />
in case of SAIL is also partly because of higher employee<br />
expenses incurred due to the Sixth Pay Commission<br />
recommendation.<br />
A large number of nonferrous companies in India are<br />
integrated players and most of the raw material cost don‘t<br />
change in line with the change in finished products’<br />
prices. <strong>With</strong>in base metals, aluminium has fallen more<br />
sharply than others like copper and zinc. It has come to<br />
such a low level that its cost of production was very close<br />
to aluminium ingot prices. Hence, Hindalco and Nalco,<br />
which mostly produce aluminium products are expected<br />
Heavy Metal:<br />
March 2009 quarterly estimates of metal companies<br />
*Tata Steel<br />
Sail<br />
JSW Steel<br />
*Hindalco<br />
Sterlite Industries<br />
Nalco<br />
*Standalone Results<br />
Net Sales<br />
(Rs in Cr)<br />
5920<br />
10672<br />
3589<br />
3335<br />
3873<br />
984<br />
Y-o-Y<br />
Change<br />
(%)<br />
3.2<br />
-20.8<br />
-26.9<br />
-33.4<br />
-42.8<br />
-30.0<br />
Net Profit<br />
(Rs in Cr)<br />
919<br />
929<br />
119<br />
272<br />
578<br />
96<br />
Y-o-Y<br />
Change<br />
(%)<br />
-31.0<br />
-60.9<br />
-73.4<br />
-74.8<br />
-56.1<br />
-76.5<br />
Source: Bloomberg<br />
<strong>The</strong> nonferrous companies are also expected to report<br />
equally poor numbers mainly because of low sales<br />
realization. <strong>The</strong> sales realization of nonferrous companies<br />
is directly linked to the London Metal Exchange<br />
(LME) base metal prices and movement of rupee against<br />
the US dollar. Indian Rupee has depreciated almost 25%<br />
on a y-o-y basis, whereas LME base metal prices are<br />
around half of what they were a year ago. Also, unlike<br />
steel companies, there is no significant improvement in<br />
sales volume in case of nonferrous companies. <strong>The</strong> net<br />
result is that these companies too are going to see a<br />
decline in their net sales, which can even be higher than<br />
the fall seen in the case of steel companies.<br />
Telecom Sector:<br />
<strong>The</strong> telecom sector continues to maintain its differential<br />
position when it comes to quarterly earnings. During the<br />
December 2008 quarter when most of the sectors were<br />
badly hit, the telecom sector performed very well. Now,<br />
during the March 2009 quarter, when some of these<br />
sectors witnessed slight revival, the growth in profitability<br />
numbers of telecom companies is expected to be<br />
lower than the December 2008 quarter.<br />
<strong>The</strong> telecom sector has seen strong subscribers’ addition<br />
in recent months. <strong>The</strong> launch of GSM services by new<br />
players like Reliance Communications (RCom) and Idea<br />
Cellular has further added fuel to this growth. RCom and<br />
Idea launched their GSM service in many circles either at<br />
to take a bigger hit in their operating profits compared to<br />
Sterlite Industries, which is more diversified into copper<br />
and zinc. <strong>The</strong> consensus estimate is that the net profit of<br />
Hindalco and Nalco is expected to decline by around<br />
75% (y-o-y) compared to 56% (y-o-y) fall in case of<br />
Sterlite Industries.<br />
Overall, this quarter is not going to be very great for<br />
metal companies at large. But one can’t even deny the<br />
fact that there has been some kind of revival in demand in<br />
the March 2009 quarter as compared to the December<br />
2008 quarter.<br />
the end of calendar year 2008 or at the beginning of 2009.<br />
Telecom companies would witness the full impact of<br />
these GSM launches in the March 2009 quarter.<br />
Both these companies have spent huge sums of money to<br />
garner their subscriber base. Idea took the route of brand<br />
building exercise and thus spent huge amounts of money<br />
in advertising and marketing. On the other hand, RCom<br />
offered very low tariffs in its initial offering. For<br />
instance, it offered Rs 5 and Rs 10 worth of free talk time<br />
per day for initial 90 days time period. Initiatives by<br />
these two companies helped drive up the subscriber<br />
addition to 14-15 million per month during the March<br />
2009 quarter compared to the average of 10 million in the<br />
second half of calendar year 2008.<br />
14 Beyond Market 20th Apr ’09<br />
It’s simplified...
Getting Phoney:<br />
Bharti<br />
RCom<br />
Idea<br />
March 2009 quarterly estimates of telecom companies<br />
Net Sales<br />
(Rs in Cr)<br />
10204<br />
6012<br />
2895<br />
Y-o-Y<br />
Change<br />
(%)<br />
30.5<br />
13.2<br />
45.8<br />
Net Profit<br />
(Rs in Cr)<br />
2277<br />
1357<br />
229<br />
Y-o-Y<br />
Change<br />
(%)<br />
22.9<br />
-1.2<br />
-17.1<br />
Source: Bloomberg<br />
Telecom last year, might see an inorganic growth of little<br />
more than 41%. Though RCom added a record number of<br />
subscribers during the months of January and February,<br />
the discounts and lower tariff rates would pull down its<br />
topline growth to little less than 15%.<br />
Unlike previous quarters, operating margin of the<br />
telecom companies would be under pressure during the<br />
March 2009 quarter. As a result, the growth in bottom<br />
line is expected to slow down.<br />
<strong>The</strong> lower ARPU, higher launch cost and more selling<br />
and marketing expenses are some of the factors expected<br />
to hurt the operating margins of the telecom operators.<br />
However, the impact on operating margin would be<br />
different for different companies.<br />
For Bharti, which has relatively stable business operations,<br />
the operating margin for the March 2009 quarter<br />
might contract only by 40-100 basis points compared to<br />
the same period last year.<br />
As a result, the sector is expected to witness a doubledigit<br />
growth in its revenue figures during the March 2009<br />
quarter. Estimates indicate that the top three players -<br />
Bharti Airtel, RCom and Idea - are expected to report an<br />
aggregate year-on-year growth of 27% in their topline.<br />
This kind of growth would come on the back of falling<br />
average revenue per user (ARPU). <strong>The</strong> lower tariffs and<br />
higher competition would result either in lower minutes<br />
of use (mostly in case of established players like Bharti)<br />
or lower revenue per minute (in case of RCom), resulting<br />
in lower ARPU in either case.<br />
However, for others like RCom and Idea which have<br />
incurred higher network expansion costs and huge<br />
marketing expenses, the impact could be even higher. As<br />
per estimates, the operating margin of RCom and Idea is<br />
expected to contract by around 400 and 1,000 basis<br />
points respectively.<br />
<strong>The</strong> positive factor during this quarter is the relatively<br />
lower depreciation of INR against other currencies like<br />
USD and JPY. Most of the telecom companies like<br />
Bharti and RCom have outstanding foreign loans<br />
denominated in these currencies.<br />
<strong>The</strong> lower depreciation would definitely reduce the<br />
Forex losses and hence would improve the bottom line.<br />
Similarly, the lowering of services tax from 12% to 10%<br />
has been another positive factor for this sectoR.<br />
Bharti Airtel continues to be the market leader and is<br />
expected to report a growth of around 31% in its organic<br />
revenue. On the other hand, Idea, which acquired Spice<br />
Beyond Market 20th Apr ’09 It’s simplified...<br />
15
For A Picture-Perfect Family’s<br />
Financial Future<br />
When you have worked hard to earn money,<br />
let the money work for you through a good financial plan, says an expert<br />
very person thinks that he is a smart manager and is capable<br />
of managing his finances well. But is he actually <strong>The</strong>re are<br />
very few who know that every financial decision affects<br />
Eother areas of their finances.<br />
As it is rightly quoted: “Money management is something everyone<br />
talks about or thinks they talk about, but rarely implement.”<br />
Same was the attitude of Rajeev Bajaj, 45, until he realized that<br />
managing finances was not his cup of tea and that it was best to leave<br />
it to the experts in the field. Earlier he used to take tips on stocks but<br />
having lost a huge part of his capital in the stock market, where he<br />
thought he would be able to multiply his money manifold, he decided<br />
to seek advice of a financial planner.<br />
<strong>With</strong> the introduction of complex financial products it becomes<br />
difficult for individuals to cope with their personal financial<br />
planning. Here is where a financial doctor comes into picture to take<br />
care of the financial well-being of an individual. He assesses the<br />
individual properly and gives a proper prescription. He studies the<br />
investor and based on it he finds out if his client is allergic to any<br />
particular asset class or not.<br />
Bajaj and his wife Mansi are 45 and 43 years, respectively. <strong>The</strong>y<br />
have two kids Arti (18) and Aksh (15). Bajaj has a well-established<br />
advertising business and earns an annual income of Rs 10 lakhs.<br />
Goals:<br />
To set aside money for Arti’s higher education when<br />
she turns 21, i.e. 3 years from now. Today’s cost of<br />
international studies would be around Rs 20 lakhs.<br />
To keep money for Aksh’s higher education when he<br />
would be 21 years, i.e. 6 years from now. Today’s cost of<br />
international studies would be around Rs 20 lakhs.<br />
To keep a lumpsum of Rs 20 lakhs in today’s value for<br />
his daughter Arti’s marriage when she would be around<br />
24 years old.<br />
A lumpsum of Rs 15 lakhs in today’s value for his son<br />
Aksh’s marriage when he would be 26 years old.<br />
To accumulate enough money for his retirement<br />
within the next 15-20 years, while taking inflation<br />
into consideration.<br />
Personal accident insurance policy for protection of<br />
the family and also for income replacement protection in<br />
case of any circumstances caused due to the accident.<br />
Bajaj has a personal insurance cover of Rs 3 crores. His<br />
other investments are Rs 8 lakhs in PPF, Rs 25 lakhs in<br />
diversified equity Mutual Fund. His investments in RBI<br />
Bonds will mature in 2014 and would fetch him Rs 40<br />
lakhs. He had direct investment in equity worth Rs 29<br />
lakhs, which is now worth Rs 5.5 lakhs.<br />
Goals Of Mr Bajaj:<br />
Needs<br />
Year When<br />
Need Arises<br />
Current<br />
Value<br />
(Rs)<br />
Future<br />
Value<br />
(Rs)<br />
Years Of<br />
Investment<br />
Arti’s Education<br />
Aksh’s Education<br />
Arti’s Wedding<br />
Aksh’s Wedding<br />
Total<br />
2012<br />
2015<br />
2015<br />
2019<br />
2000000<br />
2000000<br />
2500000<br />
1500000<br />
8000000<br />
2315250<br />
2680190<br />
3350240<br />
2443340<br />
10789020<br />
3<br />
6<br />
6<br />
10<br />
*Figures in Rs<br />
16 Beyond Market 20th Apr ’09<br />
It’s simplified...
Recommendations:<br />
Before recommending anything to Bajaj, he should be lauded for<br />
taking adequate insurance for his dependents.<br />
Though Bajaj has faced a setback in his equity investments, he still<br />
has other savings to achieve his goals. His investments like Mutual<br />
Funds, RBI Bonds and direct equity would be utilized to fund these<br />
goals. Taking this into consideration, a 12% return on Mutual Fund<br />
and Equity would be reasonable as his goals are beyond 3 years. <strong>The</strong><br />
present value of these goals has increased at an annual rate of 5%.<br />
Bajaj need not make any additional savings for these goals as he has<br />
sufficient savings in various avenues to accomplish them.<br />
His retirement planning investment in PPF would fetch<br />
him an amount close to Rs 25.64 lakhs. So his retirement<br />
planning as on today is short by Rs 109.74 lakhs. To meet<br />
the shortfall he will have to save annually an approximate<br />
amount of Rs 3,45,400 for the next 15 years, which<br />
would grow at the rate of 10%. For this he can invest in<br />
an asset allocation of equity and debt, which would fetch<br />
him a return of 10%. Considering 8% on Debt and 12%<br />
on Equity, he can have 50:50 asset allocation for this<br />
particular goal.<br />
<strong>The</strong> table mentioned below gives an idea of his existing savings at various stages:<br />
Investments<br />
Existing Mutual Fund Before Goals<br />
After Goal<br />
3512320<br />
1197070<br />
Year<br />
2012 2015<br />
2362804<br />
652374<br />
2019<br />
1026523<br />
291398<br />
RBI Bonds Before Goals<br />
After Goals<br />
NA<br />
NA<br />
4320000<br />
NIL<br />
NA<br />
NA<br />
Equity before Goals<br />
After Goal<br />
*Figures in Rs<br />
<strong>The</strong> above table shows values of various investments in the year of<br />
the major goals. Arti’s education needs would be funded through the<br />
existing Mutual Funds whereas RBI Bonds, which mature in 2014,<br />
when reinvested in debt for another one year, would fetch 8% return.<br />
This investment would be utilized to fund Arti’s wedding and Aksh’s<br />
education needs arising in 2015. <strong>The</strong> shortfall would be adjusted<br />
through Mutual Fund investment.<br />
Investment in Equity would be required to fund Aksh’s wedding,<br />
which is approximately 10 years from now. Here again the shortfall<br />
would be adjusted by investment in Mutual Funds. Bajaj would still<br />
have a surplus of around Rs 3 lakhs with him after his goals, which<br />
we think can be utilized for his retirement.<br />
Retirement Planning:<br />
Retirement planning is very crucial considering increasing life<br />
expectancy rate in India and rising cost of living due to inflation. It is<br />
never too early to begin planning for your retirement. At the time of<br />
retirement, Bajaj needs a corpus of Rs 135.39 lakhs to enjoy the same<br />
lifestyle for another 20 years till 80 years, his expected life expectancy,<br />
considering inflation at 5% p.a. on today’s estimated monthly<br />
expense of Rs 35,000 per month.<br />
772710<br />
772710<br />
1525192<br />
1525192<br />
1708217<br />
NIL<br />
Health Insurance:<br />
Bajaj has a family floater of Rs 5 lakhs and has been<br />
advised to do so to save the extra premium. As he is in his<br />
mid-forties, it is recommended that he buy individual<br />
Mediclaim policies to the full extent of Rs 5 lakhs for<br />
himself and his wife. As the medical expenses are<br />
increasing with every passing day, he is also advised to<br />
buy a Family Floater Top-up from Star Health up to Rs<br />
10 lakhs.<br />
Estate Planning:<br />
This is one of the most important parts of financial<br />
planning. However, people usually forget to do it for lack<br />
of knowledge or sheer ignorance. Bajaj does not have<br />
any succession plan, so it would be ideal for him to make<br />
a will. It hurts when you have worked hard to earn your<br />
money and money doesn’t work back for you. So it is<br />
never late to get up and give a call to a financial planner<br />
and get yourself checked. So go and get yourself a financial<br />
plan noW.<br />
If you need a financial plan write to us at<br />
beyondmarket@nirmalbang.com<br />
Beyond Market 20th Apr ’09 It’s simplified... 17
<strong>Tastes</strong> <strong>Success</strong> <strong>With</strong> <strong>The</strong> <strong>Right</strong> <strong>Product</strong> <strong>Mix</strong><br />
Health and wellness profile to be the key growth drivers for this FMCG company<br />
N<br />
estle India (NESTLE) is the third largest fast moving consumer goods (FMCG) company after Hindustan Lever Ltd<br />
(HLL) and ITC in the FMCG space in India. <strong>Nestle</strong> India, a 61.9% subsidiary of the international giant <strong>Nestle</strong> SA,<br />
was founded by Henry <strong>Nestle</strong> in 1867. It generated sales of 106 billion Swiss Francs in 2007 from 500 factories in<br />
approximately 100 countries and offers over 8,000 products to millions of consumers worldwide.<br />
<strong>The</strong> <strong>Nestle</strong> brand is synonymous with food products like milk products and nutrition, beverages, prepared dishes and cooking aids,<br />
chocolates and confectionery. <strong>Nestle</strong> India Ltd has spread its wings to significant areas within the food and beverage industry.<br />
It has factories in Punjab, Tamil Nadu, Karnataka, Haryana, Goa and Uttarakhand. <strong>Nestle</strong> India Ltd initiated its workings in India<br />
with the Moga unit in Punjab in 1961, which was succeeded by the Choladi unit in Tamil Nadu. <strong>The</strong> Moga unit dealt entirely with<br />
dairy products whereas the Choladi unit diverted its interests to the tea industry. <strong>Nestle</strong> India Ltd also owns Nanjangud unit in<br />
Karnataka, Samalkha unit in Haryana, Ponda and Bicholim units in Goa and Pant Nagar unit in Uttarakhand. <strong>Nestle</strong> products are<br />
sold all over India and are also exported to Russia, Hungary, Japan, the US and several other countries.<br />
<strong>Product</strong> Line:<br />
18<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
New <strong>Product</strong> Pipeline <strong>With</strong> Innovations Or Renovations:<br />
Nesvita Pro-Heart Milk: To battle rising cholesterol levels in India, <strong>Nestle</strong> India has introduced a new skimmed milk - Nesvita<br />
Pro-Heart Milk with Omega 3. This product is aimed at the urban, health conscious market and is positioned as the “health &<br />
wellness” product.<br />
<strong>Nestle</strong> Cerevita: <strong>Nestle</strong> Cerevita, a multigrain cereal and a nutritious breakfast, is available in two delicious variants – wheat and<br />
corn and mixed fruit. Cerevita is an alternative available against Kellogg’s Corn Flakes. Cerevita is test-marketed in select outlets<br />
in Bangalore city.<br />
<strong>Nestle</strong> Milkmaid Fun Shakes: <strong>Nestle</strong> offers the goodness of toned milk and real fruit/cocoa. Delicious Nestlé Milkmaid Fun<br />
Shakes make it fun to drink milk.<br />
<strong>Nestle</strong> Nido: <strong>Nestle</strong> offers <strong>Nestle</strong> Nido, the world’s No 1 children’s milk brand. <strong>Nestle</strong> Nido is a nutritious milk product, specially<br />
formulated for growing children from the age of two years onwards. <strong>Nestle</strong> Nido has been launched in select cities and is available<br />
in 500 gm tins.<br />
<strong>Nestle</strong> Nesvita Dahi: <strong>Nestle</strong> India provides Nesvita Dahi with pro-biotic which is tasty and low in fat. This Nesvita Dahi can be<br />
easily digested and has more than 100 crore probiotics. This dahi is 98% fat-free thus making it an ideal food choice for a fit and<br />
healthy lifestyle.<br />
Maggi Cuppa Mania: Tapping into the cup-o-noodle segment, <strong>Nestle</strong> India is now introducing Maggi in ready-to-eat packs in a<br />
cup. <strong>The</strong> product is targeted at the whole family, but is betting specially on the customer base in the 18-24 age group, given its<br />
tagline ‘Just add garam paani…Carry on jaani!’<br />
Maggi Pichkoo: Maggi has also introduced a Rs 12 Maggi Pichkoo tomato ketchup. <strong>The</strong> brand claims a leadership position in<br />
sauces and ketchups and believes that the Rs 12 price point will further aid the expansion of its consumer base through greater<br />
affordability.<br />
<strong>Nestle</strong> Polo Xtra Strong: <strong>Nestle</strong> India’s Polo Xtra Strong is an innovation on its existing brand, Polo. It comes with added menthol<br />
crystals that provide real, long-lasting freshness. It comes in a pocket friendly singles format priced at 50 paise.<br />
Maggi Healthy Soups-Sanjeevni: <strong>Nestle</strong> launched healthy soups named ‘Sanjeevni’ with traditional recipes for good health, which<br />
are made with ingredients like amla, badam, spinach, dal and tomato.<br />
Business Analysis:<br />
Market Position (Value) Milk <strong>Product</strong>s & Nutrition - 43.40%<br />
Prepared Dishes & Cooking Aids - 23.53%<br />
Category<br />
Beverages - 17.91%<br />
Chocolate & Confectionery - 15.20%<br />
Baby Foods & Infant Formula<br />
Dairy Whitener<br />
Instant Noodles & Ketchups<br />
Healthy Soups<br />
Instant Coffee<br />
Wafers & White Chocolates<br />
Chocolate<br />
Éclairs<br />
Nestlé’s<br />
Rank<br />
1<br />
1<br />
1<br />
2<br />
1<br />
1<br />
2<br />
2<br />
<strong>Nestle</strong> India has a strong product profile and with the<br />
continuous addition of products into its family basket, the<br />
company has gained competitive advantage against its peers.<br />
<strong>The</strong> company’s focus on the niche segment allows it to<br />
command a premium pricing.<br />
Revenue distribution<br />
Source: Company reports<br />
Raw Material Price Trend:<br />
<strong>Nestle</strong> consumes milk, wheat, sugar, cocoa, etc, as raw materials. Prices of these products were very volatile last year. To combat<br />
the volatility in commodity prices, <strong>Nestle</strong> has developed a long-term relationship with farmers and milk suppliers. <strong>Nestle</strong> has<br />
set-up ‘milk districts’ around its milk plant for regular and efficient supply of milk. <strong>Nestle</strong> procures agricultural raw materials<br />
either through trade channels or directly from farmers. This helps <strong>Nestle</strong> in maintaining the operating profit margin and remains<br />
cost-efficient against its peers.<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...<br />
19
Playing On Price Point And Affordability:<br />
<strong>Nestle</strong> has launched SKUs (Stock Keeping Units) to focus on the smaller market and increase the trial usage rate. <strong>With</strong> the<br />
introduction of SKUs in various products like Maggi, Munch, Bar-one, Maggi Pichkoo, Polo, Dahi and Coffee, <strong>Nestle</strong> has been<br />
able to increase the trial usage rate among consumers and converting one-time consumer to brand loyalists. <strong>With</strong> SKUs, <strong>Nestle</strong><br />
has been able to enter the lower socioeconomic strata resulting in better acceptability, visibility and affordability of products.<br />
<strong>Nestle</strong> has launched SKUs from as low as 50 paise to Rs 10, which has helped in generating higher revenues for the company.<br />
SWOT Analysis:<br />
STRENGTH:<br />
Well diversified product portfolio<br />
Distribution channel<br />
Brand equity<br />
Brand positioning in the minds of the consumers<br />
Strong fundamentals<br />
Access to skill-sets, products and R&D of parent company – <strong>Nestle</strong> SA<br />
Ongoing product innovation and renovation<br />
Good management track record<br />
WEAKNESS:<br />
Export market not fully tapped<br />
Complex supply chain configuration<br />
OOPPORTUNITIES:<br />
Expansion of product portfolio<br />
Entry into the niche segment – less competition<br />
Growing trend for ‘out-of-home’ consumption<br />
Increasing the trial usage rate by launching SKUs<br />
Increase in consumer awareness, per capita income & lifestyle<br />
THREAT:<br />
Prices of raw material and fuel<br />
Entry of ITC in the processed food segments<br />
Slowdown in the economy<br />
Financial Analysis:<br />
Net sales for the full year 2008 at Rs 4,324.24 crores have increased by 23.4% from Rs 3,504.35 crores in 2007, driven by<br />
increased volumes as well as better realizations. Domestic and export sales increased by 25.6% and 2.6% respectively.<br />
<strong>The</strong> raw material consumed in 2008 was Rs 2,088.44 crores, an increase of 21.6% from Rs 1,717.60 crores in 2007. <strong>With</strong> various<br />
cost optimization initiatives, <strong>Nestle</strong> was able to offset steep increase in commodity prices like milk solids, green coffee, fuels and<br />
vegetable fat.<br />
<strong>The</strong> company reported an increase in operating profit by 23.1% to Rs 866.82 crores in 2008 from Rs 704.2 crores in 2007. <strong>The</strong> net<br />
profit for the year increased by 29.1% over 2007, with the net profit margin improvement at 12.3% from 11.8%.<br />
<strong>The</strong> company reported an EPS of Rs 55.39 in the year 2008 as against Rs 42.92 in the year 2007.<br />
20 Beyond Market 20th Apr ’09<br />
It’s simplified...
Financial Outlook:<br />
Posting Strong Growth:<br />
KEY FINANCIALS<br />
Net Sales<br />
EBIDTA<br />
EBIDTA (%)<br />
PAT<br />
PAT (%)<br />
EPS<br />
P/E<br />
P/BV<br />
Dividend Per <strong>Share</strong><br />
Dividend yield<br />
Performance Ratios:<br />
KEY FINANCIALS<br />
Debt/ Equity<br />
ROCE<br />
RONW<br />
PE Band:<br />
2007 2008<br />
3,501<br />
704<br />
20%<br />
427<br />
12%<br />
44.3<br />
34.5<br />
35.3<br />
33<br />
2.16%<br />
4328<br />
867<br />
20%<br />
551<br />
12.3%<br />
55.39<br />
29.1<br />
33.8<br />
42.50<br />
2.56%<br />
2007 2008<br />
0.01<br />
152%<br />
106%<br />
0.01<br />
173%<br />
123%<br />
2009E<br />
5,299<br />
1,095<br />
21%<br />
683<br />
13%<br />
70.8<br />
23.5<br />
24.9<br />
53.11<br />
3.20%<br />
2009E<br />
0<br />
174%<br />
122%<br />
*E = Estimate figs.<br />
<strong>The</strong> FMCG sector has been registering a<br />
double-digit growth in sales since the last couple<br />
of years. Currently estimated at US $17.44<br />
billion, it is one of the most promising sectors in<br />
India. FMCG business has a steady rate of<br />
growth as it does not suffer from huge recession.<br />
In this turbulent market condition and growing<br />
concern about recession all over the world, the<br />
FMCG sector has regained its safe haven<br />
position. <strong>The</strong> FMCG sector enjoys the defensive<br />
appeal and acts as recession resistant. <strong>The</strong><br />
demand scenario for FMCG companies is<br />
relatively inelastic in nature. <strong>The</strong> reason is quite<br />
simple - they sell first-necessities products, the<br />
last ones which people tend to give up in their<br />
consumption habits.<br />
3000<br />
PE Band of <strong>Nestle</strong> India<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
0<br />
Jan’99 Jan’00 Jan’01 Jan’02 Jan’03 Jan’04 Jan’05 Jan’06 Jan’07 Jan’08 Jan’09<br />
Close Price x20 x30 x40 x50<br />
At CMP of INR 1665.45 (as on 16th April, 2009), the stock is trading at P/E of 23.6x for CY09E. Historically, the stock has never<br />
traded below the PE of 20x, which insulates the stock against a huge downside risk.<br />
Nestlé is expected to out-drive the FMCG sector by reporting higher earnings growth, which, added with the defensive nature of<br />
its business, makes the stock attractive from a long-term perspectivE.<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...<br />
21
<strong>The</strong> Multi-purpose Crop<br />
From a polymer<br />
in industries<br />
to food products,<br />
Guar seed is an<br />
essential commodity<br />
History:<br />
India accounts for 80% of the world production. Nearly<br />
80-85% of Guar gum and its derivatives produced in<br />
India are exported to the US, UK, China and other<br />
countries. <strong>The</strong> value-added derivatives of Guar powder<br />
are used by various industries in India.<br />
Guar Plant:<br />
<strong>The</strong> Guar plant flourishes in extremely drought-resistant<br />
and semi-arid regions where most plants perish. It grows<br />
best in sandy soils. <strong>The</strong> ideal areas for farming are west<br />
and northwest India and parts of Pakistan. <strong>The</strong> major<br />
processing centers of Guar gum are in the northwestern<br />
states of India.<br />
<strong>The</strong> Guar plant grows 3 feet to 9 feet high. <strong>The</strong> plant’s<br />
flower buds start out white and change to light pink as the<br />
flower opens. <strong>The</strong> flowers turn deep purple and are<br />
followed by fleshy seedpods, which ripen and are<br />
harvested in October-November.<br />
Guar seed is grown mainly in India, Pakistan,<br />
the United States, Sudan and also in some<br />
parts of Africa and Australia. In olden times,<br />
Guar was only used as rich protein to feed<br />
cattle. It is also used as green vegetables in India. After<br />
the Second World War there was a major shortage of<br />
locust bean gum, which adversely affected the textile and<br />
paper industries. At that time Guar gum was found as the<br />
most suitable substitute for scarce locust bean gum. In<br />
1953 the extraction technology of Guar gum was<br />
commercialized in the US and followed by India a<br />
decade later.<br />
Properties Of Guar Gum Powder:<br />
Guar gum is a white to yellowish white powder. It is<br />
almost odourless. When dissolved in hot or cold water<br />
Guar gum forms a paste of high viscosity. Guar’s viscosity<br />
is a function of temperature, time and concentration.<br />
Guar gum is used in a variety of applications due to its<br />
properties like:<br />
Easy solubility in cold and hot water<br />
Binding agent<br />
Resistance to oils, greases<br />
Better thickening agent<br />
High viscosity<br />
Functioning at low temperatures<br />
22 Beyond Market 20th Apr ’09<br />
It’s simplified...
Guar Seed<br />
Cross-section<br />
Guar Protein<br />
Guar Seed<br />
germ<br />
hull<br />
endosperm<br />
germ<br />
Unrefined Guar Splits<br />
hull<br />
endosperm<br />
Guar Gum Usages:<br />
According to historical data, around 55% of the total guar<br />
produced across the globe is used for industrial purposes<br />
like textile printing and sizing, ceramics, printing inks,<br />
mosquito mats, synthetic resins, paper industry, battery<br />
electrolytes, water paint, oil well drilling and mining.<br />
Similarly, around 35% of it is in food products. It is<br />
mainly used in bakery, dairy, meat, dressing and sauces<br />
and beverages.<br />
hull<br />
hull<br />
endosperm<br />
Major Growing Countries:<br />
Guar Protein<br />
Refined Guar Splits<br />
India - 80%<br />
Pakistan - 15%<br />
Others - 05%<br />
Guar Seed:<br />
• First, the pods are dried in sunlight and manually<br />
separated from the seeds.<br />
• <strong>The</strong> seeds are supplied to the industry for processing.<br />
• Guar by-products, namely churi and korma are used as<br />
cattle feed.<br />
Guar Splits:<br />
• A mechanical process of roasting, differential attrition,<br />
sieving and polishing, commercially extracts the gum<br />
from the seeds.<br />
• <strong>The</strong> seeds are broken and the germ is separated from<br />
the endosperm.<br />
• Two halves of the endosperm are obtained from each<br />
seed and are known as undehusked Guar splits.<br />
Refined Guar Splits:<br />
Refined Guar splits are obtained when the fine layer of<br />
fibrous material, which forms the husk, is removed and<br />
separated from the endosperm halves by polishing.<br />
Guar Powder:<br />
<strong>The</strong> refined Guar splits are then treated and finished into<br />
powders by a variety of routes and processing techniques<br />
depending on the end product desired.<br />
State-wise <strong>Product</strong>ion in India:<br />
Rajasthan - 70%<br />
Gujarat - 12%<br />
Haryana - 11%<br />
Punjab - 04%<br />
Others - 03%<br />
Source: NB Research<br />
Statistics:<br />
Source: NB Research<br />
Year<br />
2005-06<br />
2006-07<br />
2007-08 2008-09<br />
Acreage (in mn hect)<br />
2.2<br />
2.27<br />
3<br />
3.45<br />
Guar <strong>Product</strong>ion (in lakh tonnes)<br />
6<br />
7<br />
10.1<br />
7.8<br />
Guar Gum (30% of guar seed)<br />
1.8<br />
2.1<br />
3.03<br />
2.19<br />
Exports from Apeda (in million tonnes)<br />
1.83<br />
1.9<br />
2.04<br />
1.55(e)<br />
Source: NB Research, Apeda<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...<br />
23
Global Scenario:<br />
Besides India, Pakistan, Sudan and parts of the US are<br />
the other major Guar growing countries. Nearly 55-60%<br />
of Guar gums or their derivatives produced in India are<br />
exported mainly to the US and European countries. <strong>The</strong><br />
value-added derivatives of Guar powder are used by<br />
various industries in India as well as abroad. <strong>The</strong> world<br />
market for Guar gum is estimated to be around 2,20,000<br />
to 2,50,000 tones/year, 90-92% of which is produced by<br />
India and Pakistan.<br />
<strong>The</strong> Most Important Factor – Weather:<br />
In India, the sowing season for guar seed is end of July<br />
and it is harvested in October-November. It is usually a<br />
90-day crop. Guar is a rain-fed monsoon crop, which<br />
requires 3-4 spells of 8-15 inches of rain. For effective<br />
Guar cultivation, the crop needs two rainfalls before<br />
sowing, one rainfall when the crop buds out and another<br />
when the crop comes up and begins blossoming. <strong>The</strong>n it<br />
requires plenty of sunshine and dry weather to come up<br />
really well. During harvesting period the guar crop needs<br />
good sunshine in order to dry up and become usable for<br />
the industries.<br />
Abnormal weather with unseasonal rains and low<br />
temperatures is hurting agriculture in India, affecting<br />
wheat and pulse crop in particular. <strong>The</strong> wheat and pulse<br />
crops have been adversely impacted because of the<br />
unseasonal showers and hail in the northern plains, while<br />
stone fruits such as plums and peaches have also taken a<br />
hit in northern India because of hailstorms. Horticultural<br />
crops in India-controlled Kashmir have been affected as<br />
well. Recently as per the Indian Meteorological Department<br />
(IMD), the maximum temperature is below normal<br />
by 3 degrees Celsius in parts of Punjab, Haryana, south<br />
Rajasthan, Gujarat and west Madhya Pradesh. This is bad<br />
for the crops this time of the year as maturing wheat and<br />
pulse crops essentially need warm weather to facilitate<br />
grain formation.<br />
On closely monitoring the chart, one can observe that<br />
from April to October there has been a substantial<br />
upward movement every year. Traders tend to bet on<br />
weather and its aberrations that lead to sharp upside in<br />
Guar seed prices.<br />
2500<br />
Weather<br />
Weather<br />
Guar Seed<br />
Weather<br />
2000<br />
Weather<br />
<br />
1500<br />
1000<br />
500<br />
0<br />
Closing Price<br />
Apr’04<br />
Jul’04<br />
Oct’04<br />
Jan’05<br />
Apr’05<br />
Jul’05<br />
Oct’05<br />
Jan’06<br />
Apr’06<br />
Jul’06<br />
Oct’06<br />
Jan’07<br />
Apr’07<br />
Jul’07<br />
Oct’07<br />
Jan’08<br />
Apr’08<br />
Jul’08<br />
In Rs (Quintal)<br />
Oct’08<br />
Jan’09<br />
Apr’09<br />
In a nutshell:<br />
Abnormal weather is creating anxiety among Guar seed traders who fear that any delay in monsoon may trigger an<br />
upside in Guar seed prices as carry forward stock of the commodity has dropped drastically over the last two years.<br />
Pakistan’s production went down last year due to flooding in the Guar producing region. Hence the carry forward stock<br />
of the commodity is depleting and any delay in monsoon may aggravate the recent bull run in Guar seed. Carry forward<br />
stock, which was around 30-35 lakh bags (100 kg each) a few years back, is expected to be at 20 to 22 lakh bags this<br />
year. Due to the global slowdown, the demand for Guar derivates have declined and that resulted in sharp downside in<br />
prices few months back. However, with some signs of recovery in the US and China, the demand for this product may<br />
move up in the coming months. Guar seed is one agro commodity, in which we haven’t seen any significant bull run.<br />
We expect guar seed prices to move up and May contract may touch Rs 1,950/quintal levels in the next fortnighT.<br />
24 Beyond Market 20th Apr ’09<br />
It’s simplified...
Fortnightly Outlook<br />
Commodities rally was led by base metals and oilseeds in agro<br />
commodities. Both complexes made handsome percentage gains<br />
in the last fortnight. Commodity prices are the vanguard of the<br />
global economy. If we are looking for a real recovery then the<br />
commodity prices should rally. Prices of base metals and crude oil<br />
started moving up even before we saw the financial markets recovering.<br />
<strong>The</strong> bull run in the commodities market is far from over and<br />
this rally could just be the beginning.<br />
BASE METALS:<br />
Base metals saw a rally in the last fortnight. During this period,<br />
copper prices shot up by more than 15%, zinc by 14%, lead by<br />
18% and nickel by more than 20%. This sharp upside in base<br />
metals can be attributed to strategic buying by the Chinese State<br />
Reserve, production cuts and the lag effect of stimulus packages.<br />
We believe the market requires more triggers for copper. Our<br />
picks for the next fortnight are nickel and lead.<br />
Market News:<br />
• Preliminary global stainless steel production for the fourth<br />
quarter of 2008 fell by 30% year-on-year to 4.84 million tonnes,<br />
according to International Stainless Steel Forum (ISSF). This led<br />
to a fall in demand for nickel by about 20% since the end of last<br />
year and nickel production has been cut by 20-30%.<br />
• China’s manufacturing sector was the major bright spot for the<br />
copper market. China’s official Purchasing Managers’ Index for<br />
March rose to 52.4 from 49.0 in February, as per the China Federation<br />
of Logistics and Purchasing (CFLP).<br />
• Glencore said it had suspended operations at its Iscaycruz<br />
lead-zinc mine in Peru. <strong>Product</strong>ion cuts in zinc too helped prices to<br />
edge higher recently.<br />
• China’s imports of unwrought and semi-finished copper rose<br />
to 374,957 tonnes in March, 14% higher than the previous record<br />
of 329,311 tonnes set in February, China’s customs office said.<br />
Imports have risen as spot supply has been tight. However,<br />
imports of scrap copper were pretty low.<br />
• Chinese Premier Wen Jiabao recently said China’s annual<br />
industrial output growth accelerated to 8.3% in March, from a<br />
record low of 3.8% in the first two months of 2009.<br />
• Xstrata is putting its Sinclair nickel mine in Western Australia<br />
on care and maintenance due to decline in nickel prices. This may<br />
trigger some upside in nickel prices once production cuts intensify.<br />
• Vale Inco is shutting down its nickel mining and processing<br />
operations in Sudbury, Ontario, for eight weeks starting June 1 due<br />
to weak demand for the metal, which is mainly used to make<br />
stainless steel. Sudbury is one of the largest nickel producing sites<br />
in the world and last year provided feedstock for the production of<br />
85,300 tonnes of finished nickel, 31% of which was from Vale.<br />
• China Association of Automobile Manufacturers (CAAM)<br />
data, released on 9th April, 2009 shows first quarter domestic car<br />
sales reaching 2.6788 million units, up 3.88% over the same period<br />
last year, a rebound that looks primarily to be the result of market<br />
stimulation policies. In the first quarter, the sale of Chinese<br />
vehicles exceeded that of the United States by over 4,00,000 units.<br />
It is quite possible that China will overtake the United States this<br />
year to become the world’s largest automobile market. This may<br />
drive the demand for lead, a major raw material in manufacturing<br />
car batteries.<br />
Fortnightly Outlook:<br />
We might see copper testing Rs 242 to Rs 245 levels. But we<br />
recommend to book profits and a correction of 3-5% can be used<br />
again as a buying opportunity as some Chinese provinces have<br />
shown interest in buying these metals. If they live up to their word<br />
we might see this rally intensifying. Nickel will continue to remain<br />
bullish and prices are expected to trade up and may touch Rs<br />
685-690/kg in the next fortnight. Lead also looks very strong due<br />
to expectations of improvement in demand from the auto sector.<br />
PRECIOUS METALS:<br />
Precious metals lost some sheen in the last fortnight. Prices of gold<br />
corrected from Rs 15,100/10gm to Rs 14,000/10gm. We saw<br />
stability in the financial markets, which had victimized gold prices<br />
recently. Euro strengthened against the US dollar, which triggered<br />
more selling in precious metals. <strong>The</strong> recent results of financial<br />
institutions in the US have exceeded expectations and have offered<br />
something to cheer about.<br />
Finally the largest gold ETF holding went down by 8 tonnes.<br />
Precious metals have been on a downslide after the G20 Summit,<br />
which aimed at moderating the crisis and IMF’s gold sales report<br />
softened the price of the yellow metal. We believe gold prices are<br />
likely to touch Rs 13,600 (MCX) and $850/oz (COMEX) in the<br />
coming fortnighT.<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...<br />
25
Turn Volatility<br />
Into An<br />
Opportunity<br />
Low risk and positive returns<br />
make Arbitrage Funds a good<br />
investment option in an<br />
unpredictable market<br />
To achieve your needs, goals and dreams, it is<br />
important to prioritize them. Financial<br />
planning does exactly this by routing the<br />
current finances to various investment<br />
options for a secured future. As a person ages, his priorities<br />
change and so do the viable investment options.<br />
While in the previous issue, we recommended Systematic<br />
Investment Plan for the younger generation in the<br />
age group of 25 to 35 years, in this issue we are laying<br />
emphasis on Arbitrage Funds for individuals between 35<br />
and 55 years. <strong>With</strong> added responsibilities, these people<br />
always try to maximize returns by pumping money into<br />
right investment avenues.<br />
Arbitrage Funds offered to investors by the Fund Houses:<br />
Looking at the current volatility in the stock market,<br />
people don’t expect positive returns. However, Arbitrage<br />
Funds offered by Fund Houses, are giving positive<br />
returns with minimal risk. Hence this can be a good<br />
investment option going by the unpredictability in the<br />
stock market.<br />
Arbitrage Funds:<br />
Arbitrage Funds aim to capitalize on the opportunities<br />
arising from price differences between the spot and the<br />
future markets. <strong>The</strong>se can be broadly classified into four<br />
categories: cash future, cash to cash, index arbitrage and<br />
call put parity.<br />
It is a risk-free transaction as the long and short legs of<br />
the transaction exactly offset each other and are less<br />
volatile compared to other equity funds. <strong>The</strong>re is a rare<br />
chance of Arbitrage Funds giving negative returns.<br />
Arbitrage Strategy:<br />
• Entering into simultaneous transactions of a long<br />
position in cash and a short position in futures for the<br />
same underlying.<br />
• Equity position is completely hedged from the very<br />
inception of the trade.<br />
• Arbitrage returns are generated by:<br />
• Squaring up on expiry.<br />
• Early square ups.<br />
• Rollovers into next month.<br />
Compounded Annualised %<br />
(Point to Point)<br />
Scheme Name<br />
NAV<br />
(15 Apr ’09)<br />
Corpus<br />
(Rs in Cr)<br />
(31 Mar ’09)<br />
Min<br />
Investment<br />
1 Year<br />
2 Years<br />
Since<br />
Inception<br />
(P2P)-C<br />
UTI Spread Fund<br />
HDFC Arbitrage Fund<br />
ICICI Prudential Blended Plan - Option A<br />
JM Arbitrage Advantage Fund<br />
Kotak Equity Arbitrage Fund<br />
Religare Arbitrage Fund<br />
SBI Arbitrage Opportunities Fund<br />
ICICI Prudential Equity & Derivatives Fund<br />
IDFC Arbitrage Fund - Plan A<br />
12.755<br />
11.162<br />
13.520<br />
12.420<br />
13.084<br />
11.633<br />
12.163<br />
12.090<br />
11.839<br />
259.47<br />
331.80<br />
122.29<br />
290.27<br />
216.44<br />
44.370<br />
347.75<br />
250.46<br />
276.37<br />
5000<br />
5000<br />
5000<br />
5000<br />
5000<br />
5000<br />
25000<br />
5000<br />
5000<br />
9.559<br />
7.419<br />
7.317<br />
7.277<br />
7.264<br />
6.836<br />
6.728<br />
6.519<br />
5.901<br />
9.370<br />
--<br />
8.063<br />
8.055<br />
8.004<br />
--<br />
7.672<br />
8.410<br />
6.869<br />
9.089<br />
7.713<br />
8.090<br />
8.215<br />
7.878<br />
8.018<br />
8.323<br />
8.628<br />
7.555<br />
26<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
Of the various options available, JM Arbitrage Advantage<br />
Fund, has been giving higher payout NAV than its<br />
previous one since inception. This fund is an open-ended<br />
equity oriented interval fund, which was the second one<br />
to be launched.<br />
Asset Allocation:<br />
72%<br />
Equity 24% Debt 04% Money Market<br />
JM Arbitrage Advantage Fund:<br />
Investment Objective:<br />
<strong>The</strong> primary investment objective of the scheme is to<br />
generate income through arbitrage opportunities emerging<br />
out of mispricing between the cash market and the<br />
Top 10 Holdings as on 31 Mar’09<br />
Company<br />
Jammu and Kashmir Bank Ltd<br />
Infosys Technologies Ltd<br />
Hindustan Unilever Ltd<br />
Oil & Natural Gas Corpn Ltd<br />
CBLO<br />
Global Tele-Systems Ltd<br />
Mphasis BFL Ltd<br />
HDFC Bank Ltd<br />
ITC Ltd<br />
Sun Pharmaceuticals Industries Ltd<br />
Value<br />
(Rs in Cr)<br />
60.00<br />
24.57<br />
14.47<br />
12.68<br />
11.88<br />
11.82<br />
10.18<br />
10.00<br />
07.09<br />
07.03<br />
Top Industry Allocation as on 31 Mar’09<br />
Sector %<br />
Banks<br />
30.71<br />
Computers - Software & Education<br />
14.77<br />
Oil & Gas, Petroleum & Refinery<br />
08.43<br />
Telecom<br />
06.47<br />
Cement<br />
05.58<br />
Diversified<br />
04.98<br />
Engineering & Industrial Machinery<br />
03.97<br />
Pharmaceuticals<br />
03.97<br />
Power Generation, Transmission & Equip<br />
03.29<br />
Tobacco & Pan Masala<br />
02.44<br />
%<br />
20.67<br />
08.46<br />
04.98<br />
04.37<br />
04.09<br />
04.07<br />
03.51<br />
03.44<br />
02.44<br />
02.42<br />
derivatives market and through deployment of surplus<br />
cash in fixed income instruments.<br />
Benefits of Arbitrage Fund:<br />
No Price And Leverage Risk:<br />
Cash positions completely hedged with futures, thus<br />
insulated by market volatility.<br />
Reduced Maturity Risk:<br />
As the future maturity contracts used in the strategy are<br />
for one month, it reduces the average maturity of the<br />
portfolio.<br />
Enhanced Return Over Comparable Risk Profile:<br />
<strong>The</strong> returns are expected to be higher than the other<br />
comparable alternative investments.<br />
No tax on long-term capital gains (one year or more)<br />
and only 15% tax on short-term capitals gains (less than<br />
a year).<br />
Unlike arbitrage activity carried out directly by the<br />
investor that attracts 33.6% tax on his net profit, the<br />
arbitrage activity carried out by Mutual Fund is tax-free.<br />
Corpus As On 31 Mar’09: Rs 290.2788 cr<br />
Nav As On 15 Apr’09: Rs 12.4203<br />
52 Weeks High: Rs 12.44 (31 Mar’09)<br />
52 Weeks Low: Rs 11.59 (17 Apr’08)<br />
Fund Manager: Biren Mehta<br />
Inception Date: 30 Jun’06<br />
Benchmark Index: Crisil Liquid Fund Index<br />
Due to its ability to generate risk-free returns, which in<br />
turn, reduces the risk in one’s entire portfolio, Arbitrage<br />
Funds make a perfect alternative investment option. <strong>With</strong><br />
the current global meltdown and general elections at the<br />
door, volatility is expected to stay. Such an opportunity<br />
can be used to invest in an Arbitrage FunD.<br />
Beyond Market 20th Apr ’09 27<br />
It’s simplified...
JJM Financial is an integrated financial services<br />
group, offering a wide range of services to a<br />
significant clientele that includes corporations,<br />
financial institutions, high net-worth individuals<br />
and retail investors.<br />
<strong>The</strong> Group has interests in investment banking, institutional<br />
equity sales, trading, research and broking, private<br />
and corporate wealth management, equity broking,<br />
‘Arbitrage Fund Is<br />
A Safe Haven<br />
Investment’<br />
portfolio management, asset management, commodity<br />
broking, NBFC (Non Banking Finance Company) activities,<br />
private equity and asset reconstruction.<br />
JM Financial Mutual Fund is one of India’s first private<br />
sector Mutual Funds - an integral part of the first wave<br />
that commenced operations in 1993-94. It is part of the<br />
JM Financial Group, which has a rich heritage, built over<br />
three decades.<br />
Biren Mehta is the Fund Manager - Equity Derivatives at JM Financial. He<br />
manages the JM Nifty Plus Fund and the JM Arbitrage Advantage Fund. He<br />
brings with him a vast experience in equity trading and Arbitrage Funds. He<br />
has worked with reputed equity trading houses and was Vice President-<br />
Institutional Sales at Refco-Sify Securities Ltd.<br />
Qualification: MBA – Finance<br />
Experience: In Capital Markets since 1989.<br />
28<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
Mehta speaks to Beyond Market on capital markets, JM<br />
Arbitrage Advantage Fund and the different kinds of<br />
funds people can opt for in the current scenario.<br />
Excerpts from the interview:<br />
Q. How have you seen the investment atmosphere<br />
transform over the past decade<br />
<strong>The</strong> Indian capital market has seen a massive transformation<br />
in the past 10 to 15 years. I started my career when<br />
the open outcry and the age-old badla system existed.<br />
<strong>The</strong>n in 1994-1995 we saw the transformation of<br />
exchanges into electronic trading systems and also the<br />
entry of the private sector into the Mutual Fund space.<br />
JM Financial Group took the leadoff by being the first<br />
private sector Mutual Fund House. This opened up a lot<br />
of opportunities for investors in terms of alternative<br />
investment avenues. <strong>The</strong> process of investment has also<br />
changed over the past few years. Unlike in the past, when<br />
stocks were picked on the basis of news and some basic<br />
fundamental analysis, a lot of research goes into stock<br />
picking. Global inputs are taken into consideration, a lot<br />
of new techniques are being used and the research is<br />
more process-driven now. Investors have become aware<br />
of the investment risks and are well informed of changes<br />
in the Capital Markets.<br />
Q. How is JM Financial‘s Arbitrage Fund better than<br />
its competitors<br />
JM Financial AMC was the first to launch the Arbitrage<br />
scheme in India for people at large with an investment of<br />
as low as Rs 5,000 way back in 2005. <strong>The</strong> concept was<br />
new and a lot of hand-holding exercise and educational<br />
seminars were held along with Dun & Bradstreet across<br />
the country. JM Arbitrage Advantage Fund aims to<br />
protect investors’ capital at all times and does not take<br />
any directional position in the arbitrage space. All<br />
positions are hedged at all times right from the start of the<br />
trade. Our historical NAV’s show that our redemption<br />
NAV’s are never lower than the previous redemption<br />
NAV. <strong>The</strong> JM Arbitrage Advantage Fund provides all<br />
tax benefits of an equity scheme and the risk parameters<br />
are lower than that of debt schemes. <strong>The</strong> scheme has, till<br />
date, paid dividends every quarter since 2006. And the<br />
dividend is free of dividend distribution tax.<br />
Q. How would an investor benefit from this scheme<br />
going by the current economic and market scenario<br />
Q. Do you feel investors should take extra risk for<br />
better returns through Arbitrage Funds instead of<br />
Income Funds<br />
Arbitrage Funds may also be called ‘safe haven investments’.<br />
<strong>The</strong> term arbitrage itself defines the term<br />
risk-free. When all positions in a portfolio are completely<br />
hedged at all times, there is no price or volatility risk. JM<br />
Arbitrage Advantage Fund is one such product that<br />
delivers risk-free returns. Our payout NAV has never<br />
been lower than the previous payout NAV.<br />
Q. What do you prefer more - value or growth Why<br />
Value stocks are something that one can look for with a<br />
short-term horizon of say, 6 to 8 months, like certain<br />
stocks that are unnecessarily beaten down, but a growth<br />
story is the kicker and that is where the real multi-bagger<br />
lies. Depending on one’s investment horizon a strategy<br />
needs to be adopted for value or growth stocks.<br />
Q. What kind of funds should one invest in the<br />
current situation<br />
In the current situation, alternative investment avenues<br />
like a capital protection fund with stable returns is a must<br />
in every investor’s portfolio. <strong>The</strong> stock market scams in<br />
the past and the global financial meltdown now have all<br />
led to great wealth erosion in every portfolio. An<br />
Arbitrage Fund may not give a handsome return like an<br />
equity stock or equity scheme, but will give good and<br />
stable returns over a longer period of time and give you a<br />
good night’s sleep over your investments.<br />
Q. How do you think Indian stock market will cope<br />
with the ongoing economic meltdown<br />
<strong>The</strong> Indian stock market is very resilient and history has<br />
proven this in the past too. Indian bourses have witnessed<br />
many a fall and have withstood all the stock market and<br />
political scams over the years. We in India have a mature<br />
set of traders and investors who understand the risks<br />
associated with investing in direct equities. India has<br />
definitely not been insulated from the global meltdown,<br />
but our conservative financial policies by the Reserve<br />
Bank of India have saved us from a major crisis. Our<br />
banks have been strong and more resilient than the banks<br />
in the western hemisphere. Our economy will be ready to<br />
bounce back in a matter of 4 to 6 quarterS.<br />
When an investor invests money he looks for a) capital<br />
protection, b) stable returns and c) tax efficiency among<br />
other things. JM Arbitrage Advantage Fund gives an<br />
investor all the above benefits. This is how an investor<br />
will benefit in the present time.<br />
Beyond Market 20th Apr ’09 It’s simplified... 29
BULK DEALS<br />
MAJOR BULK DEALS WHERE OVER 1% OF EQUITY WAS TRADED FROM 30 Mar’09 TO 09 Apr ’09<br />
Exchange Date Company Client<br />
Transaction Quantity % of Equity<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
BSE<br />
30 Mar'09<br />
30 Mar'09<br />
30 Mar'09<br />
30 Mar'09<br />
30 Mar'09<br />
30 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
31 Mar'09<br />
01 Apr'09<br />
02 Apr'09<br />
02 Apr'09<br />
06 Apr'09<br />
06 Apr'09<br />
06 Apr'09<br />
06 Apr'09<br />
BL Kashyap<br />
Forbes Gokak<br />
Indage Vintners<br />
Indage Vintners<br />
Spanco<br />
Welspun India<br />
BL Kashyap<br />
Decolight Ceram<br />
Indo Tech Trans<br />
Shri Baj Alloys<br />
Spanco<br />
Steel Exchange<br />
Temptation Food<br />
TV 18<br />
Allied Digital<br />
Pritish Nandy<br />
Pritish Nandy<br />
Arshiya Intl<br />
FAG Bearings<br />
FAG Bearings<br />
FAG Bearings<br />
Arisaig Partners Asia Pte Ltd<br />
Deutesche Int Trust Corp Mauritius Ltd<br />
India Max Investment Fund Ltd.<br />
Sicom Ltd<br />
AVL India Leasing<br />
Welspun Trading Ltd<br />
Arisaig India Fund Ltd<br />
Clarus Finance And Securities<br />
Blackstone Asia Advisors L.l.c.<br />
Clarus Finance And Securities<br />
AVL India Leasing<br />
Clarus Finance And Securities<br />
Venture Business Advisors Pvt Ltd<br />
T Rowe Price New Asia Fund<br />
Blackrock Trust Japan<br />
Cresta Fund Ltd<br />
<strong>The</strong> Indiaman Mauritius Ltd<br />
Swiss Finance Corporation Mauritius Ltd<br />
Acacia Institutional Partners Lp<br />
Acacia Partners Lp<br />
Notz Stucki Et Cie S A<br />
Sell<br />
Buy<br />
Buy<br />
Sell<br />
Buy<br />
Buy<br />
Sell<br />
Buy<br />
Sell<br />
Buy<br />
Buy<br />
Buy<br />
Buy<br />
Buy<br />
Buy<br />
Buy<br />
Sell<br />
Sell<br />
Buy<br />
Buy<br />
Sell<br />
400000<br />
400000<br />
200000<br />
218620<br />
400000<br />
1543262<br />
446650<br />
268159<br />
190628<br />
240092<br />
685000<br />
419236<br />
435171<br />
1926292<br />
191015<br />
1000000<br />
1000000<br />
999729<br />
192402<br />
179181<br />
447177<br />
1.95<br />
3.1<br />
1.31<br />
1.43<br />
1.94<br />
2.11<br />
2.17<br />
1.46<br />
1.79<br />
2.67<br />
3.32<br />
2.09<br />
1.73<br />
1.61<br />
1.05<br />
6.91<br />
6.91<br />
1.7<br />
1.16<br />
1.08<br />
2.69<br />
Price (Rs)<br />
Traded Close<br />
129.75<br />
360<br />
49.45<br />
49.45<br />
25.87<br />
21.42<br />
129<br />
6.5<br />
300.01<br />
14.1<br />
27.61<br />
13.43<br />
29.87<br />
67.5<br />
173<br />
15.25<br />
15.25<br />
50.02<br />
283<br />
283<br />
283<br />
129.6<br />
359.95<br />
49.3<br />
49.3<br />
25.95<br />
21.25<br />
130.65<br />
6.14<br />
299.8<br />
14<br />
27.85<br />
16.04<br />
29.35<br />
70.15<br />
177.7<br />
18<br />
18<br />
58<br />
298.7<br />
298.7<br />
298.7<br />
Source: NSE, BSE & RBI<br />
PUT CALL RATIO<br />
30 Mar'09<br />
31 Mar'09<br />
01 Apr'09<br />
02 Apr'09<br />
06 Apr'09<br />
08 Apr'09<br />
09 Apr'09<br />
Call Open<br />
Interest<br />
108747425<br />
122332365<br />
131416682<br />
136806696<br />
150459528<br />
165724537<br />
174651562<br />
Future<br />
Open<br />
Interest<br />
969944473<br />
990569595<br />
1029992880<br />
1072019450<br />
1094927235<br />
1170799943<br />
1161765327<br />
Put<br />
Open<br />
Interest<br />
79129205<br />
84422523<br />
95350270<br />
108552064<br />
116411269<br />
128970473<br />
138168624<br />
CLOSE<br />
2988.10<br />
3015.25<br />
3061.50<br />
3222.60<br />
3260.25<br />
3355.50<br />
3355.40<br />
Call<br />
Volume<br />
88693678<br />
90606242<br />
98187426<br />
124537706<br />
120602253<br />
154326778<br />
134251735<br />
Put<br />
Volume<br />
50883871<br />
43109942<br />
47667320<br />
63788569<br />
48876709<br />
64732095<br />
57256615<br />
Future<br />
Value<br />
28418<br />
30386<br />
30093<br />
29937<br />
28251<br />
37304<br />
37129<br />
Call<br />
Value<br />
10180<br />
9231<br />
12008<br />
13678<br />
10674<br />
14518<br />
13261<br />
Put<br />
Value<br />
10440<br />
8999<br />
10382<br />
13265<br />
9420<br />
13377<br />
12493<br />
Put Call<br />
Ratio<br />
103<br />
97<br />
86<br />
97<br />
88<br />
92<br />
94<br />
PUT CALL RATIO (CONTD.)<br />
30 Mar'09<br />
31 Mar'09<br />
01 Apr'09<br />
02 Apr'09<br />
06 Apr'09<br />
08 Apr'09<br />
09 Apr'09<br />
Future Open<br />
Interest<br />
Value<br />
26586.32<br />
27708.03<br />
28981.36<br />
31927.10<br />
32607.54<br />
35708.76<br />
36369.59<br />
Call Open<br />
Interest<br />
Value<br />
11884.50<br />
12688.38<br />
13167.59<br />
13926.41<br />
15113.90<br />
16467.82<br />
17411.96<br />
Put Open<br />
Interest<br />
Value<br />
16644.24<br />
17180.06<br />
18923.05<br />
21601.53<br />
22394.46<br />
24309.65<br />
25628.99<br />
Future<br />
Volume<br />
870882855<br />
934239482<br />
974038545<br />
1092221891<br />
1108878764<br />
1363526699<br />
1342209292<br />
<strong>The</strong>se tables show position<br />
of futures and options for<br />
the fortnight gone by<br />
Source: NB Research<br />
30<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
CHANGE IN PRICE AND OPEN INTEREST<br />
Company Name<br />
ABB Ltd<br />
ACC Ltd<br />
Ambuja Cements Ltd<br />
Axis Bank Ltd<br />
Bank NIFTY<br />
Bharat Heavy Electricals Ltd<br />
Bharat Petroleum Corporation Ltd<br />
Bharti Airtel Ltd<br />
Cairn India Ltd<br />
Cipla Ltd<br />
DLF Ltd<br />
GAIL (India) Ltd<br />
Grasim Industries Ltd<br />
HCL Technologies Ltd<br />
HDFC Bank Ltd<br />
HDFC Ltd<br />
Hero Honda Motors Ltd<br />
Hindalco Industries Ltd<br />
Hindustan Unilever Ltd<br />
I T C Ltd<br />
ICICI Bank Ltd<br />
Idea Cellular Ltd<br />
Infosys Technologies Ltd<br />
Larsen & Toubro Ltd<br />
Mahindra & Mahindra Ltd<br />
Maruti Suzuki India Ltd<br />
National Aluminium Co. Ltd<br />
NIFTY<br />
NTPC Ltd<br />
Oil & Natural Gas Corporation Ltd<br />
Power Grid Corporation of India Ltd<br />
Punjab National Bank<br />
Ranbaxy Laboratories Ltd<br />
Reliance Capital Ltd<br />
Reliance Communications Ltd<br />
Reliance Industries Ltd<br />
Reliance Infrastructure Ltd<br />
Reliance Petroleum Ltd<br />
Reliance Power Ltd<br />
Siemens Ltd<br />
State Bank of India<br />
Steel Authority of India Ltd<br />
Sterlite Industries (India) Ltd<br />
Sun Pharmaceutical Industries Ltd<br />
Suzlon Energy Ltd<br />
Tata Communications Ltd<br />
Tata Consultancy Services Ltd<br />
Tata Motors Ltd<br />
Tata Power Co. Ltd<br />
Tata Steel Ltd<br />
Unitech Ltd<br />
Wipro Ltd<br />
CHANGE IN PRICE AND OPEN INTEREST OF THE NIFTY 50 COMPANIES<br />
30 Mar'09 09 Apr'09<br />
Price<br />
(Rs)<br />
406.90<br />
561.60<br />
70.90<br />
398.05<br />
4044.00<br />
1485.00<br />
369.40<br />
612.30<br />
182.50<br />
218.00<br />
161.05<br />
233.90<br />
1540.00<br />
99.00<br />
941.00<br />
1453.00<br />
1047.00<br />
50.30<br />
240.60<br />
179.80<br />
339.20<br />
50.35<br />
1300.00<br />
654.00<br />
371.50<br />
751.45<br />
220.00<br />
2995.00<br />
183.60<br />
790.10<br />
95.00<br />
396.40<br />
159.00<br />
339.00<br />
164.85<br />
1536.25<br />
505.55<br />
94.90<br />
100.50<br />
247.90<br />
1026.00<br />
93.65<br />
349.50<br />
1087.85<br />
41.70<br />
523.20<br />
527.00<br />
171.85<br />
767.70<br />
196.60<br />
32.50<br />
243.40<br />
Open<br />
Interest<br />
1188500<br />
2137184<br />
7546920<br />
5880600<br />
674750<br />
2383500<br />
1127500<br />
8581500<br />
9387500<br />
2230000<br />
24646400<br />
4475250<br />
635008<br />
2880800<br />
3588400<br />
2187600<br />
2463200<br />
13319148<br />
9613000<br />
16650000<br />
13786500<br />
22923000<br />
6167600<br />
5018000<br />
3290976<br />
4308800<br />
2605900<br />
36180350<br />
24625250<br />
5740200<br />
19615750<br />
2003400<br />
5265600<br />
7320624<br />
19427800<br />
8764200<br />
5144088<br />
21312700<br />
23996000<br />
1135520<br />
3997224<br />
20498400<br />
8993016<br />
891675<br />
31872000<br />
1286250<br />
4966000<br />
11184300<br />
1130800<br />
10893112<br />
55521000<br />
4003200<br />
Price<br />
(Rs)<br />
463.8<br />
584.25<br />
77.95<br />
445.1<br />
4596.25<br />
1504.8<br />
385<br />
670<br />
200.25<br />
228.7<br />
214.55<br />
270.2<br />
1605.9<br />
121.45<br />
1050<br />
1706.05<br />
1066.75<br />
59<br />
236<br />
189.25<br />
397.7<br />
55.75<br />
1430.35<br />
829<br />
436.3<br />
804.8<br />
253.9<br />
3360<br />
196.1<br />
889.15<br />
96.6<br />
453<br />
192.5<br />
469.15<br />
209.75<br />
1744<br />
654<br />
109<br />
120.45<br />
285<br />
1142.05<br />
111.55<br />
399.9<br />
1134.2<br />
57.5<br />
580.5<br />
607.1<br />
220.7<br />
886.55<br />
261.1<br />
41.6<br />
277.7<br />
Open<br />
Interest<br />
1398500<br />
2277056<br />
8775872<br />
7292700<br />
1057450<br />
2900400<br />
1582900<br />
9516500<br />
12042500<br />
3113750<br />
26113600<br />
5448375<br />
874368<br />
3052400<br />
4525200<br />
2205300<br />
2576800<br />
18378032<br />
11309000<br />
19273500<br />
18689300<br />
23895000<br />
6952400<br />
5116800<br />
3715296<br />
4381600<br />
2987700<br />
43957950<br />
32677125<br />
7803900<br />
22861300<br />
2641200<br />
4672000<br />
6907176<br />
26213600<br />
10356000<br />
6484344<br />
22116700<br />
27570000<br />
1540096<br />
4938120<br />
24829200<br />
11417784<br />
1083375<br />
38568000<br />
1548750<br />
5644000<br />
10670900<br />
1304800<br />
13348608<br />
73458000<br />
5241600<br />
Change<br />
in Price<br />
(Rs)<br />
56.90<br />
22.65<br />
7.05<br />
47.05<br />
552.25<br />
19.80<br />
15.60<br />
57.70<br />
17.75<br />
10.70<br />
53.50<br />
36.30<br />
65.90<br />
22.45<br />
109.00<br />
253.05<br />
19.75<br />
8.70<br />
-4.60<br />
9.45<br />
58.50<br />
5.40<br />
130.35<br />
175.00<br />
64.80<br />
53.35<br />
33.90<br />
365.00<br />
12.50<br />
99.05<br />
1.60<br />
56.60<br />
33.50<br />
130.15<br />
44.90<br />
207.75<br />
148.45<br />
14.10<br />
19.95<br />
37.10<br />
116.05<br />
17.90<br />
50.40<br />
46.35<br />
15.80<br />
57.30<br />
80.10<br />
48.85<br />
118.85<br />
64.50<br />
9.10<br />
34.30<br />
Change<br />
in Open<br />
Interest<br />
210000<br />
139872<br />
1228952<br />
1412100<br />
382700<br />
516900<br />
455400<br />
935000<br />
2655000<br />
883750<br />
1467200<br />
973125<br />
239360<br />
171600<br />
936800<br />
17700<br />
113600<br />
5058884<br />
1696000<br />
2623500<br />
4902800<br />
972000<br />
784800<br />
98800<br />
424320<br />
72800<br />
381800<br />
7777600<br />
8051875<br />
2063700<br />
3245550<br />
637800<br />
-593600<br />
-413448<br />
6785800<br />
1591800<br />
1340256<br />
804000<br />
3574000<br />
404576<br />
940896<br />
4330800<br />
2424768<br />
191700<br />
6696000<br />
262500<br />
678000<br />
-513400<br />
174000<br />
2455496<br />
17937000<br />
1238400<br />
Change<br />
in<br />
Price(%)<br />
13.98<br />
4.03<br />
9.94<br />
11.82<br />
13.66<br />
1.33<br />
4.22<br />
9.42<br />
9.73<br />
4.91<br />
33.22<br />
15.52<br />
4.28<br />
22.68<br />
11.58<br />
17.42<br />
1.89<br />
17.30<br />
-1.91<br />
5.26<br />
17.25<br />
10.72<br />
10.03<br />
26.76<br />
17.44<br />
7.10<br />
15.41<br />
12.19<br />
6.81<br />
12.54<br />
1.68<br />
14.28<br />
21.07<br />
38.39<br />
27.24<br />
13.52<br />
29.36<br />
14.86<br />
19.85<br />
14.97<br />
11.31<br />
19.11<br />
14.42<br />
4.26<br />
37.89<br />
10.95<br />
15.20<br />
28.43<br />
15.48<br />
32.81<br />
28.00<br />
14.09<br />
Change<br />
in Open<br />
Interest<br />
(%)<br />
17.67<br />
6.54<br />
16.28<br />
24.01<br />
56.72<br />
21.69<br />
40.39<br />
10.90<br />
28.28<br />
39.63<br />
5.95<br />
21.74<br />
37.69<br />
5.96<br />
26.11<br />
0.81<br />
4.61<br />
37.98<br />
17.64<br />
15.76<br />
35.56<br />
4.24<br />
12.72<br />
1.97<br />
12.89<br />
1.69<br />
14.65<br />
21.50<br />
32.70<br />
35.95<br />
16.55<br />
31.84<br />
-11.27<br />
-5.65<br />
34.93<br />
18.16<br />
26.05<br />
3.77<br />
14.89<br />
35.63<br />
23.54<br />
21.13<br />
26.96<br />
21.50<br />
21.01<br />
20.41<br />
13.65<br />
-4.59<br />
15.39<br />
22.54<br />
32.31<br />
30.94<br />
Source: NB Research<br />
Beyond Market 20th Apr ’09<br />
It’s simplified... 31
PRICE TO BOOK VALUE<br />
<strong>The</strong> table given below represents companies<br />
that are listed on the BSE . <strong>The</strong>se companies<br />
have a price to book value below 1<br />
Company Name<br />
Current Market Price<br />
(16 Apr’09)<br />
Book Value<br />
Price / Book Value<br />
Videocon Indsustries Ltd<br />
Mahanagar Telephone Nigam Ltd<br />
Raymond Ltd<br />
Hindalco Industries Ltd<br />
Hinduja Ventures Ltd<br />
J K Cements Ltd<br />
Gujarat Alkalies and Chemicals Ltd<br />
Chennai Petroleum Corporation Ltd<br />
Electrosteel Castings Ltd<br />
Moser Baer India Ltd<br />
Gujarat Narmada Valley Fertilizers Company Ltd<br />
Zuari Indsustries Ltd<br />
Finolex Cables Ltd<br />
Gujarat State Fertilizers Chemicals Ltd<br />
Gammon India Ltd<br />
Shipping Corporation of India Ltd<br />
Anant Raj Industries Ltd<br />
PSL Ltd<br />
Nirma Ltd<br />
Tamil Nadu Newsprint and Papers Ltd<br />
Dalmia Cement Bharat Ltd<br />
Great Eastern Shipping Company Ltd<br />
Provogue India Ltd<br />
Bajaj Hindusthan Ltd<br />
Kesoram Indsustries Ltd<br />
Deepak Fertilisersand Petrochemicals Corporation Ltd<br />
Patni Computer System Ltd<br />
Ballarpur Industries Ltd<br />
Bongaigaon Refinery and Petrochemicals Ltd<br />
Dredging Corporation of India Ltd<br />
Tube Investments of India ltd<br />
MRF Ltd<br />
Asian Hotels Ltd<br />
EMCO Ltd<br />
Gujarat Industries Power Company Ltd<br />
Hindustan Petroleum Corporation Ltd<br />
JSW Steel Ltd<br />
Inox Leisure Ltd<br />
Apollo Tyres Ltd<br />
Shiv Vani Oil and Gas Exploration Services Ltd<br />
Mercator Lines Lines<br />
Prime Focus Ltd<br />
Tata Steel Ltd<br />
McNally Bharat Engineering Company Ltd<br />
Sundram Fasteners Ltd<br />
3i Infotech Ltd<br />
Phoenix Mills Ltd<br />
Usha Martin Ltd<br />
HEG Ltd<br />
Rajesh Exports Ltd<br />
114.85<br />
74.55<br />
91.4<br />
57.9<br />
133.6<br />
53.9<br />
74.7<br />
118.6<br />
21.03<br />
64.1<br />
69.05<br />
170.2<br />
25.45<br />
112.05<br />
74.8<br />
89.3<br />
66.5<br />
90.55<br />
111.1<br />
66.65<br />
95.35<br />
198.95<br />
40.8<br />
70.1<br />
157.35<br />
59.7<br />
149.7<br />
17.47<br />
44.55<br />
345.5<br />
30.35<br />
2083.05<br />
233.85<br />
52.5<br />
62.9<br />
262.75<br />
330.85<br />
35.85<br />
21.75<br />
125.15<br />
34.45<br />
130.15<br />
269.15<br />
48.45<br />
18.24<br />
39.65<br />
95.05<br />
33.4<br />
117.5<br />
32.45<br />
294.96<br />
189.23<br />
227.81<br />
128.42<br />
287.67<br />
108.99<br />
146.85<br />
232.61<br />
40.94<br />
117.03<br />
118.75<br />
286.84<br />
41.94<br />
184.62<br />
111.93<br />
133.01<br />
98.04<br />
132.45<br />
162.26<br />
95.37<br />
132.8<br />
273.03<br />
55.77<br />
95.13<br />
213.51<br />
79.23<br />
196.8<br />
22.83<br />
57.66<br />
442.42<br />
38.86<br />
2643.37<br />
290.52<br />
64.04<br />
75.17<br />
311.31<br />
391.73<br />
41.89<br />
25.22<br />
140.14<br />
38.5<br />
144.96<br />
298.78<br />
53.53<br />
20.09<br />
41.7<br />
98.56<br />
34.59<br />
120.91<br />
33.08<br />
0.39<br />
0.39<br />
0.40<br />
0.45<br />
0.46<br />
0.49<br />
0.51<br />
0.51<br />
0.51<br />
0.55<br />
0.58<br />
0.59<br />
0.61<br />
0.61<br />
0.67<br />
0.67<br />
0.68<br />
0.68<br />
0.68<br />
0.70<br />
0.72<br />
0.73<br />
0.73<br />
0.74<br />
0.74<br />
0.75<br />
0.76<br />
0.77<br />
0.77<br />
0.78<br />
0.78<br />
0.79<br />
0.80<br />
0.82<br />
0.84<br />
0.84<br />
0.84<br />
0.86<br />
0.86<br />
0.89<br />
0.89<br />
0.90<br />
0.90<br />
0.91<br />
0.91<br />
0.95<br />
0.96<br />
0.97<br />
0.97<br />
0.98<br />
Source: Capital Line<br />
32<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
CASH POSITION OF ASSET MANAGEMENT COMPANIES<br />
This table signifies change in the amount of cash held by fund houses.<br />
An increase in the cash position can be due to the fund houses<br />
choosing to hold cash expecting better opportunities in the future or it could also be that<br />
they are expecting more redemptions due to a liquidity crunch and are therefore<br />
maintaining a high cash position.<br />
A decrease in the cash holding can be the outcome of purchases made by fund houses<br />
or due to redemptions that might have come in during the said period.<br />
Fund House<br />
AIG Global Investment Group Mutual Fund<br />
Baroda Pioneer Mutual Fund<br />
Benchmark Mutual Fund<br />
Birla Sun Life Mutual Fund<br />
Canara Robeco Mutual Fund<br />
DBS Chola Mutual Fund<br />
DSP BlackRock Mutual Fund<br />
Deutsche Mutual Fund<br />
Escorts Mutual Fund<br />
Fidelity Mutual Fund<br />
Fortis Mutual Fund<br />
Franklin Templeton Mutual Fund<br />
HDFC Mutual Fund<br />
HSBC Mutual Fund<br />
ICICI Prudential Mutual Fund<br />
IDFC Mutual Fund<br />
ING Mutual Fund<br />
JM Financial Mutual Fund<br />
JPMorgan Mutual Fund<br />
Kotak Mahindra Mutual Fund<br />
LIC Mutual Fund<br />
Religare Mutual Fund<br />
Mirae Asset Mutual Fund<br />
Morgan Stanley Mutual Fund<br />
PRINCIPAL Mutual Fund<br />
Quantum Mutual Fund<br />
Reliance Mutual Fund<br />
Sahara Mutual Fund<br />
SBI Mutual Fund<br />
Sundaram BNP Paribas Mutual Fund<br />
Tata Mutual Fund<br />
Taurus Mutual Fund<br />
UTI Mutual Fund<br />
Total<br />
Corpus*<br />
as on<br />
28 Feb '09<br />
(Rs in Cr)<br />
514.07<br />
30.88<br />
22.84<br />
4120.77<br />
301.73<br />
122.32<br />
5732.85<br />
295.70<br />
19.45<br />
4216.14<br />
347.06<br />
7334.59<br />
9792.88<br />
2375.15<br />
7454.32<br />
2584.10<br />
297.92<br />
1235.01<br />
645.76<br />
2187.86<br />
850.73<br />
503.68<br />
138.12<br />
1373.13<br />
1377.50<br />
20.95<br />
19494.84<br />
37.54<br />
9808.22<br />
4573.00<br />
3686.43<br />
137.88<br />
12319.54<br />
103952.94<br />
Feb'09<br />
Cash<br />
Holding<br />
(Rs in Cr)<br />
7.49<br />
4.68<br />
1.45<br />
827.76<br />
44.33<br />
20.81<br />
753.32<br />
57.34<br />
6.40<br />
329.10<br />
27.75<br />
435.13<br />
946.59<br />
370.18<br />
757.70<br />
281.22<br />
17.16<br />
162.73<br />
166.70<br />
356.70<br />
127.48<br />
32.01<br />
5.13<br />
40.41<br />
107.79<br />
0.96<br />
6306.97<br />
13.47<br />
2134.19<br />
993.60<br />
806.60<br />
36.46<br />
3620.56<br />
19800.16<br />
Cash<br />
Holding<br />
(%)<br />
1.46<br />
15.15<br />
6.35<br />
20.09<br />
14.69<br />
17.01<br />
13.14<br />
19.39<br />
32.89<br />
7.81<br />
8.00<br />
5.93<br />
9.67<br />
15.59<br />
10.16<br />
10.88<br />
5.76<br />
13.18<br />
25.81<br />
16.30<br />
14.98<br />
6.36<br />
3.72<br />
2.94<br />
7.83<br />
4.56<br />
32.35<br />
35.88<br />
21.76<br />
21.73<br />
21.88<br />
26.45<br />
29.39<br />
19.05<br />
Corpus*<br />
as on<br />
31 Mar '09<br />
(Rs in Cr)<br />
537.18<br />
30.88<br />
22.12<br />
4438.53<br />
323.64<br />
130.57<br />
6108.61<br />
300.59<br />
17.77<br />
4010.06<br />
353.66<br />
8034.43<br />
10450.17<br />
2492.96<br />
7997.21<br />
2443.05<br />
307.35<br />
1313.87<br />
678.90<br />
2299.44<br />
868.74<br />
493.80<br />
152.42<br />
1452.70<br />
1460.41<br />
22.79<br />
20704.33<br />
38.96<br />
10581.25<br />
4879.63<br />
3955.41<br />
130.60<br />
13148.16<br />
110180.16<br />
Mar'09<br />
Cash<br />
Holding<br />
(Rs in Cr)<br />
13.24<br />
4.68<br />
2.46<br />
804.66<br />
35.82<br />
12.06<br />
682.63<br />
57.14<br />
7.53<br />
350.27<br />
22.83<br />
550.73<br />
999.16<br />
350.48<br />
826.06<br />
272.44<br />
15.95<br />
301.47<br />
152.29<br />
362.93<br />
142.80<br />
39.02<br />
5.42<br />
75.46<br />
141.54<br />
0.91<br />
5829.42<br />
10.53<br />
1374.34<br />
978.07<br />
713.71<br />
28.60<br />
3843.48<br />
19008.14<br />
Cash<br />
Holding<br />
(%)<br />
2.46<br />
15.15<br />
11.12<br />
18.13<br />
11.07<br />
9.24<br />
11.17<br />
19.01<br />
42.39<br />
8.73<br />
6.46<br />
6.85<br />
9.56<br />
14.06<br />
10.33<br />
11.15<br />
5.19<br />
22.95<br />
22.43<br />
15.78<br />
16.44<br />
7.90<br />
3.55<br />
5.19<br />
9.69<br />
4.00<br />
28.16<br />
27.03<br />
12.99<br />
20.04<br />
18.04<br />
21.90<br />
29.23<br />
17.25<br />
* AUM of the Equity schemes owned by the fund house<br />
Beyond Market 20th Apr ’09<br />
It’s simplified... 33
COMPANIES IN AND OUT<br />
IN<br />
COMPANY QTY AMC<br />
OUT<br />
<strong>Share</strong>s of companies bought and sold by<br />
FUND HOUSES from Feb’09 to Mar’09<br />
COMPANY QTY AMC<br />
ABB Ltd<br />
ACC Ltd<br />
Axis Bank Ltd<br />
Bharat Heavy Electricals Ltd<br />
Bharat Petroleum Corporation Ltd<br />
Bharti Airtel Ltd<br />
Cairn India Ltd<br />
Cipla Ltd<br />
DLF Ltd<br />
Gas Authority Of India Ltd<br />
Grasim Industries Ltd<br />
HDFC Bank Ltd<br />
Hindalco Industries Ltd<br />
Hindustan Unilever Ltd<br />
ICICI Bank Ltd<br />
Idea Cellular Ltd<br />
Infosys Technologies Ltd<br />
Mahindra & Mahindra Ltd<br />
Maruti Suzuki India Ltd<br />
National Aluminium Company Ltd<br />
NTPC Limited.<br />
Power Grid Corporation of India Ltd<br />
Punjab National Bank<br />
Reliance Capital Ltd<br />
Reliance Infrastructure Ltd<br />
Reliance Petroleum Ltd<br />
Reliance Power Ltd<br />
Siemens Ltd<br />
1488<br />
30600<br />
2040<br />
34128<br />
20636<br />
29<br />
117286<br />
87135<br />
225086<br />
590<br />
37538<br />
163107<br />
10130<br />
210775<br />
2801<br />
190446<br />
8356<br />
890<br />
354411<br />
11948<br />
367249<br />
7810<br />
274361<br />
282171<br />
55055<br />
10<br />
102480<br />
1511000<br />
1613480<br />
44000<br />
2530<br />
61497<br />
21776<br />
600000<br />
683273<br />
680<br />
7020<br />
115000<br />
449472<br />
571492<br />
37232<br />
59635<br />
96867<br />
4533<br />
548287<br />
29560<br />
1599<br />
10001<br />
59916<br />
71516<br />
1706<br />
63548<br />
65254<br />
419520<br />
759295<br />
49962<br />
5540<br />
1234317<br />
397479<br />
60300<br />
82727<br />
540506<br />
16844<br />
18759<br />
35603<br />
2365<br />
10000<br />
12365<br />
ICICI Prudential<br />
Kotak Mahindra<br />
Sahara<br />
Escorts<br />
Edelweiss<br />
IDFC<br />
JP Morgan<br />
Bharti AXA<br />
ICICI Prudential<br />
JP Morgan<br />
Taurus<br />
Bharti AXA<br />
JP Morgan<br />
Benchmark<br />
Benchmark<br />
DSP BlackRock<br />
ICICI Prudential<br />
Benchmark<br />
JP Morgan<br />
JP Morgan<br />
Sahara<br />
Escorts<br />
Sundaram BNP Paribas<br />
DBS Chola<br />
Bharti AXA<br />
Fortis<br />
ICICI Prudential<br />
Sundaram BNP Paribas<br />
Bharti AXA<br />
Sahara<br />
Sundaram BNP Paribas<br />
Tata<br />
JP Morgan<br />
Tata<br />
ICICI Prudential<br />
JP Morgan<br />
ICICI Prudential<br />
Bharti AXA<br />
Fortis<br />
JP Morgan<br />
ICICI Prudential<br />
JP Morgan<br />
DSP BlackRock<br />
HSBC<br />
JP Morgan<br />
Religare<br />
JP Morgan<br />
Kotak Mahindra<br />
Morgan Stanley<br />
ICICI Prudential<br />
Taurus<br />
ICICI Prudential<br />
Kotak Mahindra<br />
ABB Ltd<br />
ACC Ltd<br />
Ambuja Cements Ltd<br />
Axis Bank Ltd<br />
Bharat Heavy Electricals Ltd<br />
Bharat Petroleum Corporation Ltd<br />
Bharti Airtel Ltd<br />
Cairn India Ltd<br />
Cipla Ltd<br />
Gas Authority Of India Ltd<br />
Grasim Industries Ltd<br />
HCL Technologies Ltd<br />
HDFC Bank Ltd<br />
Hindalco Industries Ltd<br />
Hindustan Unilever Ltd<br />
HDFC Ltd<br />
ICICI Bank Ltd<br />
Idea Cellular Ltd<br />
Infosys Technologies Ltd<br />
ITC Ltd<br />
Larsen & Toubro Ltd<br />
Mahindra & Mahindra Ltd<br />
Maruti Suzuki India Ltd<br />
NTPC Ltd<br />
Oil & Natural Gas Corpn Ltd<br />
Punjab National Bank<br />
Ranbaxy Laboratories Ltd<br />
Reliance Capital Ltd<br />
Reliance Industries Ltd<br />
Reliance Infrastructure Ltd<br />
Reliance Power Ltd<br />
Siemens Ltd<br />
1624369<br />
574907<br />
14000<br />
46571<br />
630934<br />
3412157<br />
9060<br />
2233998<br />
2243058<br />
3999<br />
6536229<br />
6540228<br />
7609703<br />
19365<br />
7629068<br />
2422269<br />
39955<br />
1020553<br />
8783<br />
1069291<br />
10787508<br />
840464<br />
44498<br />
884962<br />
3990<br />
133684<br />
12097902<br />
12235576<br />
6478488<br />
1508904<br />
5250<br />
1514154<br />
13417220<br />
3047005<br />
2077410<br />
785<br />
2078195<br />
5968471<br />
1949116<br />
35000<br />
1000<br />
4352089<br />
4353089<br />
55000<br />
959719<br />
1014719<br />
4829331<br />
372<br />
15000<br />
27386<br />
2148145<br />
3400<br />
2194303<br />
1629000<br />
1994691<br />
46403<br />
500000<br />
4170094<br />
191695<br />
7306127<br />
29200<br />
8142870<br />
8172070<br />
10825<br />
33000<br />
3002<br />
2274258<br />
2310260<br />
Reliance<br />
Reliance<br />
Sahara<br />
JM Financial<br />
Reliance<br />
Reliance<br />
Escorts<br />
Reliance<br />
Bharti AXA<br />
Reliance<br />
Reliance<br />
Taurus<br />
Reliance<br />
DWS<br />
Reliance<br />
Religare<br />
Reliance<br />
Reliance<br />
Religare<br />
BOB<br />
Kotak Mahindra<br />
Reliance<br />
Reliance<br />
Reliance<br />
Religare<br />
Reliance<br />
Reliance<br />
Reliance<br />
Taurus<br />
Reliance<br />
Reliance<br />
Kotak Mahindra<br />
BOB<br />
Reliance<br />
BOB<br />
Reliance<br />
Reliance<br />
Benchmark<br />
DBS Chola<br />
Escorts<br />
Reliance<br />
Sahara<br />
HSBC<br />
Reliance<br />
Religare<br />
Tata<br />
Reliance<br />
Reliance<br />
Mirae Asset<br />
Reliance<br />
BOB<br />
BOB<br />
DBS Chola<br />
Reliance<br />
(continued)<br />
34<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...
IN<br />
OUT<br />
COMPANY QTY AMC<br />
COMPANY QTY AMC<br />
Steel Authority of India Ltd<br />
Sterlite Industries (India) Ltd<br />
Sun Pharmaceuticals Industries Ltd<br />
Suzlon Energy Ltd<br />
Tata Communications Ltd<br />
Tata Consultancy Services Ltd<br />
Tata Motors Ltd<br />
Tata Steel Ltd<br />
Unitech Ltd<br />
38406<br />
29041<br />
67447<br />
1751<br />
17817<br />
495000<br />
134813<br />
178704<br />
50<br />
828135<br />
74<br />
65062<br />
65136<br />
29492<br />
4635000<br />
10531<br />
4675023<br />
2012<br />
33048<br />
35060<br />
3150<br />
2910<br />
5124<br />
8034<br />
11404<br />
26700<br />
38104<br />
Escorts<br />
ICICI Prudential<br />
Bharti AXA<br />
Escorts<br />
HSBC<br />
JP Morgan<br />
Kotak Mahindra<br />
Sahara<br />
Benchmark<br />
JP Morgan<br />
Bharti AXA<br />
HSBC<br />
ICICI Prudential<br />
ICICI Prudential<br />
Religare<br />
ICICI Prudential<br />
Benchmark<br />
Sahara<br />
ICICI Prudential<br />
Taurus<br />
State Bank of India<br />
Steel Authority of India Ltd<br />
Sterlite Industries (India) Ltd<br />
Sun Pharmaceuticals Industries Ltd<br />
Suzlon Energy Ltd<br />
Tata Consultancy Services Ltd<br />
Tata Motors Ltd<br />
Tata Power Company Ltd<br />
Tata Steel Ltd<br />
Wipro Ltd<br />
6738409<br />
50000<br />
2019671<br />
2069671<br />
2929618<br />
389858<br />
34798<br />
9000<br />
12601<br />
8144<br />
454401<br />
11569027<br />
735527<br />
12304554<br />
5622378<br />
3863<br />
5626241<br />
6497<br />
30943<br />
37440<br />
2094949<br />
30180<br />
9055589<br />
9085769<br />
2913007<br />
Reliance<br />
Mirae Asset<br />
Tata<br />
Reliance<br />
Birla Sun life<br />
ING<br />
Mirae Asset<br />
Religare<br />
Taurus<br />
Reliance<br />
Sundaram BNP Paribas<br />
Reliance<br />
Taurus<br />
BOB<br />
Taurus<br />
Reliance<br />
Morgan Stanley<br />
Reliance<br />
Reliance<br />
800<br />
600<br />
400<br />
200<br />
0<br />
-200<br />
-400<br />
-600<br />
MF Net , FII Net & Nifty<br />
30 Mar’09 02 Apr’09 09 Apr’09<br />
MF FII NIFTY<br />
3400<br />
3300<br />
3200<br />
3100<br />
3000<br />
2900<br />
2800<br />
2700<br />
MUTUAL FUND ACTIVITY,<br />
FII ACTIVITY<br />
& NIFTY<br />
This graph and data represents<br />
the Mutual Fund and FII activity<br />
that has taken place in the last 15 days,<br />
whether the fund houses have<br />
been buyers or sellers.<br />
Beyond Market 20th Apr ’09<br />
Date<br />
30 Mar'09<br />
31 Mar'09<br />
01 Apr'09<br />
02 Apr'09<br />
06 Apr'09<br />
08 Apr'09<br />
09 Apr'09<br />
Source: NB Research<br />
MF Net*<br />
-220.5<br />
627.4<br />
16.1<br />
245.1<br />
-222.9<br />
-489.5<br />
359.8<br />
FII Net *<br />
-270.7<br />
-464.6<br />
-531.4<br />
234.8<br />
696.3<br />
172.3<br />
484.1<br />
Nifty<br />
2978.15<br />
3020.95<br />
3060.35<br />
3211.05<br />
3256.6<br />
3342.95<br />
3342.05<br />
*Net activity in Equity<br />
It’s simplified... 35
Equity Schemes<br />
36 Beyond Market 20th Apr ’09<br />
Scheme Name<br />
Movers<br />
SBI Magnum Midcap Fund<br />
JM Basic Fund<br />
JM Emerging Leaders Fund<br />
SBI Magnum Sector Umbrella - Emerging Businesses<br />
Canara Robeco Emerging Equities<br />
Laggards<br />
UTI-MEPUS<br />
IDFC India GDP Growth Fund<br />
HSBC Dynamic Fund<br />
Religare AGILE Fund<br />
Escorts High Yield Equity Plan<br />
Balance Schemes<br />
Movers<br />
HDFC Prudence Fund<br />
Birla Sun Life 95<br />
Canara Robeco Balance<br />
PRINCIPAL Balanced Fund<br />
Birla Sun Life Balance Fund<br />
Laggards<br />
Escorts Opportunities Fund<br />
Escorts Balanced Fund<br />
ICICI Prudential Balanced<br />
Tata Balanced Fund<br />
FT India Balanced Fund<br />
Debt Schemes<br />
Scheme Name<br />
Scheme Name<br />
Movers<br />
ICICI Prudential Income Fund<br />
DWS Premier Bond Fund - Regular Plan<br />
HDFC Income Fund<br />
HDFC HIF<br />
IDFC D B F- Plan A<br />
Laggards<br />
Franklin India International Fund<br />
Sundaram BNP Paribas Income Plus<br />
SBI Magnum NRI Invst Fund - Long Term Bond Plan<br />
Baroda Pioneer Income Fund<br />
JM Income<br />
NAV<br />
(9-Apr’09)<br />
11.4700<br />
9.7693<br />
3.9086<br />
16.1000<br />
8.7500<br />
29.6600<br />
10.4489<br />
6.5717<br />
4.6000<br />
7.5582<br />
NAV<br />
(9-Apr’09)<br />
98.7990<br />
168.6300<br />
34.4500<br />
19.2500<br />
28.3200<br />
23.1569<br />
37.6033<br />
27.7200<br />
45.0838<br />
30.9417<br />
NAV<br />
(9-Apr’09)<br />
28.5794<br />
14.8599<br />
20.5940<br />
29.9510<br />
17.8533<br />
12.4207<br />
14.4546<br />
10.5555<br />
13.8925<br />
28.5173<br />
Absolute %<br />
(Point to Point)<br />
2 Weeks<br />
19.9791<br />
18.4574<br />
18.1560<br />
17.4325<br />
17.1352<br />
0.1689<br />
3.2347<br />
3.7839<br />
4.0724<br />
4.5828<br />
Absolute %<br />
(Point to Point)<br />
2 Weeks<br />
9.6974<br />
9.3864<br />
8.7094<br />
8.2069<br />
7.0295<br />
0.4472<br />
2.6591<br />
4.9602<br />
5.2858<br />
5.3356<br />
Absolute %<br />
(Point to Point)<br />
2 Weeks<br />
3.7723<br />
3.4704<br />
3.2741<br />
3.1246<br />
3.0446<br />
-0.8494<br />
0.0408<br />
0.0417<br />
0.0468<br />
0.1071<br />
Source: NB Research<br />
It’s simplified...<br />
MOVERS<br />
AND<br />
LAGGARDS<br />
IN MUTUAL<br />
FUND SCHEMES
TECHNICAL OUTLOOK FOR THE FORTNIGHT<br />
As predicted in the last issue, the market continued to move up<br />
and the Nifty also surged ahead positively crossing the 200-day<br />
moving average. Earlier this month we saw a spectacular rally in<br />
the Indian market after Nifty managed to sustain above the 3,150<br />
mark. <strong>The</strong>reafter, it went on a northbound journey and began<br />
making higher tops and higher bottoms, testing the 3,511 mark in<br />
nine trading sessions. Global cues were mixed. We, therefore, saw<br />
buying across sectors along with short-covering in reality, banking<br />
and capital goods. <strong>The</strong> turnovers also increased in the last<br />
couple of days and recorded the highest figure since 25th September,<br />
2008. Incidentally, FIIs were net buyers in the cash segment<br />
in the past week while Mutual Funds were net sellers and were<br />
seen booking profits.<br />
Going forward, it is necessary that the market consolidates and<br />
sustains above its 200-day SMA (3,415), which is its long-term<br />
moving average. <strong>The</strong> Nifty Relative Strength Index (RSI) at one<br />
time had reached 81. In a normal market, if the RSI is above 65<br />
then it is considered as overbought. <strong>With</strong> the market being in the<br />
overbought region, one may see a correction in the coming days.<br />
Hence, aggressive positioning may not be sensible till we get a<br />
clear picture of the market direction.<br />
In the last nine trading sessions we saw huge volumes in small and<br />
mid-cap stocks. We believe that one should focus on mid-cap<br />
stocks rather than the frontline. Even if we look at the benchmark<br />
indices, the market moved continuously in the nine<br />
trading sessions and was up almost 1,800/545 points from the<br />
April low.<br />
<strong>The</strong> short-term outlook is overbought with the RSI at 81<br />
suggesting higher level sell off in the coming days. Thus at the<br />
current juncture, we believe that the upside is capped and going<br />
forward the index is most likely to witness a correction before<br />
giving a fresh break-out above the 3,520 level.<br />
At this current market scenario the price does not offer great<br />
risk or reward. So we recommend selling in this rally. <strong>The</strong><br />
overall trend is likely to remain cautiously positive as indices<br />
are near their long-term moving average. In the near term, Nifty<br />
faces resistance at 3,520 and 3,670 levels while 3,230 and 3,110<br />
are its important support levels. If Nifty breaks the 3,110 level<br />
then the market could witness a sharp fall and we may test<br />
2,910 level. On the upside, the Sensex faces resistance at the<br />
11,400 and 11,950 levels but seeks support at the 10,500 and<br />
10,110 levels. So investors should wait for the market to settle<br />
down and then enter again.<br />
Stock Idea: Bhel, HDFC, LT, Bharti Airtel, Indian Oil Corporation<br />
and State Bank of India appear to be great buys on dipS.<br />
Nifty Future Daily Chart: Nifty Future resistance at 3,520, it’s a 50% retracement level from<br />
the high of 4,800 to the low of 2,228. First strong support exits at 3,205.<br />
1 61 .8 %<br />
1 00 .0 %<br />
6 1. 8%<br />
5 0. 0%<br />
3 8. 2%<br />
2 3. 6%<br />
0 .0 %<br />
- N S E 50 - 1 M O N T H (3, 5 00 .6 0 , 3, 51 4 .0 0 , 3, 36 2 .1 0, 3 ,3 7 5 .6 0, -1 1 7. 3 00 )<br />
F e b ru ary M a rc h A p ril M a y J u ne J u ly A u g us t S e p te m b erO c t ob e r N o v e m be rD e c em be r 2 00 9 F e b ru ary M a rc h A p ril M a y<br />
7 20 0<br />
7 10 0<br />
7 00 0<br />
6 90 0<br />
6 80 0<br />
6 70 0<br />
6 60 0<br />
6 50 0<br />
6 40 0<br />
6 30 0<br />
6 20 0<br />
6 10 0<br />
6 00 0<br />
5 90 0<br />
5 80 0<br />
5 70 0<br />
5 60 0<br />
5 50 0<br />
5 40 0<br />
5 30 0<br />
5 20 0<br />
5 10 0<br />
5 00 0<br />
4 90 0<br />
4 80 0<br />
4 70 0<br />
4 60 0<br />
4 50 0<br />
4 40 0<br />
4 30 0<br />
4 20 0<br />
4 10 0<br />
4 00 0<br />
3 90 0<br />
3 80 0<br />
3 70 0<br />
3 60 0<br />
3 50 0<br />
3 40 0<br />
3 30 0<br />
3 20 0<br />
3 10 0<br />
3 00 0<br />
2 90 0<br />
2 80 0<br />
2 70 0<br />
2 60 0<br />
2 50 0<br />
2 40 0<br />
2 30 0<br />
2 20 0<br />
2 10 0<br />
2 00 0<br />
1 90 0<br />
Disclaimer<br />
<strong>The</strong> information provided here has been obtained<br />
from various sources and is considered to be<br />
authentic and reliable. However, Nirmal Bang<br />
Securities Private Limited is not responsible for<br />
any error or inaccuracy in the same.<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...<br />
37
Cool Retreats<br />
To Beat<br />
<strong>The</strong> Heat<br />
Visit the good old<br />
destinations this summer<br />
without burning a hole<br />
in your pocket<br />
Being a tropical country, India witnesses<br />
quite harsh summers. And the sweltering heat<br />
is pushing people to pack their bags and head<br />
to cooler climes. Given the economic<br />
meltdown, not many are willing to go abroad. So what<br />
does one do keeping in mind all these factors We<br />
suggest you take off to popular Indian hotspots to rejuvenate<br />
and relax.<br />
Getting there:<br />
Bangalore (260 km), Mangalore (135 km)<br />
Mysore (146 km)<br />
<strong>The</strong> Mysore-Mangalore highway (NH48) passes<br />
through Kodagu. <strong>The</strong> district headquarters Madikeri<br />
(Mercara), is 260 km from Bangalore and 120 km from<br />
Mysore. <strong>The</strong> distance from Mangalore is 136 km and<br />
from Cannanore and Tellicherry, it is about 115 km.<br />
<strong>The</strong>re are regular buses plying from these locations<br />
places to Madikeri.<br />
1. Hotel Coorg International<br />
Convent Road,<br />
Madikeri.<br />
Tel: (8272) 29390/28071/28072<br />
Coorg:<br />
One of the best places in the country you can be at during<br />
summer, Coorg is also known as the ‘Scotland of India’.<br />
Coorg or Kodagu will haunt you forever with its timeless<br />
beauty. It offers a fascinating past, captivating natural<br />
beauty, great cuisine and aromas of coffee plantations,<br />
oranges and honey. Set amidst verdant valleys, imposing<br />
mountains and teak wood forests, this is one of the most<br />
beautiful hill stations you can visit. Only 252 km from<br />
Bangalore, Coorg offers various activities such as<br />
trekking, golf, angling and white water rafting.<br />
2. Kabbe Holidays Home Stay<br />
Chelavara Village, Cheyandane P.O., S.Coorg.<br />
Tel: (8272) 200658<br />
Mob: 098454 46652/098459 9451<br />
3. Swarga Resorts<br />
Coffee Planter, Kumbarahalli Estate Post, Via Yeslur,<br />
Hassan District.<br />
Tel: (8173) 329215, 278242<br />
Mob: 094480 54505<br />
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It’s simplified...
3. Albert Guest House<br />
41, Brooks Land, Coonoor.<br />
Tel.: (0423) 2231223<br />
Ooty:<br />
Ooty, short for Ootacamund or Udagamandalam, is one<br />
of South India’s most popular hill stations. It is also<br />
called as the ‘Queen of hill stations’. Situated in the<br />
Nilgiri Hills at an altitude of 2,240 mts and spread out<br />
along a high plateau, Ooty is covered with green forests<br />
and valleys, tea plantations, streams and mountains.<br />
Though crowded during summer, Ooty remains a favourite<br />
among travellers both local and foreign. It used to be<br />
a popular summer and weekend getaway for the Britishers<br />
during the colonial days. An added attraction for<br />
tourists heading to Udagamandalam is the mountain train<br />
journey on a ratchet and pinion track which commences<br />
from Kallar near Mettupalayam and wends its way<br />
through many hair-raising curves and fearful tunnels and<br />
chugs along beside deep ravines full of verdant vegetation,<br />
gurgling streams and tea gardens.<br />
Manali:<br />
This is Himachal Pradesh’s main summer destination for<br />
backpackers, trekkers and partygoers wanting to escape<br />
the summer heat. A popular tourist destination at 570 km<br />
from New Delhi and 280 km from Shimla, Manali is the<br />
northern-most town of Himachal Pradesh’s Kullu valley.<br />
Situated on the national highway that leads to Leh,<br />
Manali is also the gateway to the remote and desolate<br />
valleys of Lahaul and Spiti. Manali and its surrounding<br />
areas are of great significance to the Indian culture and<br />
heritage as it was the home and abode of the Saptarshi’s<br />
or seven sages. <strong>The</strong> ancient cave temple, Hidimba Devi<br />
Temple, is not far from town, 3 km from the main city.<br />
Manu Maharishi temple is also located in old Manali<br />
village, which is 4 km far from the Manali. <strong>The</strong>re are<br />
various places around Manali too like Rohtang Pass,<br />
Monasteries, Rahala waterfalls and Vashishat, which<br />
people can visit.<br />
Getting there:<br />
Coimbatore (100 km). You can catch a direct flight<br />
to Coimbatore from Chennai, Kozhikode, Bangalore and<br />
Mumbai. Indian Airlines flies Delhi-Kochi via Mumbai<br />
and Coimbatore.<br />
Mettupalayam (46 km). <strong>The</strong> next major railway<br />
junction is Coimbatore (89 km). It is connected with all<br />
major cities.<br />
It is 18 km from Coonoor (via Gudalur), 155 km<br />
from Mysore, 187 km from Calicut. <strong>The</strong>re are regular<br />
bus services from most destinations.<br />
1. Taj Savoy Hotel<br />
77, Sylks Road,<br />
Ooty.<br />
Tel: (0423) 2444142<br />
2. Nahar's Nilgiris Hotel<br />
52A Charing Cross,<br />
Ooty.<br />
Tel: (0423) 2442173, 2443685<br />
Getting there:<br />
Bhuntar (50 km). <strong>The</strong>re are a number of non-stop<br />
services to Bhuntar from Delhi.<br />
Manali is not easily approachable by rail. <strong>The</strong> nearest<br />
broad gauge railheads are at Chandigarh (315 km),<br />
Pathankot (325 km) and Kalka (310 km). <strong>The</strong> nearest<br />
narrow gauge railhead is at Joginder Nagar (135 km).<br />
Manali is well connected by road to Delhi through<br />
NH-21 and NH 1 which goes on to Leh and is considered<br />
to be world’s highest motorable road.<br />
1. Albert Country Resorts<br />
Address: Near Log-Huts,<br />
Manali.<br />
Tel.: (0902) 254187<br />
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It’s simplified... 39
2. Leela Huts<br />
Sunshine Orchards, Club House Road,<br />
Manali.<br />
Tel.: 0902 (252464)<br />
3. Hotel Gilbert Manali<br />
Hadimba Road, Manali.<br />
Mob: 099966 31113<br />
3. Rands (Private Bungalow for family accommodation)<br />
10, Vilpatty Road,<br />
Kodaikanal.<br />
Tel: (0484) 3230122<br />
Mob: 098951 53002<br />
Kodaikanal<br />
A hilly retreat established by American missionaries<br />
around 1845 to escape from the high temperatures of the<br />
plains, Kodaikanal, or Kodai as it is better known, is a<br />
quiet hill station at an altitude of 2,195 mts, on the southern<br />
ridge of the Palani hills in Tamil Nadu. It is popular<br />
among locals as well as other tourists and has earned the<br />
nickname of ‘Princess of Hill Stations’. <strong>With</strong> its rocks,<br />
woods, lovely lake and bracing air, Kodaikanal is an<br />
ideal hill resort for tourists. <strong>The</strong> hill town is renowned for<br />
its educational institutions of international repute. <strong>The</strong><br />
hill-plantain fruits and plums are known for their<br />
freshness and taste. Berijam lake, one among the beautiful<br />
lakes of South India, spreads over an area of 24<br />
hectares and is a must visit.<br />
Getting <strong>The</strong>re:<br />
Madurai (135 km), Coimbatore (170 km) and Trichy<br />
(195 km).<br />
Kodairoad (80 km).<br />
It is connected by road with all important<br />
towns. Buses are available to Kodaikanal from Madurai,<br />
Bangalore and Coimbatore.<br />
1. Green Acres Resort<br />
11/213, Lake Road,<br />
Kodaikanal.<br />
Tel: (04542) 242384, 098415 65481.<br />
2. Villa Retreat Coaker's Walk<br />
Kodaikanal.<br />
Tel: (4542) 240940<br />
40 Beyond Market 20th Apr ’09<br />
Srinagar<br />
What better summer destination to recommend than the<br />
summer capital of Jammu and Kashmir Srinagar, also<br />
called ‘Paradise on Earth’ is set around the beautiful Dal<br />
Lake, where picturesque houseboats or shikharas carry<br />
tourists on boat rides. This scintillating hill resort set in<br />
the Kashmir valley and on the banks of the Jhelum river<br />
is an ideal summer getaway. Srinagar basically has an<br />
alpine weather, as the summers are mild and winters are<br />
cold. It is only in the recent years that the place has<br />
become a little unsafe for tourists. However, things have<br />
started getting better and tourism is opening up once<br />
again. <strong>The</strong> city is famous for its lakes and houseboats. It<br />
is also known for traditional Kashmiri handicrafts and<br />
dry fruits.<br />
Getting <strong>The</strong>re:<br />
Direct flights to Srinagar from Delhi and Mumbai.<br />
Buses from Jammu and Leh. <strong>The</strong>re are overnight<br />
buses from Delhi too.<br />
1. Hotel Paradise,<br />
Boulevard, Srinagar.<br />
Tel: (0194) 2500663<br />
Mob: 094190 11632.<br />
2. Intercontinental <strong>The</strong> Grand Palace<br />
Gupkar Road,Srinagar.<br />
Tel: (0194) 2470101.<br />
3. Kolu Houseboats,<br />
Old Boulard Road, Srinagar.<br />
Mob: 09419 40457 / 099067 09713,<br />
So what are you waiting for Pack you bags and head to<br />
one of these famous summer retreatS.<br />
It’s simplified...
Making Sense Of Personal<br />
Financial Ratios<br />
A person can evaluate his personal financial position by using six different ratios<br />
E<br />
very market savvy person is aware of the importance of technical and fundamental analysis to evaluate a company. Graphs, charts<br />
and ratios form the crux of this analysis. Financial ratios are an integral part of the financial statement of a company and it helps<br />
in comparing companies between different time periods, among companies and industries too. All these help investors in making<br />
the right investment decisions.<br />
Similarly, if a person wants to evaluate his personal financial position based on his financial statements considering the cash flow or his net<br />
worth or whether he is over-borrowed or whether he has enough liquidity, he can gauge his position on the basis of basic financial ratios.<br />
<strong>The</strong> components involved in reaching the appropriate ratio have been discussed below in detail.<br />
Unlike company ratio analysis, personal financial ratio is quite simple. <strong>The</strong>re are six ratios in all which help individuals to evaluate their<br />
financial position.<br />
1. Basic Liquidity Ratio:<br />
This ratio indicates an individual’s ability to meet his or her monthly expenses in case of an emergency or a catastrophe.<br />
Cash (near cash)<br />
Basic Liquidity Ratio =<br />
Monthly Expenses<br />
Cash (near cash) includes all liquid assets like savings a/c, Fixed Deposit, cash in hand and Liquid Funds.<br />
Monthly Expenses include mandatory fixed and variable expenses. An average of 12 months is taken into consideration while calculating<br />
mandatory variable expense and the expenditure tends to vary every month. It does not include voluntary expenses like those on entertainment,<br />
vacation or those that can be avoided, if needed.<br />
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41
Mandatory Fixed Expenses include EPF/PF contribution, EMIs on loans, insurance premium, mediclaim premium, professional fees, rent<br />
and other such expenses.<br />
Mandatory Variable Expenses are those like groceries, utilities, transportation, personal care, medical care, household repairs, educational<br />
expenses and other expenses which are just unavoidable.<br />
<strong>The</strong> ideal basic liquidity ratio is 3, where 3 stands for three months. Money equivalent to three months of mandatory expenditure should be<br />
kept aside for emergency. Research has shown that if a person saves an average of three month’s expenditure, he can sail through an<br />
emergency situation. In an economic turmoil like the one we are facing, this fund becomes all the more important.<br />
2. Liquidity Ratio:<br />
This ratio helps a person to know his financial liquidity. Maintaining a certain level of liquidity is essential to ward off any unforeseen financial<br />
hardships. Property can be considered as a good investment avenue but lack of liquidity is its biggest drawback and while equity is risky,<br />
its biggest advantage is liquidity.<br />
Liquid Assets<br />
Liquidity Ratio =<br />
Net Worth<br />
Liquid Assets include all cash (near cash assets), equities, Equity Mutual Funds (not Equity Linked Savings Schemes as they have three<br />
years’ lock-in period), Debt Funds (which include Short Term, Gilt Funds, Monthly Income Plans and other such funds except Closed-Ended<br />
Funds) and other assets which can be redeemed within three to four working days.<br />
Net Worth is the amount left after deducting total liabilities from total assets.<br />
<strong>The</strong> ideal liquidity ratio is 15%. At least 15% of one’s portfolio should have assets, which can be redeemed almost immediately in case of an<br />
emergency. Anything less is not healthy.<br />
3. Savings Ratio:<br />
This ratio indicates the amount an individual sets aside as savings for his future goals.<br />
Savings<br />
Savings Ratio =<br />
Gross Income<br />
Savings include any form of savings like Fixed Deposits, Liquid Funds, Mutual Funds, Equities, Debt, Bonds, PPF, Post Office Small Saving<br />
Schemes and others where the individual saves on a regular basis.<br />
Gross Income includes income earned through business, profession or in the form of salary, bonus, EPF contribution, interest, dividend,<br />
rent/royalty and any other form of income.<br />
<strong>The</strong> ideal savings ratio is at least 10%. At least 10% of a person’s gross income should go towards savings. Anything less might not be quite<br />
what one might want it to be.<br />
4. Debt to Asset Ratio:<br />
This ratio helps a person to understand whether he is over borrowed or is in a comfortable position, i.e., if he faces any solvency problems.<br />
This ratio should always be used when one is planning to take a new loan. If an individual is over borrowed, it is best to avoid getting into<br />
something new. Instead the person should wait until he has finished paying off his previous loan amount.<br />
Total Liabilities<br />
Debt to Asset Ratio =<br />
Total Assets<br />
Total Liabilities are all liabilities like personal loan, home loan, car loan, any credit card outstanding, amount taken from private money<br />
lenders and any other form of loan.<br />
42 Beyond Market 20th Apr ’09 It’s simplified...
Total Assets include all assets that a person has like investments, cash (near cash), home, car, jewellery and other assets.<br />
<strong>The</strong> ideal debt to asset ratio is maximum 50%. <strong>The</strong> maximum debt any individual can take should not exceed 50% of his total assets.<br />
5. Solvency Ratio:<br />
This ratio is a continuation of the Debt to Asset Ratio. Solvency is a big problem and no one would want to be in a position where even daily<br />
expenses become a problem by being over-borrowed. This ratio helps to determine if a person is in a comfortable position to lead a healthy<br />
financial life after repaying all debts from his assets.<br />
Total Net Worth<br />
Solvency Ratio =<br />
Total Assets<br />
Total Net Worth is equal to total liabilities minus total assets.<br />
Total Assets includes assets like investments, cash (near cash), home, car, jewellery and any other assets.<br />
Ideal Solvency Ratio is minimum 50%. On the same lines as Debt-to-Asset Ratio, the solvency ratio should also be at least 50% of the total<br />
assets.<br />
6. Net Invested Assets to Net Worth Ratio:<br />
An individual should have clear goals when accumulating assets for future goals. This ratio increases as a person nears his retirement as that<br />
is the time when his savings is expected to be maximum, to sustain himself until the end of life in the absence of any other source of income<br />
other than savings.<br />
Net Invested Assets<br />
Net Invested Assets to Net Worth Ratio =<br />
Net Worth<br />
Net Invested Assets are all invested assets like shares, Equity Mutual Funds, Debt Funds, Bonds, PPF, EPF, property, etc.<br />
Net Worth is total liabilities deducted from total assets.<br />
<strong>The</strong> net invested assets to net worth ratio should ideally be 50% or more.<br />
<strong>The</strong> six ratios mentioned above serve as a guideline to help an individual understand how his income, savings and debt are related. One need<br />
not be a fundamental analyst or a financial guru to understand these simple personal financial ratios. Simply maintaining a proper cash inflow<br />
and outflow statement and statement of assets and liabilities will do. Maintain a healthy financial scenario by calculating these ratios from<br />
time to timE.<br />
RATIOS<br />
Basic Liquidity Ratio =<br />
Cash(Near Cash)/Monthly Expenses<br />
Liquidity Ratio =<br />
Liquid Assets/Net-Worth<br />
Savings Ratio =<br />
Savings /Gross Income<br />
Debt To Asset Ratio =<br />
Total Liabilities/ Total Assets<br />
Solvency Ratio =<br />
Total Net Worth/Total Assets<br />
Net Invested Assets To Net Worth Ratio =<br />
Total Invested Assets/Net Worth<br />
IDEAL RATIO<br />
3 months<br />
15%<br />
Min 10%<br />
Max 50%<br />
Min 50%<br />
Preferably 50% or more<br />
Beyond Market 20th Apr ’09<br />
It’s simplified...<br />
43
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information developed in-house. Such information has not been independently verified and we make no representation or warranty as to its accuracy,<br />
completeness or correctness. Any opinions or estimates herein reflect the judgement of Nirmal Bang Securities Private Limited at the date of this<br />
publication/ communication and are subject to change at any point without notice. This is not a solicitation or any offer to buy or sell. This publication/<br />
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