Archive for October, 2009

RBI Raises Concern over Circular Investment Btw. MFs & Banks.

RBI Raises Concern over Circular Investment Btw. MFs & Banks

RBI Raises Concern over Circular Investment Btw. MFs & Banks

As per the latest data released from the Reserve Bank of India, nearly 90% of the funds, which are parked by the banks in mutual funds (MFs) come back into the banks.

The funds come in the form of overnight borrowings through various channels.

🙂

RBI said that the banks parked Rs 66,687 crore in MFs as of September 25, 2009 in debt and liquid schemes.

In turn, the MFs have lent Rs 29,504 crore under the collateralized lending and borrowing obligation (CBLO) platform and Rs 29,328 crore under market repo, respectively.

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CBLO allows non-banks to lend to banks short-term surpluses.

The lending of MF through CBLO and market repo as a percentage of banks’ investment in mutual funds has surged to 88% in September from about 64% in July.

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The objection of RBI came when MFs also subscribe to commercial paper issued by corporates, which is tantamount to lending to corporates by MFs, which is ostensibly from funds raised from banks.

RBI has objected against indirect lending by banks through intermediaries.

In this circular flow, MFs lend to corporates, which the banks themselves hesitate to lend, which exposes banks in a regulatory concern.

However, the more serious is its concern over the circular investment between MFs and banks.

Bharti Airtel’s Scrip Fell 6% Down !

 

 

Bharti Airtel’s scrip Friday fell 6.38 percent

Bharti Airtel’s scrip Friday fell 6.38 percent lower at the Bombay Stock Exchange (BSE)

Telecom major Bharti Airtel’s scrip Friday fell 6.38 percent lower than its previous close at the Bombay Stock Exchange (BSE) as investors dumped the stock because of disappointing second quarter results.

The scrip, which had fallen to an intra-day low of Rs. 290.30 from Thursday’s closing figure of Rs. 312.05, ended the day at Rs. 292.15.

Bharti Airtel said its net profit, according to US accounting rules, increased 13.4 percent to Rs. 2,321 crore (495 million) for the quarter ended Sep 30 from Rs. 2,046 crore in the like quarter of previous fiscal.

This was, however, a decline of 8 percent over the previous quarter of current fiscal.

Revenues were up 9 percent to Rs. 9,846 crore from Rs. 9,020 crore reported a year earlier.

“The industry is seeing entry of many players and this is bound to have a bearing on the fortunes of existing companies,” said Jagannadham Thunuguntla, equities head of brokerage and capital markets consultancy SMC Capital.

“In the short term, the stock could see some more pressure, though it is coming within range of a good buy, at least for the long term investor,” Thunuguntla added.

The Bharti scrip has lost as much as 30.2 percent over October and at current levels is the lowest in seven  months.

Bear and Bull – Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series” 🙂

Have you all ever wondered that what exactly this Bull and Bear Market is ?

 

Bull markets and bear markets...what are they?

Bull markets and bear markets...what are they?

What are they? What do they look like? What’s the origin of this terminologies?

Lets Talk about it

🙂

When we talk about bull and bear stock markets it reminds us that it’s a zoo out there. And, like any zoo, there are quite a few wild species to be found 😉

The first two are the bulls and the bears.

Bull market is when stock prices are climbing strongly and a Bear market is when they’re languishing.

Bear Market

To be more precisely, in finance, a bear market is a market condition that occurs when the prices of shares decline or are about to decline.

Figures may vary, but if prices decrease by 15 to 20% then the market is assumed as a bear market.

In general, a bear market resumes if the government goes into recession and if the inflation rate is high.

Bull Market

A bull market is a condition of a financial market of a group of securities in which prices are rising or are expected to rise.

The term “bull market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue.

🙂

Myth About Bull and Bear Markets

One common myth is that the terms “bull market” and “bear market” are derived from the way those animals attack a foe, because bears attack by swiping their paws downward and bulls toss their horns upward.

This is a useful mnemonic, but is not the true origin of the terms.

Long ago, “bear skin jobbers” were known for selling bear skins that they did not own; i.e., the bears had not yet been caught.

This was the original source of the term “bear”.

This term eventually was used to describe short sellers, speculators who sold shares that they did not own, bought after a price drop, and then delivered the shares.

Because bull and bear baiting were once popular sports, “bulls” was understood as the opposite of “bears.” I.e., the bulls were those people who bought in the expectation that a stock price would rise, not fall.

🙂

Stay Tuned for more on this where we would touch upon if bull and bear markets are inevitable and what are the basics investors should keep in mind while trading in bear and bull market.

Government to Set Up New Vigilant System to Track Corporate Frauds

Government to Set Up New Vigilant System to Track Corporate Frauds

Government to Set Up New Vigilant System to Track Corporate Frauds

The Government has embarked on a new vigilant system to track the corporate frauds post Satyam scam debacle.

As a part of this, it has decided to look into companies whose financials are found to be suspicious.

Ministry of corporate affairs has said that the government’s new drive will be technology-driven and bank heavily on the MCA21 e-governance programme, which is now the main gateway for corporates to file their statutory documents.

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This is part of govt’s efforts to have an effective early warning system and the idea is to detect frauds, or any tendency of fraud, early.

Meanwhile, pilot work on the project has already been kickstarted.

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Government has plans to involve the regional directorates (RDs) and registrar of companies (RoCs) in the exercise after it gets computer-generated alerts on suspect companies through the e-governance network.

“There will be several triggers to generate any suspicion on the activities of a corporate. These include things like unusually high jump in profits, suspect related party transactions, and huge amounts of unutilised cash and bank balance,” sources from govt stated.

Once a list of suspect companies is drawn up, these would be looked into by the RDs and the RoCs who would look into their filings and financials further.

However, this would be a non-invasive document verification exercise with no intention of hounding the corporate sector.

🙂

Government is taking steps to further strengthen the MCA21 programme which enables electronic filings, storage, retrieval, processing and transmission of transactions, including incorporation of a company, and filing of annual and statutory returns.

The exercise to upgrade MCA21 has started, officials said.

🙂

The government has also decided to become more vigilant in view of the recent surge in stock markets and feels that extra caution and early detection will help protect retail investors further.

Imports of Gold Jumped to 37.5 Tonnes in September

Imports of Gold Jumped to 37.5 Tonnes in September

Imports of Gold Jumped to 37.5 Tonnes in September


The imports of Gold surged by 72 per cent to 37.5 tonnes in September as compared to previous month due to the increased demand during festive season.

🙂
The gold import in August stood at 21.8 tonnes after witnessing a growth of nearly three-fold from 7.8 tonnes in July, data provided by the Bombay Bullion Association showed.

The volume of shipment surged due to festive season demand, Bombay Bullion Association quoted.

Moreover, BBA has said that the imports is likely to decline from this level in October after the festival demand is over.

During the festival season, this year, the demand was more for gold coins than for retail jewelery as the prices were hovered above the Rs 16,000 per 10 grams level.

The high prices are likely to affect the demand.

The gold prices were ruling at Rs 15,898 per 10 grams for MCX December delivery while it stood at 1,034.8 dollar an ounce (28.34 grams) on the international comex.

The imports stood at 54 tonnes in the same month last year.

🙂

NEWS CAPSULES

Hello Friends,

Last week witnessed lots of action with results of some major companies coupled with the RBI’s monetary policy.

Moreover, Week gone by, Indian markets turned distinctly weak as a sluggish global trend continued to cast a shadow on markets.

NEWS CAPSULES

NEWS CAPSULES

Having said that here we bring you latest updates from the Indian market and Industry.

NEWS CAPSULES

1.

A hawkish Reserve Bank of India (RBI), while staying away from hiking key rates like repo or reverse repo, hiked the statutory liquidity ratio(SLR) to 25% from 24%.

The cash reserve ratio (CRR), the minimum amount banks need to park with the RBI, was also left unchanged.

2.

Sun TV Network Ltd (Sun TV), owned by Kalanithi Maran, is looking at foreign partners to produce non-fiction contents.
The company joined hands with Dutch firm Endemol to launch a television game show.

3.

Tata Steel, the sixth-largest steel maker in the world, has posted a 49.49 per cent drop in net profit at Rs 902.94 crore in the second quarter, following a sharp fall in steel and ferro alloys’ prices.

Total income fell 16.46 per cent to Rs 5,692.11 crore.

4.

The Anil Dhirubhai Ambani Group-controlled Reliance Natural Resources (RNRL) has posted a 5 per cent rise in net profit at Rs 21 crore for the quarter ended September 30, 2009, against Rs 20 crore for the corresponding previous quarter.

During the quarter under review, RNRL’s total income decreased to Rs 66 crore from Rs 81 crore for the same quarter ended previous year.

The company posted an earning of Rs 0.13 per share for the quarter.

5.

Wipro Limited, backed by increases in price realisation, utilisation and fixed price contracts at its flagship IT services business, posted a 19 per cent increase in its net profit to Rs 1,162 crore for the second quarter ended September 30, 2009 as compared to the corresponding quarter of the previous financial year.

6.

United Spirits, India’s largest spirits firm, has posted a 25 per cent decline in net profit to Rs 69.6 crore for the quarter ended September 30, 2009 where as the same was at Rs 94 crore for the quarter ended September 30, 2008.

7.

Jet Airways, India’s largest private airline, reported net losses of Rs 406.69 crore for the second quarter ended September 20, down nearly 6 per cent from the same quarter last year.

The loss was mainly because of lower yield per seat following Jet’s decision to shift over half of its capacity to its low-cost service.

The shift of capacity to low-cost arm Jet Konnect was executed in May this year.

Jet Konnect fares are at least 25 per cent cheaper than full-service fares and a high load factor of 77 per cent did not offset the lower yield per passenger from cheaper fares.

🙂

However, For More latest Industry, Gyan, Stock Market and Economy News Updates, Click here

MCX Stock Exchange Targets Bottom of the Pyramid

MCX Stock Exchange drawn up a strategy to lower costs significantly to take on established players :)

MCX Stock Exchange drawn up a strategy to lower costs significantly to take on established players 🙂

The MCX Stock Exchange (MCX-SX), which is still some distance away from launching trade in equities, has already drawn up a strategy to lower costs significantly to take on established players.

🙂

Exchange, promoted by the Financial Technologies group, is waiting for approval from the market regulator.

But the blueprint is aimed at doing what the National Stock Exchange (NSE) did to the capital markets 15 years ago.

MCX-SX is planning to significantly lower :

1) the Entry Cost,

2) the Cost of Transaction, and

3) the Cost of Technology.

Under the plan, there will be many more segments to trade.

Mutual funds and Initial Public Offers might also be distributed.

🙂

In Other major Agri Updates :

FMC open to debate on extended trading hours:

The Forward Markets Commission (FMC), the commodity markets regulator, says it is willing to discuss the issue of extending trading hours, in line with what the equity markets regulator, the Securities andExchange Board of India (Sebi), did last week.

Sebi has allowed trade timing in equities to be extended, from 9 am to 5 pm; the current hours are 9:55 am to 3:30 pm.

Currently, agri commodities are traded on the exchanges between 10 am and 5 pm.

Market participants have urged the regulator on various occasions to extend trading time till at least 7.30 pm, to capture the sentiment of late evening trades.

🙂

Note : For More Latest Industry, Stock Market and Economy News and Updates, please CLICK HERE

High Dividends !! Not the Best Way to Judge MF Schemes :)

High Dividends !! Not the Best Way to Judge MF Schemes

High Dividends !! Not the Best Way to Judge MF Schemes


Mutual fund schemes
generally boast about high dividends but mutual fund experts say picking a mutual fund scheme on the basis of its dividend payout may not be the best way to invest in the sector.

🙂

As per MF experts, comparing the quantum of dividends paid in short term is not the correct way to measure a fund’s performance.

The proportion of dividend depends on a number of factors, including the frequency of payouts over a certain period of time.

There are funds that have higher net asset value (NAVs) but lower dividends, while others have lower NAVs, higher dividends.

🙂

Moreover, many analysts believes that the consistency of dividend payout is important than the quantum of dividend.

Experts always insist investors to not to base their investment decision on the percentage of dividend paid in a short period.

Rather Investors should look for the track record of the fund in this regard over a longer period of time.

🙂

After the recent equity market bull-run, many equity funds have declared dividends up to 70 per cent.

So far in October, over a dozen of equity schemes have declared dividends.

Experts are of view that the quantum of dividend paid does not directly indicate the performance of the fund, especially in the short term.

Unlike equities, if a mutual fund scheme pays certain percentage of dividend, NAV of the scheme drops by the same proportion.
If investors go for dividend plans, they most probably miss the compounding opportunities over the long-term for short-term gains.
🙂

An Equity head of a mutual fund said “unlike debt funds, where the intention of an investor is to earn dividends on a regular basis, investors in equity funds,  do not always look for dividend”.

At times, the focus is more on capital appreciation.

Even Fund Managers of reputed firms have maintained quite often that they pay dividends every year irrespective of the market conditions and consistency have always been theirs primary concern not the quantum of dividend.

🙂

Corporate India is Likely to Register 22.8% Growth

corporate India is likely to clock 22.8% growth in net profit in 2009-10

corporate India is likely to clock 22.8% growth in net profit in 2009-10

Corporate India is likely to register 22.8% growth in net profit in 2009-10 despite the slowdown in the global economy and bad monsoon.

🙂

Centre for Monitoring Indian Economy (CMIE) in its latest report has attributed theimprovement in the margins..due to fall in input costs” as the major reason for the concerned growth of corporate India.

According to the report, the revenue of the companies will grow at much slower pace.

🙂

The report said, “Corporate sales growth will average at a meagre 4.1% in 2009-10.

At the same time, profit after tax (PAT) will rise by a robust 22.8%.”

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The performance of the manufacturing sector, excluding petroleum sector, would be encouraging.

The report said the sectors PAT would manage to grow at 24.3% mainly on account of low raw material prices and soft interest rates.

PAT of the financial and nonfinancial services would rise by 32.2% and 20.4% respectively, the report projected.

🙂

According to the report, corporate India took a hit on its sales due to the fall in commodity prices, drying up of export demand and postponement of purchases by the domestic consumer following the global liquidity crisis.

The report estimated that corporate profits have grown by 44% in the second quarter of 2009-10 due to the handsome profit likely to have been made by the petroleum products sector as against the losses incurred in the year ago quarter.

Aggregate PAT of the rest of the manufacturing sector is also estimated to have risen by a modest 4.5% in the second quarter, the report said.

CMIE estimated the PAT of the financial and non-financial services to have risen by 26%-29%.

Sales, however, is estimated to have fallen by 5.3%, it said.

The fall in sale realization is also because of sharp fall in the prices of the commodities.

The report said that non-financial services chose to keep their employees cost and other expenses on a tight leash and enjoyed benefit of fall in interest rates.

🙂

Market to Go Volatile This Week, Due to Host of Factors

Market to Go Volatile This Week, Due to Host of Factors

The Market is likely to remain volatile this week as a host of triggers are set to guide investor sentiments. These factors are :

1. Expiry of the October series of derivatives contracts,

2. September quarter results of some key companies such as Reliance Industries and

3. the RBI money policy review.

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Global cues may also induce some choppiness in the market.

Noted Market analyst, Jagannadham Thunuguntla, head of equities at SMC Capital quoted that;

“The market is facing heavy pressure.  There a wide gap between fundamentals and stock valuations.  The second quarter results have come up less than what most investors had anticipated”.

He also added “though the average profits of companies, which have so far reported second quarter results, have grown 30-40 per cent on cost-cutting measures, growth in net sales has been sluggish“.

Also Thunuguntla said that “we have huge liquidity in the market thanks to the 100 per cent rally and this has helped the market sustain at this level till now. No doubt, fundamentals are catching up with valuations slowly”.

🙂

Thunuguntla said the market was in a consolidation phase.

“It may remain volatile this week ahead of the expiry of near-month futures and options contracts and the RBI policy review.”

On the global front, the US will disclose its third quarter GDP figures on Thursday.

Meanwhile, the rate of inflation jumped to 1.21 per cent for the week ended October 10 against 0.92 per cent a week ago.

The BSE Sensex slipped 512.01 points, or 2.96 per cent, last week to close at 16,810.81.01.

The Nifty index on the NSE dipped 145.10 points, or 2.82 per cent, to end the week at 4,997.05.

🙂

According to other observers, Nifty has a support at 4,900.
Market sentiment may get hurt if this level is breached.

Thunuguntla also said investors would keenly follow the quarterly results of Reliance Industries as well as global cues.

“Amid the fight between the Ambani brothers, investors will watch the RIL results keenly.  Global cues will also be followed after a few bad economic numbers from the US last week,” he said.

🙂

Foreign institutional investors (FIIs) on Friday remained net sellers, offloading equities worth Rs 295.70 crore, according to figures available at the website of market regulator Sebi.

🙂