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January 04, 2011
market-outlook
The Sensex didn't perform as well in 2010 as it did in 2009. In 2009 the Sensex returns was 77% and in 2010 it was just about 18%. But some of the individual sectors performed better than the benchmark index. The top sectoral perpformances came from the consumer durables with a spectacular 64% return, followed by the auto sector and the healthcare sector which posted an impressive 33% returns each.The biggest loser was the realty sector,down about 25% and the power sector fell by 7%.

So, going forward, what is the outlook for equity markets and other investing opportunities in 2011? One of the most important things to look at for 2011 is where to invest. Should one choose Stocks, Bank FDs or Commodities like precious metals?


Equities: There is no doubt markets are fairly valued on FY11 Sensex EPS numbers and Investors entering at current levels have not big upside left. But for a longer time horizon , there is for scope for making gains, based on FY12 numbers. The Sensex EPS estimates are between 1250-1290, based on various brokerage estimates. Based on 5 year average P/E for Indian markets, the Sensex has targets of about 21250-21900. Hence,investors can enter only on corrections to buy fundamentally sound large and mid cap stocks and the sectors to watch out are Banking, Capital goods,Midcap IT and Metals. So one has to be very stock specific to make better returns than the index. Keep watching the Stock Watch section for more stock specific updates.

Fixed Income: Fixed Income returns are to become more robust. The last few years' return in fixed income assets has barely been able to match inflation. But this is set to change, since interest rates are on the rise and Bank FD rates ( 9 to 9.5% p.a) reflecting the same. Hence one can expect higher returns in Bank FDs than the past couple of years.

Gold and Silver: While the stocks have gone up reasonably, the precious metals - gold and silver - have massively outperformed them.However, will silver and gold continue to outperform stocks like it has done in the previous year? It is most likely will continue to do well but Gold unlike other investments acts as an insurance policy against inflation.Hence 10-15% is the maximum exposure one could have exposure to Gold and Silver and not go overboard on this.

Hence, investors can take cue from the above mentioned points and depending upon their risk profile thye should take their decisions.

Be a wise investor !
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December 11, 2010
masterandstudent-psu-banks
Punjab and Sind Bank, a PSU Bank, is coming out with an IPO of 4cr shares of Rs.10 each in the price band of Rs.113- Rs.120. The main objective of the issue is to augment capital base to meet future capital requirements and other general corporate purposes.PSB is a mid-sized bank with a network of 920 branches, serving over 5m customers.

The bank has over 100 years of banking experience and established relationships with customers, including the Central and State Governments and public sector enterprises and their presence is predominantly in Punjab and other north Indian states.

The revenues for FY10 stand at Rs.4326cr and PAT at 506cr , resulting in an EPs of Rs.27. The book value of the bank is at Rs.105, while the most of the mid-cap PSU banks are quoting between 1-1.5 times book value, the pricing of the issue seems okay. Medium to Long term investors can go for this issue.

Details of the issue:

Issue Open: Dec 13, 2010 - Dec 16, 2010.
Face Value: Rs. 10 Per Equity Share.
Issue Price: Rs. 113 - Rs. 120 Per Equity Share.(5 % discount offered to retail investors)
Market Lot: 50 Shares.
Listing at BSE and NSE.
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December 08, 2010
Despite falling last week on the heels of a poor jobs report—United States unemployment rose to 9.6% and nonfarm payrolls did not rise as highly as forecasted—the U.S. dollar began to firm up against both the euro and the yen. Federal Reserve Bank Chairman Ben Bernanke announced in an interview on 60 Minutes that the latest quantitative easing project might go beyond the original $600 billion projection. These factors suggest, then, that even with this short-term gain, the U.S. dollar will continue to weaken, thus creating uncertainty and skittishness on the part of traders as the market finds its way. Long-term positions, then, could be favorable for those trading against the dollar, though this will be a tough bet.

As euro zone finance ministers struggled to protect the euro from the U.S. dollar, Japanese exporters had begun to sell the euro so that they could buy the yen while it remained above 111.000. This happened after the U.S. dollar gained on the yen to reach 82.85 yen over 82.58 yen last week. Likewise, the euro fell on the morning of the 6th of December to 1.3363 U.S. dollars, a slight drop from 1.341 of last week. Only time will tell how these pairs will shift throughout the week, given the upcoming talks regarding Ireland's aid package woes, as well as whether or not the European Union will revamp its budget rules.

So what is the sensible move for early December? Although it's a bit stingy right now, the market could favor the euro after the Irish budget passes and the European Union's aid package goes through for Ireland, though euro investor confidence will slow after that, based on the recent Sentix report that dropped noticeably after a nice rise in November.

This drop in the confidence index could push EUR/USD to a short-term resistance around last Friday's high of 1.3438 or thereabouts, in which case traders might consider selling for a tidy turn around if they can afford it. The recent sharp downturn happened quickly, however, so there's the possibility that corrections might occur in the next few days, so adjust your stop-loss accordingly so you don't get caught out in the open and unprepared.

Those of you following the EUR/USD trends, the job situation in the United States, and Bernanke's quantitative easement plan might consider going on to further do some in-depth research on this matter. Either way, it's definitely an interesting time for the U.S. dollar, the euro, and the yen, which will make for some exciting trading these next few months.

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December 04, 2010
capital markets
Currently, Indian Capital Markets swinging to the tunes of Global markets & Scams and the Sensex is trading between 19k and 20k, after hitting a 3 year high of 21k a month ago. What does this all mean to an individual investor and what should he do at this point of time - buy, sell or hold?

Before we come to any conclusions, let us check out some of recent happenings in and around us. Recently markets have been hit with many scams, some of them directly impacting the markets, like the housing loans and Global events like European crisis, Korean shoot outs and other similar events. These events are causing substantial swings in the markets and the much talked about US Fed’s QE2 program is not having much impact, either.

Currently Sensex at 20k, trading at 17.1 x FY11E EPS and 14.6X FY12E EPS, which is at fair valuations. The strong FII inflows and strong earnings growth are providing support to the Indian markets' valuations at 15-18 x  FY12E EPS, above its 12-15x historical range, which would mean the Sensex in the range of 15-16k.The P/E expansion in multiples could be led by (1) continued strong FII inflows, (2) positive macro-economic outlook and (3) strong earnings growth, which could lead the markets higher.

To sum up, there is no doubt that the markets are at fair valuations, but the factors mentioned above could take the markets further up. Hence, existing investors could hold and ride the wave and anyone who wants to enter now, can participate in the current rally by taking the SIP method of investing in mutual funds.New investments and big ticket investments could be made only when sensex is available around historical range mentioned above.

After all investing is not that easy,  isn't it?
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November 21, 2010
moil-ipo
Manganese Ore India Limited (MOIL) largest producer of manganese ore and a 'Mini Ratna' PSU, is coming out with an IPO of 33,600,000 Equity Shares of Rs.10 each in the price band of 345-375. MOIL accounts for approximately 50.0% of India's total production of manganese ore and the company hopes to maintain its leadership position in the manganese ore market.

MOIL operates seven underground mines and three opencast mines to produce more then 1m tonnes of manganese ore. The company is well positioned to capture the growth potential of the Indian steel industry, due to its track record and strategic location of the mines. The key risk is that the Manganese ore and alloy industry has historically derived demand from the steel industry and hence is directly exposed to the volatility and the cyclicality of the global steel industry.

Details of the issue:

Issue Open: Nov 26, 2010 - Dec 01, 2010.
Issue Size: 33,600,000 Equity Shares of Rs. 10.
Face Value: Rs. 10 Per Equity Share.
Issue Price: Rs.340-375 Per Equity Share.
Listing at BSE and NSE.

The EPS for the year FY10 stands at Rs.28 and at the higher band of Rs.375 the company would be trading at 14 P/E, which is well priced. There is no direct comparable listed peer with which the stock can be compared with other than NMDC which trades at at 25 P/E.

With the expectations of robust growth in the domestic steel production, demand for manganese ore is likely to increase during the next few years. The domestic manganese ore demand to grow at a CAGR of about 9% during the next 2-3 years.

After the stupendous success of Coal India IPO, the MOIL IPO too, will evoke good response from institutional and retail investors. Hence, long term investors can apply for this issue and not for listing gains alone.
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November 11, 2010
obama-india
Despite President Barack Obama's recent election setbacks at home, his trip to India last week was met with a measured amount of success, according to both U.S. and Indian media. One of the biggest announcements that Obama made during his trip was his intention to support securing India a permanent seat in the U.N.'s Security Council. Although the chances of securing a seat are rather slim, Obama's endorsement is a big first step.

Most importantly, however, the U.S. president and Prime Minister set an agenda for improved trade between the two countries, signaling new opportunities for Indian and U.S. economic growth. Although many see the President's move to expand trade with India a politically risky one, considering how pervasive the misinformed notion of Indians taking jobs from Americans is, Obama addressed the issue straightforwardly.

A recent CNN article quoted Obama as saying:

"In 2010, trade between our countries is not just a one-way street of American jobs and companies moving to India. It is a dynamic, two-way relationship that is creating jobs, growth, and higher living standards in both our countries."

Obama unveiled a plan on Saturday November 6 to create over 50,000 jobs in the United States with $10 billion dollars in new contracts for the Indian government and private companies. Obama also urged India to loosen its trade and investment barriers in various different industries like retail and telecom, an appeal that went well with Indian officials.

After Obama's weekend visit, a New Delhi article published Tuesday November 9 reported that India asserted it was time to "seriously consider" making an agreement that would further open trade between the two countries. Although any new free trade agreements will likely take a long time to negotiate, Minister of Commerce and Industry Anand Sharma noted the importance of engaging "in negotiations for a comprehensive economic partnership agreement that encompasses trade, investment, and services."

The New Delhi article underscored the fact that while industry in India has long favored lowering barriers in trade and investment, for the first time the government is opening up to the idea. For both Indian and American investors, these talks could signal new global opportunities in a variety of industries.

By-line:
This guest post is contributed by Alvina Lopez, who writes on the topics of accredited online schools . She welcomes your comments at her email Id: alvina.lopez @gmail.com.
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November 06, 2010
powergrid fpo
Power Grid Corporation of India,  India's biggest power transmission company is coming out with follow-on public offer of about 84 cr shares , which comprises a fresh issue of 42 cr shares and adding to that , an offer for sale of 42 cr shares by the President of India. The proceeds will be utilized for constructing country-wide high capacity power transmission corridors.

Details of the issue:
Issue Open: Nov 09, 2010 - Nov 12, 2010.
Face Value: Rs.10 Per Equity Share.
Issue Price: Rs.85- Rs.90.
Discount of 5% is available to retail investors.

The company's second quarter results were quite impressive. It announced a 41 percent increase in its net profit to Rs.651 crore and Rs.1,354 crore in first six months compared to the Rs.1,006 crore in 2009. The annualized EPS for the current year works out to Rs.6 and the FPO price of  85-90 makes the company available at 15 P/E, which is reasonably good. Currently the book value stands at Rs.40 and the offer is made at 2.25 times the book value.

Considering sound fundamentals, investors can subscribe to this issue with a medium to long term view. After the successful issue of Coal India, the Power Grid issue is also likely to be a hit.
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