Manage the risk…

Current financial meltdown across the globe has been an eye-opener for lot of people. A very strong looking rally has suddenly changed to a bearish trend. Although, it was expected but the impact is beyond any one's imagination.
Big I bankers have either become Bankrupt or are looking for help from the Govt. The ripple effect has gripped Indian market as well. Our financial sector is very much secluded and with quality of credit far better than that of our US counterpart. Still it has impacted not only the Fin sector but reality and manufacturing sectors are feeling the heat.
Till now majority of us have been focusing more on the micro economic factors while investment in the share market. Assuming Indian economy is doing well, if the company has a good management and the sector is performing well, people were ready to put in the money in those stocks. But the current meltdown has changed everything. All the sectors have got impacted. Share prices of most of the scrip have reached near 52 week low mark.

How to survive in such situation
1. It is always advisable to put your money in quality stocks. The prices will crash even for these shares but the recovery will be fast. These companies will try to get the maximum out of the slowing down economy. They will focus on streamlining their process during this phase. Some buyouts might happen as they will get some good companies readily available in the market at throwaway valuation.
Once the economy revives, these companies will lead the pack by giving good returns to the shareholders.
Reliance capital made an announcement to foray into Investment banking and Housing finance on the very next day of Lehman’s bankruptcy. Some might feel that is this the right time for them to make this announcement. Well I feel yes because Interest rates have already reached the peak. In coming few months things should improve and rates will fall leading to a rise in credit off take. As far as I-banking is concerned, the key to success is how well connected you are with the prospective clients. It’s all about relationship which guarantees some good opportunities and hence good business. Timing would not have been better when best of the brains of these distressed companies are looking for new avenues. Reliance Capital will get these top quality people who in turn can help a big bang launch of I banking business.

2. Averaging is a good tool to minimize your losses and increases the probability of faster breakeven. But the only concern is we are not sure when the stock price will bottom out. At times you average out assuming market has already bottomed but the very next day it falls again. It’s better to do it in phased manner based on your risk appetite and how much disposable income you have. There is no full proof way to beat the market but managing the same may be helpful.

3. Commodities can be another option to look into. The nature of the collapse in US is entirely driven by consumer spending. The main beneficiary of the situation is China and the Middle East countries. The appetite for taking huge loans on the part of US consumers driven by very high spending on household needs accounted this downfall.

In the last 9 recessions since 1950, S & P 500 index rose by 30% in the first 12 months once the market reached bottom. Surprisingly in 8 of the 9 recoveries the market reached bottom before the end of the recession.

Whenever such great correction, collapse, recession, war, terrorism, any other natural calamities etc happens …people at large go back to basic which is the old theory. They either keep the money in cash in the locker or they invest in Gold. Gold is one commodity which trades like money and the exchange/liquidity is also very high. Historical events show that Gold is very good long term investment and it has beaten the Inflation number in the last 50 years of history in India atleast.

Price of Gold was Rs. 200 per ten grams in 1968. Today in 2008 the price for the same 10 grams has reached to Rs. 12500 which is 62 times higher than the 1968 price.

Happy Investing!!!

Where is the Bull?

Party is over in Dalal Street. One of the longest bull-run has come to an end. Thanks to Inflation and not so enthusiastic growth figures from various sectors. Oil prices are at an all time high. In the middle of this uncertain environment, there are people with some disposable income but not sure where to put the money.
The Banks are giving handsome returns in Fixed Deposits. Suddenly 9% return from FD is looking more lucrative than share market.
There are ways to beat the negative returns from the market. Try looking for those sectors which are somewhat secured from these negatives factors. Firstly I will go for the media and entertainment sector. No one is going to stop watching movies (read PVR, ADLABS).These big multiplex groups are into movie production as well. Our film industry is doing well which in turn will lead to better numbers for these companies. Still the mantra is to buy and hold these shares as you won’t get some extraordinary returns in short term.
Another share which looks good from a long term perspective is Dish TV. It’s the only listed company in its category. Currently they are busy in capturing the market as the biggest challenge is to move Indian viewers from cable operators to set top box. Hence free set top box scheme will definitely make a dent in the financial books in short term but in the long term the picture looks bright. They will start getting the subscription fees which will improve the cash inflow. At current levels this share looks good. In a span of two years it will definitely give some handsome return.
Beating the street may not be easy but people are making money. Happy Investing!

Lakhtakiya !!!

Launch of Lakhtakiya (Tata Motors' Nano) was one of the much awaited events of the year. Ratan Tata managed to put the base price at 1 Lakh. Higher version will cost more based on the additional features.
Things have changed a lot from the announcement date till now.
Thanks to Mamata effect, the manufacturing plant completion is already behind the schedule. Project delay means cost overrun. If we go by the market rumor, TATA motor has already lowered their procurement figures from various vendors. This means that the launch may not be on a large scale. Initial rollout of Nano will be less in numbers.
Rise in the input costs will also put a lot of pressure on the margin. Rise in steel price and other input materials will definitely hit the bottomline. They have put an upper cap of 1 Lakh on the selling price (for base model) but putting a freeze on the cost is not possible. It is something that is determined by the market forces. Inflation figures are already making some new high every week.
Third hit would be from the competitors like Maruti and Bajaj. Maruti has already announced its plan to bring a trim down version of its ‘Maruti 800’ model. With so much experience in India car market and the already depreciated machinery, reducing the cost will not be a big challenge for Maruti. Existing distribution network and vendors will add to the advantage.
Ratan Tata has always come out in flying colors in the time of adversity. People were apprehensive at the time of Indica launch. I am sure Nano will not only clear these hurdles but win the hearts of the middle class who wants a safe vehicle. With so much innovation I am sure things would improve by the launch time. They have already filed for 34 patents. I am sure TATAs will come out with some new distribution model to reduce the cost. Adding to this is the cute look of the car which every middle class Indian want to own.

Be Indian Buy Indian

The title of this blog sounds as if it was written before 1947.It holds true even in this globalized economy.

I try to go for some thing which is very INDIAN provided the quality is at par with the so called Big MNCs.Bisleri or Kinlay,Voltas or LG,Fruity or Maaza....the list goes increasing.I go for the Indian products which are "Made in India" "Made by an Indian Company".
Ab aap log bhi soch rahe hongey ki mai 19vi sadi ki baat kar raha hoo.If the quality is at par then why not go for some Indian product..."wo kehte hai na Ghar ka paisa ghar mei rahega".
Its not always possible to get a good deal for an Indian Product as the case holds good for TV,refrigerator or any cosmetic product.MNCs have outshined the Indian companies in many areas.
They have every reason to be so as they have huge financial backup to change the market dynamics.
Still my mantra is 'Be India Buy Indian'...isliye mainey liya India ka AC :)

Yeh hai cricket

IPL,the new generation cricketing event has changed the face of cricket.The involvment of corporates and film stars have shown that there is something for every one-money,fame.The big guns of Indian cricket were SOLD at some astonishing high prices.But the not so known faces have performed well and this is good for the future of Indian cricket.The failure of Big shots like Mr Wall,Mr. Very Very Special,Prince of Kolkata(the list is long) has put in the new players to come in limelight.Yousuf Pathan,Abhishek Nayar and some others have proven that they can play good cricket.Hopefully from next series we may find a totally new team where the balance tilts towards the youngistan.After all the corporates who have put in their money want some return Boss.Its all about money and of course Cricket.